Global Market Insights: PBoC's Stand Against Speculators, Chinese FDI Trends, and Indian Inflation

PBoC pushes back at speculators. Chinese FDI numbers and Indian inflation are Asia's main highlights today.

 

Global Macro and Markets

• Global markets:  US stocks returned to growth mode yesterday, with the S&P 500 and NASDAQ rising 0.67% and 1.14% respectively. Equity futures suggest that this might be short-lived, however. Chinese stocks had a mixed day, with the Hang Seng falling 0.58%, but the CSI 300 rising 0.74%.  US Treasury yields haven’t changed much. In fact, 2Y yields are unchanged from a day ago, while the yield on the 10Y US Treasury is only up about 2bp to 4.288%. EURUSD has recovered to 1.0750, after dabbling with levels below 1.07 at times the previous day. The AUD has also benefited from this, rising back to 0.6430 and Cable has pulled itself back up to 1.2512. The JPY has also made further gains following Ueda’s weekend comments about potentially ending super-easy monetary policy later this year and is now 146.55. In the Asian FX space, the PBoC took advantage of the USD’s weakness and some stronger-than-expected lending data and issued a stiff warning against speculative trading to weaken the CNY, resulting in a strong rally, which took the CNY down to 7.27 at one stage, and it is now 7.2894. This move helped lift other currencies such as the SGD.
• G-7 macro:  Yesterday was a pretty quiet day regarding Macro data, and today isn’t much more interesting. Germany publishes its monthly ZEW business survey, which is expected to show a further decline from already very low levels. The US publishes its NFIB small business survey, which is always a good and detailed snapshot of what is happening outside big business.
• China:  FDI data started to show a year-on-year decline in inflows of 4%YoY YTD in July, and we anticipate a further decline in the August numbers as overseas firms weigh the geopolitical tensions between China and the West and the disappointing re-opening, against the lure of one of the biggest markets in the world.
• India:  Inflation surged in July to 7.44%, mainly because of spikes in seasonal foods, especially tomatoes, following erratic weather. Daily price data shows that these spikes have eased a bit since last month, though there are also some sharp increases in the prices of onions. The net result should be a moderation of inflation to about 6.7% for August.

 

What to look out for: US CPI inflation and China data

• Australia Westpac consumer confidence (12 September)

• India CPI inflation (12 September)

• US NFIB survey (12 September)

• South Korea unemployment (13 September)

• Japan PPI inflation (13 September)

• India trade balance (13 September)

• US CPI inflation (13 September)

• Japan core machine orders and industrial production (14 September)

• Australia unemployment (14 September)

• ECB policy meeting (14 September)

• US initial jobless claims, PPI and retail sales (14 September)

• China medium term lending rate (15 September)

• Indonesia trade balance (15 September)

• China retail sales, industrial production (15 September)

• US University of Michigan sentiment (15 September)