Summary:
- Equity markets in Asia trade higher following the strong end of Friday’s trading in the US
- US President Donald Trump signalled he was not ready to sign a trade deal with China
- PBoC to start announcing a new rate for bank loans beginning from tomorrow
Bulls move ahead
The beginning of trading this week has been successful for Asian equity investors with the largest gains seen in Chinese indices - Shanghai Composite is up 1.6% while Hang Seng is rising 1.7% this morning. It seems that traders have been reassured to some extent after the strong end of the past week in the United States where we saw decent gains. On the other hand, we are seeing limited moves in the FX market with slight drops seen in both the Swiss franc and the New Zealand dollar. In terms of macroeconomic figures we were offered overnight it is worth mentioning services PMI for July from New Zealand which jumped to 54.7 from upwardly revised 53. Besides, the Japanese foreign trade data for July showed a deficit of 249.6 billion JPY compared to the consensus of a 194.5 billion JPY shortfall. Exports dropped 1.6% while imports declined 1.2% compared to the same month last year, both readings were above expectations though. In the bond market we see further steepening of the US yield curve following Friday’s announcement that the country is once again considering whether to start borrowing for much longer time by issuing 50-year and 100-year bonds. Since the low on Thursday the 2s/10s spread has already widened roughly 10 basis points and it is trading close to 0.08% this morning.
Start investing today or test a free demo
Open account Try demo Download mobile app Download mobile appChina-related news
On top of that, we also got another chapter of the never-ending US-China story as US President Donald Trump tweeted that the US “is doing very well with China, and talking!”, adding however that he was not ready to sign a trade agreement. He also suggested that China needs a trade deal more than the US given the relatively weak condition of the Asian nation’s economy, as Bloomberg reported. Moreover, Trump met with Apple CEO Cook to talk about an impact of tariffs on businesses. Cook was to voice his concerns about competition from non-tariffed Samsung.
A very interesting report came from the People’s Bank of China as the central bank would start announcing a new reference rate (the loan prime rate) for bank loans starting from tomorrow. A new rate will be linked to the PBoC’s medium-term liquidity facility, as a PBoC adviser told on Monday. The new rate is to benefit small and medium size companies the most by providing them with cheaper financing. The central bank said that the changes announced over the weekend would improve the mechanism used to establish the loan prime rate starting from this month. Hence, in practice companies could experience a real rate cut thus the economy will get monetary loosening.
The Chinese Hang Seng (CHNComp) is trading slightly above its important support as the new week kicks off. The first more pivotal support is localized at around 11100 points. Source: xStation5
In the other news:
-
New Zealand PPI for Q2 rose 0.5% QoQ (output prices), and 0.3% QoQ (input prices)
This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.
