Overview: The consolidative week in the capital markets is drawing to a close. Equity markets are narrowly mixed. In Asia, most indices outside of the greater China (China, Taiwan, and Hong Kong) edged higher, leaving the MSCI Asia Pacific Index slightly lower on the week. The MSCI Emerging Markets Index snapped a ten-day rally yesterday and is little changed so far today. Europe's Dow Jones Stoxx 600 is off about 0.25% in late morning turnover, and about a 0.5% loss for the week. The S&P 500 is nursing a margin loss this week coming into today's session. It has moved higher in 10 of the last 11 sessions but is continuing to knock on 2900. Bank earnings are in focus today. Bond yields in Asia were mostly higher, and China's 10-year yield rose a couple of basis points to nose above 3.30%, a new high for the year. European yields are a little softer, while the US 10-year is hovering just below 2.50%. The dollar is mostly lower, with the Japanese yen the notable exception. On the week, the dollar has risen against only the yen and Swiss franc.
Asia Pacific
China reported its lending and trade data for March. The lending data is flattered by the expected rebounded after the Lunar New Year distortions in February but also the shift in policy from de-leveraging to stimulating the economy. Aggregate lending jumped CNY2.86 trillion. The median estimate in the Bloomberg survey was for an increase of CNY1.85 trillion after a CNY703 bln increase in February. The aggregate lending includes the state banking system and shadow banking. State-dominated bank lending is seen in the new yuan loans. They rose CNY1.69 trillion, well above the forecast for CNY1.25 trillion after a roughly CNY886 bln increase in February. The difference between the aggregate lending and the new yuan loans is a proxy for the shadow banking. Its lending jumped to CNY1.17 trillion from contracting in February.
China's trade surplus surged to $32.65 bln in March. It averaged nearly $33.7 bln last year. Month-to-month swings can be notoriously volatile after the Lunar New Year. The Q1 trade surplus stood at $76.5 bln compared with nearly $45 bln in Q1 18. Exports jumped 14.2% from a year ago after a 20.8% drop in February. Imports continued to fall. The -7.6% year-over-year pace in March follows a 5.2% contraction in February.
In Australia, the economy has conflicting impulses. The labor market remains strong, but housing s weak. The central bank is neutral, but the market continues to anticipate that a rate cut late this year. News today that the largest lender in Australia is considering cutting 10k jobs and closing as many as 300 branches may be the shock to the labor market that pushes the RBA out of its neutral stance. It appears that the OIS curve is discounting about an 80% chance of a cut this year compared with a little more than a 15% chance at the start of the year. ...
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