Market Reports and Trade Recommendations by FXPRIMUS

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Market Brief of the Week for 19 May 2014: Global Macro Updates

Economic Insights

China Flash manufacturing Purchasing Managers Index (PMI)

Ongoing mini-stimulus carries a key function to stabilize the near-term growth. Forward looking components – New Order in the entire PMI index might bottom out in March. Still, less investment projects guild the flash manufacturing PMI well below 50 for quite some time; Full sets of the economic data for April remain very soft such as industrial production and aggregate financing, we expect the figure to be report at 48.2.

China housing market

Slowest housing growth in the past 18 months prompts the officials to ease the mortgage restrictions, defending its bottom line growth and preventing from another round of credit defaults. President Xi calling for the country to adapt a “new normal” of slow growth last week eliminates the stimulus in a substantial level. Rising inventory and growth risk will continue weigh on the property sectors, limiting the price gain to the upside.

Euro Central Bank (ECB) monetary policy

Now the question is not whether to ease, but how to ease in the coming policy meeting after the 1Q Gross Domestic Product (GDP) missing the estimation, falling confidence index and higher Euro. Cutting the lending rate further will not be enough because the rate is close to zero now. Lowering the deposits rate to negative territory could be a “transition move” for the more aggressive measure in the future. Asset-Backed Security (ABS) purchasing in the private sectors is ultimately needed as falling lending is the main responsibility for the current subdued inflation.

Euro – Dollar forecast in the near term

Various economic data could remain the same in the upcoming weeks, giving the ECB full controlling power of the Euro-Dollar direction in 2 weeks. Mario Draghi left no room to “stay put”, and it is extremely unlikely for him to provide with an opportunity for the investors to gain the hope on the Euro again. Downside risk for the single currency well remains despite low chance for the Quantitative easing (QE) announced, either charging for the excess cash parked with them or end the Significant Market Power (SMP) sterilization maybe good enough to send the currency lower for the short run.

Greenback is undervalued

Greenback will be soft before the yield of U.S. Treasuries stabilized. Tightening bets have been withdrawn tremendously recently. Dollar responded asymmetrically to the data recently with a downward bias, largely due to Yellen’s a few speeches consistent highlighting the “slack” in the labour market. The recovery of the greenback could be delayed until the late 3Q when the QE comes to the end.

Equities and Bonds market

Broad sound of the 1Q U.S. corporate earnings implied the improving corporate confidence, and policy remains accommodative in the coming months at least. Bonds rally fuelled by the major global central banks produces another round of “sovereigns’ fever”, disguising a “risk off” environment especially the prices are hovering in the historical high. We remain positive on the U.S. equities in the coming few months.

 

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Daily Market Report for 20 May 2014: Aussie Lower on Reserve Bank of Australia (RBA)’s Meeting Minutes

Economic Insights

Did the RBA Minutes of May Meeting offer any clues to the biasness of its currency?

Key takes of these Minutes are the inflation will be contained over next 2 years and growth in coming quarters likely below trend due to slower growth in exports, decline in mining investments and planned fiscal consolidations. They have no intention to tighten up at this stage like its neighbour – Reserve bank of New Zealand (RBNZ) unless fundamentals surprise the RBA. Aussie prefers to stay soft when the demand from China has been weakening.


RBA Cash Rate (white) vs. AUDUSD (yellow)

Source: Bloomberg


Australia’s central bank signalled record-low interest rates are set to remain in place as inflation is contained and the economy adjusts to fewer resource projects. Notes indicated that overall growth in the coming quarters was likely to be below trend given expected slower growth in exports, the decline in mining investments and the planned fiscal consolidations. The current accommodative stance of policy was likely to be appropriate for some time yet. Governor Glenn Stevens has held borrowing costs as the government prepared a fiscal tightening strategy set to drag on growth. Low borrowing costs are driving up home prices, underscoring why the RBA may be reluctant to add to 2.25 percentage points of rate cuts since late 2011. With growth in activity expected to pick up only gradually, and spare capacity in the labour market consequently remaining for some time, growth in domestic costs was forecast to remain contained.

Aussie has climbed almost 4% in the past three months as traders bet the RBA’s easing cycle has ended. The central bank said low borrowing costs and rising house prices had supported household consumption.

