Chinese Authorities Extend Support for Property Development Companies, Global Markets Show Modest Gains

Asia Morning Bites

Chinese authorities extend support for property development conpanies. 

 

Global macro and markets

• Global markets: Small gains in US stocks yesterday were in line with the early steer from equity futures, but those are not providing much direction today.  Chinese stocks also rallied slightly, helped along by an extension of relief measures for property development companies. Two of China’s financial regulators put pressure on financial institutions to extend outstanding loans to these companies. The measures also specify that project-based loans from commercial banks would not be classified as higher risk, and there was added encouragement for support to enable construction projects to be completed. Treasury yields dropped yesterday. The yield on the 2Y note came down by 8.8bp, while that on the 10Y UST fell 6.8bp to bring it back below 4%. The USD weakened further on Monday and has now pushed above the 1.10 level. The JPY has rallied down to 141.25. The AUD and GBP were more mixed. Both rallied in late trading, which brought the GBP up on the day but left the AUD lower than where it started. The rest of the Asia FX pack was very mixed. But with the exception of the IDR, which weakened by 0.39%, moves were muted.

 

• G-7 macro: There were quite a few Fed speakers doing the rounds yesterday, and the key message was that rates needed to be raised further, probably twice more and then held at those levels to be sure inflation was on the path towards its target. That doesn’t match what we saw happening in bond or currency markets, where you would have expected such comments to be supportive of higher yields and the USD.  ECB comments from Nagel and Herodotou were similarly hawkish, though Nagel believed that a hard landing could be avoided in the Eurozone. Today’s macro calendar has only the German ZEW survey and US NFIB surveys to watch for.

 

• Philippines: May trade data will be out today. Both exports and imports should post double-digit falls with the overall trade deficit likely settling at around $4.8bn. Exports will fall due to soft demand for electronics while imports are expected to contract due to relatively less expensive imported energy.

 

What to look out for: Philippines trade

• Australia Westpac consumer confidence and NAB business confidence (11 July)

• Philippine trade (11 July)

• South Korea unemployment (12 July)

• Japan PPI inflation (12 July)

• New Zealand RBNZ policy (12 July)

• India CPI inflation (12 July)

• US MBA mortgage application, CPI inflation (12 July)

• South Korea trade and BoK policy (13 July)

• China trade (13 July)

• US PPI inflation (13 July)

• Singapore GDP (14 July)

• Japan industrial production (14 July)

• India trade (14 July)

• US import prices and University of Michigan sentiment (14 July)