Overseas Headlines – June 05, 2017


China May data to show stable growth as exports stay solid

China’s economy is likely to have remained on a stable footing in May, buoyed by solid gains in trade and investment as economic ties with the United States take a positive turn and infrastructure spending cushions domestic growth. A Reuters poll of indicators from trade and industrial output to loans and property investment, is expected to show that economic growth held up nicely into the second quarter, defying worries of a sharp slowdown. Beijing has curbed lending to avert bubbles and debt risks, but tougher regulations have raised concerns the measures could go too far and hurt growth. Economists, however, said they felt reassured by positive signals from the top leaders of China and the United States that a trade war between the two economic power-houses was avoidable. “We used to be worried about the negative impact of possible trade frictions on China’s exports to the United States, but now that fear has eased,” said Yan Ling, a Shenzhen-based analyst with China Merchant Securities. “We now think it will be more about increasing U.S. imports to China.” In sign of progress, China and the United States agreed in May to take action by mid-July to increase access for U.S. financial firms and expand trade in beef and chicken among other steps as part of Washington’s drive to cut its trade deficit with Beijing.




Amount of euro zone bonds with sub-zero yields hits 2017 high

The amount of euro zone government debt with negative yields has risen to its highest level so far this year after France elected a president seen as relatively market-friendly and the European Central Bank’s bond-buying scheme keeps borrowing costs low. Tradeweb data released on Monday showed nearly 46 percent of the more than 7 trillion euros ($8 trillion) of the bloc’s government debt had yields below zero at the end of May. Analysts said France’s voting for centrist Emmanuel Macron as president in May allowed shorter-dated bond yields in the euro zone’s second biggest economy to drop. Added to that, the ECB’s bond-buying scheme and the view that the bank is unlikely to rush into scaling back purchases even as growth picks up is putting persistent downward pressure on yields. “One thing that may have helped that statistic is that political risk out of France has been priced out and allowed a bigger share of bonds in this market, one of the biggest in the euro zone, to trade negative,” Mizuho rates strategist Antoine Bouvet said. Of about 7.3 trillion euros of debt in the system, about 3.3 trillion yielded less than zero at the end of last month, according to Tradeweb. That is highest share since December and is up from around 44 percent at the end of April. Tradeweb’s data shows almost 27 percent of euro zone government bonds yield less than the ECB’s deposit rate of minus 0.4 percent, also the highest share since December.




U.S. Stocks Slip From Records as Oil, Dollar Slump: Markets Wrap

U.S. stocks retreated from records, while Treasuries fell with the dollar a markets shrugged off the latest terror attacks in the U.K. Crude slumped. The S&P 500 Index edged lower after closing at an all-time high, with commodity producers leading declines. The group also weighed on European equities, as zinc and tin led base metals lower. Markets were closed for a public holiday in a number of European countries including Germany, Norway and Ireland. Mexico’s peso traded at the strongest level in seven months. Oil erased gains sparked by a political spat between several energy-producing nations in the Middle East. The red day across many commodities reflects ongoing uncertainty about the demand for raw materials, with the bearish sentiment toward copper firming up and signs of ample supply in metals like zinc. The key for the assets may be how investors gauge the strength of global economic growth and its ability to withstand rising borrowing costs or an end to the era of easy central bank cash.