In China, property investment in China to Gross Domestic Product (GDP) ratio is more than 15%, and that doesn’t include its related industries. Banks’ exposure to the property – related products and companies could be far beyond our knowledge in its shadow banking system. Previous mortgage restrictions could be starting to ease gradually from now among the different cities, preventing from a sharp growth downturn and credit risk. We do not expect the officials to exercise the harsh policy this year on the concern of the stability.

Japan will hold the policy meeting tomorrow. Upswing 1Q GDP and inflation extended from 2012 allows the Bank of Japan (BOJ) to stay “on hold” for a while when the falling exports are yet severe enough to bring BOJ’s attention. We expect the earliest timing for the BOJ to act further will be late 3Q. Yen may continue to stay strong against the greenback in the near term on ‘muted BOJ” and “dovish Federal Reserve (Fed)”, plus the rising regional geopolitical conflicts favouring the Yen.


Japan exports YoY (yellow) vs. Japan CPI YoY (white)

Source: Bloomberg

 

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Daily Market Report for 22 May 2014: Fed Talked the Exit Strategy, and No Inflation Risk Expected


Economic Insights

Highlights from the FOMC Minutes

Federal Reserve officials last month discussed a range of tools they could use to control short-term interest rates once they decide on the first increase in borrowing costs since 2006, according to the Minutes released overnight. Among the tools were overnight reverse repurchase agreements, the term deposit facility, and interest paid on the excess reserves that banks hold at the Fed. While no decisions were made after officials heard a staff presentation on the tools, participants generally agreed that starting to consider the options for normalisation at this meeting was prudent. The Fed is trying to decide on its strategy well ahead of the time when it will actually use it, and they are very careful to note that just because they are talking about it doesn’t mean it’s coming soon. Market stays calm after the Minutes as benchmark index DJIA extended its Friday gain, and closing at 0.97% higher; U.S. 10 year yield remains low at 2.5553%.


U.S. 10 years yield remains low

Source: Bloomberg


The benchmark lending rate has been held in a range of zero to 0.25% since December 2008. Fed officials forecast in March that the rate would be 1% at the end of 2015 and 2.25% at the end of 2016, according to the median estimates. Participants at the April meeting agreed that “early communication” of their exit strategy “would enhance the clarity and credibility of monetary policy,” the minutes showed. The Fed has pushed up assets on its balance sheet to a record $4.34 trillion as it engaged in three rounds of large-scale purchases of Treasuries and housing debt intended to push down long-term interest rates and spur the economy.

Federal Reserve policy makers, weighing options for an eventual exit from extraordinary easing, said continued stimulus to push unemployment lower doesn’t risk sparking an undesirable jump in the inflation rate. With inflation expected to remain well below its 2% goal, the Federal Open Market Committee doesn’t face a trade-off between its employment and inflation objectives, and an expansion of aggregate demand would result in further progress relative to both objectives.

Yesterday, BOJ refrained to add further stimulus from the current pace. Upswing 1Q GDP and April exports rebounded even with a stronger Yen allowed the BOJ to stay “on hold”. Most importantly, Kuroda strongly believes the inflation will continue to rise. Now the macro condition in Japan favours the government to implement the third arrow – structural reform, which is the hardest but most needed for the long term benefit. We think the earliest time for them to accelerate the purchasing will be October at least.

Greenback will be staying soft before the yield of U.S. Treasuries is stabilised. Dollar responded asymmetrically to the data recently with a downward bias. As long as Yellen continue to consistently stress the “slacks” in the labour market, a sustainable recovery of the greenback could be delayed until 3Q when the QE comes to the end. But we think the BOJ will stand up to defend if the USDJPY threatened to fall below 100.

 

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Daily Market Report for 5 June 2014: Market Awaits European Central Bank (ECB)’s Decision

Today belongs to Mario Draghi

The ECB president holds a press conference 45 minutes after the rate announcement at Frankfurt. Which interest rates will Draghi cut, and how far? The majority of economists predict the ECB will become the first major central bank to introduce a negative deposit rate. But deflation can create a slow-growth trap from which it can be extremely hard to escape. The expectations of lower prices becomes a self-fulfilling prophecy, and aggregate demand gets sucked out of the system. It is no coincidence that prices are falling in Europe at the same time that euro zone Gross Domestic Product (GDP) growth has slowed to a crawl — just 0.2% as of last quarter.

