Central bank of Australia sees scope to cut interest rates.

On Thursday Australia's top central banker stated that he saw possibility to cut interest rates more to make sure a long-lasting economic influence and warned about declining business investment and consumer spending.

Thursday’s Government data sought to strike a chord to the investors about downside risks to the economy with exports falling 11% in April from March. Australian dollar fell down to $0.8014 from around $0.8040 beforehand.

As a result of a droop in exports, Australia suffered its first trade deficit since July last year, just a day after 1st quarter GDP showed the country moved away a recession, helped by its best trade performance in 48 years.

Reserve Bank of Australia Governor Glenn Stevens said that it is likely that activity has remained subdued in the June quarter, the quick downfall in business investment is more or less undoubtedly continuing. While consumer expenditure has held up quite well so far, it may be weaker over the next few months, as the one-off government payments pass and rising unemployment starts to weigh.

Stevens also said that the joint effect of the large fiscal and monetary incentive has played a role in mitigating Australia from the worst global downturn in decades and that monetary policy intended to cut borrowing costs and support demand but the central bank would be careful not to encourage shaky debts.

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Asian Market Raise on US Consumer Spending

Asian markets grew for the first time in last few days of trading which help by positive US reports. The US futures market continued to increase in the after-hours session, something that helped the Asian markets.

Even though the US GDP numbers came in much poorer than estimated, the financial market found the power to progress as consumer spending increased, while stockpiles decreased, which can make the perfect environment for the economy to improve later this year.

The combination of consumers rising their spending, where companies decrease their inventories may give the financial markets expect that the economy will rebound in the coming months, expert said. They also said that at this point, the market is in very positive form it overcame a report saying that 6 banks failed in the Treasury’s stress-test.

As such companies that have direct disclosure to the overseas markets placed important gains during the Asian session. Retail companies advanced also in the Asian equity markets, increased the gains from the US session.

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US Futures Declined at a Strong Pace, But Asian Market Rise

US Futures post significant decline tonight, although Asian markets are trading in the green. The main cause of concern seems to be the swine flu that just hit the US borders.

It seems that the swine flu is the problem to hit the US and the global financial system. For now, the investors are anxious that the cost of combating the new disease will only add another streak on the government’s budget, already influenced by the huge rescues that financial sector requisite. Also, like this time, consumers tend to spend less, which will also affect the business cycle rising significantly the recovery period. Experts said.

However, Asian equity markets seem unaffected up to now, reaching the maximum valuation in the last three months of trading. The financial sector constant to progress tonight, helped by the unofficial, preliminary stress test outcomes, which show that most banks have a sufficient capital base. Equally with the financial sector, pharmaceutical companies also placed some major gains tonight, as drug sales are possibly to raise up.

Additionally, the Japanese government decreased yet again the GDP projections for 2009, down to 3.3%, something that should have pulled the Asian markets worse.

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