U.S.:
Manufacturing Pickup Signals Boost to U.S. Economic Growth
American factories powered up in June at the fastest pace in nearly three years, with robust advances in production, orders and employment that indicate a firming in the economy, data from the Institute for Supply Management showed Monday.
HIGHLIGHTS OF ISM MANUFACTURING (JUNE)
- Factory index rose to 57.8, highest since August 2014 (est. 55.3) from 54.9 in May; readings above 50 indicate growth
- ISM’s gauge of new orders increased to three-month high of 63.5 from 59.5
- Measure of production picked up, while employment gauge climbed to the second-highest level since 2011
Key Takeaways
Faster growth in orders and production in the final month of the quarter indicates solid demand that, together with rising exports, shows manufacturing is on solid footing. The ISM’s pulse of employment in the industry also indicates the government’s measure of factory payrolls, released as part of the Labour Department’s jobs report on Friday, will rebound in June after declining a month earlier.
Asia:
China’s shadow banking lacks sufficient regulation: central bank
China’s central bank said on Tuesday the shadow banking sector lacks sufficient regulation and the bank would give more prominence to financial risk controls. Compared with traditional bank lending, the opaque nature of shadow banking products make it easier for them to bypass regulatory requirements and provide credit to restricted areas, the People’s Bank of China (PBOC) said in its annual China Financial Stability Report released online. The central bank will increase supervision over the rapidly growing asset management industry to curb shadow banking risks, it said. Since the first quarter, the PBOC has included banks’ off-the-balance-sheet wealth management products in its examination of broad credit in its Macro Prudential Assessment (MPA) risk-tool. The world’s second-largest economy faces major challenges, including excess industrial capacity, sluggish growth, high corporate leverage, mounting local government debt, property bubbles in some regions, and the deterioration of banking assets, the PBOC said in its report. As the economy still faces relatively big downward pressures, the bank pledged to create a favourable monetary and financial environment for the development of the real economy this year. The central bank also said it would strengthen coordination with other financial regulators to fend off systemic financial risks.
http://www.reuters.com/article/us-china-economy-policy-shadowbanking-idUSKBN19P1CX
Europe:
Euro zone inflation recovery ‘crucially contingent’ on low borrowing costs: Praet
A continued recovery in euro zone inflation is “crucially contingent” on low borrowing costs and, in turn, on an easy monetary policy from the European Central Bank, the ECB’s chief economist Peter Praet said on Tuesday. ECB policymakers have been trying to steady investors since suggestions by President Mario Draghi last week that the central bank may change its policy rattled markets. Echoing Draghi’s remarks, Praet predicted that stronger growth in the euro zone would boost returns on investments, thereby making borrowing more attractive and reinforcing the ECB’s monetary stimulus. But he cautioned that ultra-easy financial conditions were still needed. “The baseline scenario for future inflation remains crucially contingent on very easy financing conditions which, to a large extent, depend on the current accommodative monetary policy stance,” he said at an event in Rome. Draghi’s comments in Sintra, Portugal, sent euro zone government bond yields and the euro EUR= rallying last week, threatening to undo some of the central bank’s own work.
http://www.reuters.com/article/us-ecb-policy-praet-idUSKBN19P1LD