Euro-area services output expanded at the strongest pace in almost three years last month, helped create jobs in a region suffering from low inflation. A Purchasing Managers’ Index (PMI) rose to 53.2 from 53.1 in April. In a sign of how fragile the economy remains, separate data showed consumer spending barely grew in the first quarter and net trade subtracted from growth. Although the euro zone is enjoying its best performance in three years, this is an uneven, stuttering and lacklustre recovery. While payrolls are rising, the pace of growth is “too low to generate enough job creation to bring unemployment down to any significant degree. The ECB’s Governing Council meets today, where it will probably lower its economic forecasts and add stimulus.

U.S. shares rebounded on Wednesday after strong data on the U.S. services sector, while soft European economic data weighed on European equities and weakened the euro a day ahead of a closely watched ECB policy meeting. Better-than-expected U.S. services sector growth drove gains on Wall Street and boosted the Standard & Poor's (S&P) 500 to a record closing high, reversing the earlier losses on an industry report showing weakness in the U.S. private-sector labour market. Yields on benchmark 10-year U.S. Treasury notes edged higher.

The Institute for Supply Management said its U.S. services sector index rose to 56.3 in May from 55.2 in April, topping the expectations for a read of 55.5. A reading above 50 indicates expansion. Earlier, the Automatic Data Processing (ADP) National Employment Report showed about 179,000 private-sector jobs were added in May, below the 210,000 that had been expected. April's job gains were revised downward by 5,000.

The Dow Jones industrial average .DJI closed up 15.13 points or 0.09%, to 16,737.47, the S&P 500 .SPX gained 3.62 points or 0.19%, to 1,927.86 and the Nasdaq Composite .IXIC added 17.562 points or 0.41%, to 4,251.642.

 

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Daily Market Report for 06 June 2014: It Is Not Enough


Economic Insights

Market questioned Draghi in the end

Mario Draghi unveiled an unprecedented round of measures to help the European Central Bank (ECB)’s record-low interest rates feed through to an economy threatened by deflation. The ECB has cut its deposit rate overnight to minus 0.1%, becoming the first major central bank to take one of its main rates negative.

ECB refi-rate (white) vs. EURUSD (yellow)

Source: Bloomberg

In a bid to get credit flowing to parts of the economy that needed it, the ECB also opened a 400-billion-euro liquidity channel tied to bank lending and officials will start to work on an asset-purchase plan. While conceding that rates are at the lower bound “for all practical purposes,” the ECB president signalled policy makers that are willing to act again. “We think it’s a significant package,” Draghi said yesterday. “Are we finished? The answer is no.” A worsening in the euro area’s economic outlook and a prolonged spell of slow inflation prompted the ECB to act to preserve the fragile recovery in the world’s second-largest economy. Ultra-loose monetary policy so far hasn’t benefited all parts of the 18-nation bloc, with bank lending in the region still shrinking even after sovereign bond yields from Spain to Italy has dropped to record lows.

Draghi announced a new liquidity program designed to encourage more lending. Financial institutions will be allowed to borrow money from the ECB equivalent to as much as 7% of their outstanding loans to non-financial corporations and households, excluding mortgages. The maturity will be up to four years, priced at the ECB’s benchmark rate when the loans are taken out plus 0.1 percentage points. Banks that don’t pass the money on will be obliged to repay it after two years. The so-called targeted longer-term refinancing operations, or TLTROs, will be carried out in September and December. The central bank also said that it would push on with plans that could see it buying asset-backed securities based on bank loans. That measure could help to smoothen lending by helping banks manage risks.

The ECB’s hand has been forced by the Eurozone’s sluggish economic recovery, which is so feeble that it is proving hard to shrug off deflationary effects. In May the regional consumer price index rose by just 0.5% from a year ago. But that aggregate figure, is already well below the ECB’s target of about 2%, masks lower rates in many countries. Some have even experienced falling prices. Excessively low inflation threatens to make the sustainability of sovereign debt as an impossible challenge.
Negative deposit rates are the unusual part of the package, but their effectiveness is questionable. European banks’ deposits at the ECB have fallen close to zero in the past several months, and their reserve holdings at the ECB, to which negative rates will also apply, have also diminished significantly. The negative interest rate, therefore, is unlikely to have a significant effect on the banks’ behaviour. The LTRO facility might help at the margin to boost lending to the private sector. But regulations are forcing banks to shrink their balance sheets. Many lenders have amassed huge holdings of government bonds. And loan demand by companies is weak anyway.

