Australia Interest Rates Increased - Stock Market Soars

Australia raised their interest rates or rather the cost to borrow money. Investors took this as a sign of hope and the stock market rallied on the news release of Australia's interest rate hike.

Why does the Interest Rate Increase Executed by the Reserve Bank of Australia Boost Investor Confidence and Hopes of Recovery?

If the derived confidence from this seemingly rise in cost to do business in the world of borrowing money seems a bit bizarre or counter intuitive you are correct. Under traditional market circumstances the rise in interest rates which directly correlates or even directly causes the cost of borrowing to increase. But even so, we are not operating under normal market conditions.

Investors see this as a sign that markets are stabilizing. Here is the reasoning:

• Governments have kept interest rates or the cost of borrowing down to record low levels because they want to inject supply into the credit or capital markets.
• The Australia Government's decision to raise interest rates signals the confidence of improving markets in Australia and thus part of the international economy in which all investors are a part of.

The US interest rates or cost of debt has remained and is expected to remain at very low levels.

Citi Bank Scales Back Retail Banking Operations

Citi Bank which is one of the largest financial institutions in the world and in to a little bit of everything and a little bit too much, has announced plans to scale back their retail banking operations and has said it will be reducing the number of branches.

They will keep the operation going for the long term but will focus only on the cities that they have a strong and secure presence.

Cities of Focus for Citi Bank:

• Chicago
• Washington
• New York
• L.A.
• San Fransisco

Citi Bank has tried over the years to establish a retail and community banking presence such as their counter parts Bank of America and Wells Fargo who each have 6000 locations a piece. Citi has never been able to capitalize on the market with only 1000 branches of their own and they will be closing many of those.

Overall this is probably a good move by the board over their in the struggling land of Citi Group. Their operations have been spread all over the place over the last decade and have failed to manage any sort of synergy such as Bank of America.