RBNZ cuts rates once again

• European markets lifted by defence sector gains.
• RBNZ cuts rates once again.
• Nvidia earnings in view.

European markets are making tentative gains at the open today, with the FTSE 100, DAX, and CAC all in the green thus far. Notably, much of those gains come from the defence sector, with the likes of Rheinmetall, Rolls-Royce, Airbus, Thales, Safran, and BAE Systems all standing out within an otherwise flat starts for European trade. It should come as no surprise to see increased support for defence and military-focused stocks given the intensifying Russian assault on Ukraine and Trump’s warning that the Russian leader was “playing with fire.” Clearly the risk was growing that Trump will turn his back on peace talks if Russia continues to stall while they continue to push further into Ukrainian territory.

The RBNZ opted to cut rates by another 25 basis points overnight, continuing the easing process that has seen the bank slash their headline interest rate by 2.25% in less than a year. That rapid pace of easing stands in stark contrast to the likes of the BoE and Federal Reserve who have both cut rates by just 1% since their 2024 highs. With just one additional rate cut expected from the RBNZ, the gains seen for NZD highlight how the relative trajectory of interest rates might actually soon favour the Kiwi dollar compared to the likes of the pound.

Looking ahead, today’s Nvidia earnings provide the major corporate highlight of the week, with the world’s second largest company reporting after the close. By and large this wraps up the first quarter earnings season, with 96% of the S&P 500 having reported thus far. Key to this report will be the impact of Trump’s assault on trade with China, as we await data over the financial implications of the recent export restrictions and Chinese retaliatory tariffs. Notably, markets are expecting to see a 66.2% surge in first-quarter revenues, although there is a fear that we could finally see earnings decline compared to the previous quarter. With the stock having surged 56% from its post liberation day lows, a decline in earnings per share could yet dent sentiment for this tech giant.