In China, Chinese local governments have won the permission to issue bonds as they seek to reorganize 17.9 trillion Yuan debt. Bond bears contends that bond sales will ease refinancing and lessen the risk of defaults. Bonds may also boost transparency and cut down systemic risks by shifting debt to regulated markets from the opaque shadow-banking operations. The government has approved 400 billion Yuan worth of bond sales annually under a trial program.

 

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Market Brief of the Week for 9 June 2014: U.S. Labour Market Remains Solid After The Weakened State In Winter


Economic Insights

U.S. May payrolls exceeded the forecast, with a report of 217,000 expansion

U.S. employment returned to its pre-recession peak in May with a solid pace of hiring that offered confirmation that the economy has snapped back from a winter slump. Nonfarm payrolls increased 217,000 last month, still in line with the market expectations. The nation finally recouped the 8.7 million jobs lost during the recession, with 8.8 million more people working now than at the trough in February 2010. But the working age population has since increased 10.6 million while 12.8 million Americans have dropped out of the labour force.

U.S. Nonfarm Payroll (white) vs. US total employment level

Source: Bloomberg

The pace of hiring adds to data from automobile sales to services and factory sector activity that have suggested the economy will grow at a pace of more than 3.0% this quarter after shrinking at a 1.0% rate in the first three months of the year. Other data on Friday showed that consumer credit in April recorded its largest advance since November 2001, a sign that households were feeling more secure in taking on debt.

More of the previously discouraged workers are to re-enter the labour force over the course of the year. While that would be a sign of confidence in the labour market, it could slow the decline in the jobless rate. The long-term unemployed accounted for is 34.6% of the 9.8 million jobless Americans, moved down from the 35.3% back in April. The median duration of unemployment fell to 14.6 weeks, which is the shortest stretch in five years and a sharp drop from April. The return of discouraged job seekers and the drop in long-term unemployment will be welcomed by the Federal Reserve (Fed), which has cited low labour force participation as one of the reasons for maintaining an extraordinarily easy monetary policy.

Average hourly earnings, which are being closely watched for signs of wage pressures that could signal dwindling slack in the labour market, rose five cents, or 0.2%. On a year-over-year basis, earnings were up a tepid 2.1%, suggesting little build-up in wage inflation.

US. Average hour earning

Source: Bloomberg

China’s exports had rose more than analysts estimated in May, helping to cushion the world’s second-biggest economy from a deeper slowdown as an unexpected slump in imports highlighted risks to growth. Overseas shipments gained 7% from a year earlier. Imports fell 1.6%, leaving a $35.92 billion trade surplus, the biggest in five years according to Bloomberg data. Stronger exports may bolster Chinese leaders’ confidence that a recovery in demand from the U.S. and Europe will support economic growth and reduce the need for stronger stimulus. On June 6, Premier Li Keqiang told officials from eight places, including Beijing, Guangdong, Zhejiang and Hebei, to be proactive in supporting their local economies, saying that the government wants a “reasonable” rate of expansion.

China export YoY (white) vs. China trade balance (yellow)

Source: Bloomberg

 

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Daily Market Report for 10 June 2014: China Is Getting Warmer Now, Summer Is Here


Economic Insights

China inflation edged higher, while the central bank, People’s Bank of China (PBOC) announced the Required Rate of Return (RRR) cut for selective banks

China’s inflation accelerated in May to the fastest pace in four months on food costs, while a decline in factory-gate prices moderated. Consumer prices rose up 2.5% from a year earlier, the statistics bureau said today in Beijing. That exceeded the median estimate done by the various channels. The producer-price index fell 1.4% after a 2% decline in the previous month. Inflation gauged indices suggested that the economy is getting warming up now, after many rounds of “mini-stimulus” China had implemented in the second quarter.

China CPI YoY (white) vs. China PPI YoY (yellow)

Source: Bloomberg

Inflation below the government’s full-year target of 3.5% leaves room for more monetary easing in an economy projected to grow this year at the slowest pace since 1990. While Premier Li Keqiang is resisting broad stimulus, limited loosening includes yesterday’s announcement of a cut in some banks’ reserve requirements from June 16, intended to support agriculture and small businesses. Food prices rose up 4.1% from a year earlier, compared with a 1.7% gain for non-food costs.

A slide in home sales and construction and government efforts to rein in credit risks are weighing on the nation’s expansion. Yesterday China’s central bank announced a 0.5 percentage point cut in reserve requirements for some banks, giving details of a policy move aimed at supporting smaller companies and agriculture.

The reduction will take effect on 16th June, the PBOC said in a statement on its website yesterday. The change applies to two-thirds of city commercial banks, 80% of non-county level rural commercial banks and 90% of non-county level rural cooperative banks.

Falling imports in May showed the weakness in domestic demand that is making the Chinese economy more reliant on exports and pressuring Premier Li Keqiang to roll out broader measures to support growth. The authorities’ steps so far have included tax breaks and accelerating some government spending as a property slowdown limits the nation’s expansion.
Yet, we think the current stimulus measures are to “halt the systematic risk” instead of “providing a major growth”.

Source: Bloomberg

 

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Daily Market Report for 11 June 2014: What Is Holding The Federal Reserve (Fed) Back From Normalising The Monetary Policy?



Economic Insights

Something might be different this summer at the Federal Open Market Committee (FOMC) meeting in a week time.

U.S. benchmark equities indices stumbled this week and the Dow Jones Industrial Average (DJIA) refused to reach above the territory of 17,000. The unclear Fed policy in the second half of the year and the extreme low volatilities with falling trading volume could discourage further risk taking in the capital market, until the Fed decides to offer further clue in the upcoming FOMC meeting next week.

Whether the Fed should continue to promote its “accommodative” stance, or start putting the possible exit strategy on the table to be discussed upon is widely the focus in the market now. As a matter of fact, the U.S. economy has made a terrific progress in the first six months of the year. Jobs market has returned to the peak level before the latest financial crisis based on the headline numbers that is if we do not put those components such as wage growth, labour participating rate into consideration. Inflation climbed higher although it’s still well-below the Fed’s long term objective as Core Personal Consumption Expenditures (PCE) had climbed to 1.4% YoY.

U.S. U3 unemployment rate (yellow) & U.S. PCE YoY

Source: Bloomberg

The FOMC is much closer to its goals than it ever did in the past five years, based on one of the Fed’s own models, which clearly shows that the distance from the long term objective has been closer to 75% of the period since 1960.

Source: Federal Reserve

If this is the real scenario for the current U.S. economy, we would like to question that if the current zero interest rate policy is the correct monetary policy, and what is holding the Fed back to normalise the interest rate in a gradual pace. The housing market recovery and rising volatilities could be the reason. U.S. pending home sales have yet to show the sign of a solid recovery. The good news is that the housing supplies have been increasing since beginning of the year. Under this perspective, the Fed could prefer a low Mortgage rate to support the activities since this is a pillar industry. Besides that, construction sector had created the least jobs in May, bringing the concern on the housing market’s recovery. Fear of rising volatilities to steepen the long term curve is another reason for the Fed to remain its monetary policy accommodative.

U.S pending home sales YoY (white) vs. U.S. houses supply MoM (yellow)

Source: Bloomberg

However, we are expecting something different in a week time. As mentioned above, we are no longer in the crisis, hence the crisis management mode shall be gradually removed. Otherwise, it will dampen the economy because no policy carries the function to solve all the problem. There are tremendous concerns if the rates stay low for too long in a moderated growth pace, since it has reached the place that zero interest-rate policy (ZIRP) has limited functions to help the Fed to achieve its long term objectives under its dual mandate.

1) Over-promoting the risk taking, misleading the asset classes and distorting the assets-allocation
2) Lower rates do not help the deposit growth in the financial system, instead of encouraging the “risk investing”. Could this dampen the consumption? Maybe.
3) Labour will be more expensive, as the companies could gain the cheap financing to purchase the machine and hardware to replace the humans.

 

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Daily Market Report for 12 June 2014: Another Hike from the RBNZ

Economic Insights

RBNZ raised the OCR to 3.25% by a 25 bps hike

New Zealand’s central bank raised interest rates for the third time this year and signalled more tightening to come as Christchurch rebuild and surging immigration to fuel growth, sending the kiwi higher. “It is important that inflation expectations remain contained and that interest rates return to a more neutral level,” Governor Graeme Wheeler said after increasing the official cash rate by a quarter-percentage point to 3.25%. The Reserve Bank of New Zealand (RBNZ) left its forecast for the 90-day bank bill rate broadly unchanged; suggesting borrowing costs may rise twice more this year.

RBNZ OCR rate

Source: Bloomberg

Bank of Japan (BOJ) officials are considering maintaining a large balance sheet for the central bank even after it achieves its inflation target, reducing the risk of a surge in long-term bond yields. Under the potential strategy, the BOJ would use cash from maturing securities in its portfolio to buy long-term government debt. Governor Kuroda and his colleagues have yet to meet their inflation target, and pledge to continue asset purchases until consumer prices are rising at a 2% pace. The possibility of permanently large balance sheets — in Japan’s case, now amounting to more than half the size of the economy, may become a global legacy of unprecedented stimulus measures. The BOJ discussions parallel preparations at the Federal Reserve to avoid an exit strategy of asset sales.

The central bank’s balance sheet has expanded to 52% of gross domestic product since Kuroda unleashed record easing in April 2013, compared with 25% for the Fed and 24% for the Bank of England. The BOJ held 165 trillion yen of long-term Japanese government bonds as of May 31. In the U.S., Fed officials are preparing to keep their balance sheet close to record levels for years on concern that selling bonds from a $4.3 trillion portfolio could crush the U.S. recovery. Minutes of their last meeting made no mention of asset sales. Officials worry that such sales would spark an abrupt increase in long-term interest rates, making it more expensive for consumers to buy goods on credit and companies to invest, according to James Bullard, president of the Federal Reserve Bank of St. Louis.

Japan 10-year bond yields remain the lowest in the world, trading at about 0.6%, even as BOJ starts to drive inflation higher. Consumer prices excluding fresh food rose 1.5% in April from a year earlier, based on a BOJ estimate stripped of the effect of a sales-tax increase. If the BOJ prolonged large-scale bond purchases after reaching its inflation goal, it would need to avoid creating the impression that it was financing government spending. Any extension of the purchases would come only after a debate, since not all of the people taking part in BOJ discussions say they would be in favour. The central bank’s next policy decision will be tomorrow, with projecting no change in a policy of expanding the monetary base at a pace of 60 trillion yen to 70 trillion yen per year.

 

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Daily Market Report for 13 June 2014: Will The Fed Follow What BOE Will Do Today?


Economic Insights

Bank of England sets a strong signal to hike the interest rate earlier next year

Mark Carney from BoE has hinted households, companies and financial markets to prepare for an interest rate rise, sell side, buy side, upside, downside saying the first increase could happen sooner than markets currently expect. Sound familiar? Does that apply to the Fed as well in 5 days?

In his first hawkish comments since becoming governor of the Bank of England (BoE) almost a year ago, Mr Carney stressed overnight that the widely anticipated action by the central bank this month to cool the housing market will not be a substitute for gradual interest rate rise. Having last year guided people to expect rates to remain at the emergency level of 0.5% until 2016, financial markets currently expect the first rise in spring 2015.

“There’s already great speculation about the exact timing of the first rate hike and this decision is becoming more balanced,” Mr Carney said. The governor’s remarks will heighten expectation that the BoE will be the first major central bank to raise rates since the immediate aftermath of the financial crisis.

Still, Carney’s words do not represent a U-turn from the BoE’s revised guidance in February that when it comes to tightening policy, it will raise rates gradually and to a level significantly lower than the 5% level previously thought standard. Another similar story will be adopted by the Fed?

China’s new Yuan loans and money supply topped estimates in May as the government supports economic growth while reining in shadow banking. New Yuan loans were 870.8 billion Yuan, the People’s Bank of China said yesterday, higher than earlier estimates. M2 rose 13.4%. China is still concerned of missing a 2014 target for economic growth of about 7.5%, then prompting to speed up government spending and make limited cuts to lenders’ reserve requirements. The World Bank warned last week that rapid credit growth and debt accumulation by local governments are risks to financial stability. It suggests that policy makers are turning more serious about the downside risks to the economy and began ramping up pro-growth measures. Shadow Banking Aggregate financing, China’s broadest measure of new credit was 1.4 trillion Yuan in May, matching the median analyst estimate. The figure, which includes bank lending, corporate bond issuance and shadow-banking products like entrusted loans, compared with 1.55 trillion Yuan in April.

In Japan, The Bank of Japan maintained record stimulus as Governor Haruhiko Kuroda strives to boost inflation that remains short of a 2% target. The central bank will continue to expand the monetary base at a pace of 60 trillion Yen to 70 trillion Yen per year. A rebound in consumer sentiment and signs of strength in business investment indicate the world’s third-biggest economy is weathering a higher sales tax so far. At the same time, the yen’s 3% rise against the dollar this year threatens to undercut inflation, as the BOJ is likely to remain inactive for the next several months.