Overseas Headlines – May 10, 2017
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Asia:

China opening up its bond markets, but currency seen as major barrier
China’s policymakers plan to open the doors wider than ever to foreign investment in the country’s $3 trillion bond market, in part to help shore up the struggling yuan. But the currency is also proving to be a major barrier to the success of their plan. Foreigners own less than 2 percent of China’s $3.3 trillion in outstanding bonds and say getting their cash out of China and recent weakness of the closely controlled currency are obstacles to investment. Foreign investors are also skeptical they can assess risk accurately when most of the $2.1 trillion in corporate bonds are rated investment grade by domestic rating agencies. Chinese bonds offer their highest yields in two years and, on the basis of 10-year sovereign debt, the biggest interest rate gap with equivalent U.S. Treasuries in eight months, highlighting the dilemma of a market that is appealing on the one hand but on the other considered to carry too many risks.
http://www.reuters.com/article/us-china-bonds-index-analysis-idUSKBN1860JL

Europe:

Euro zone unemployment higher than data show, capping wages: ECB study
Euro zone unemployment is higher than official data suggest, continuing to keep wage growth muted, a European Central Bank study showed on Wednesday, raising fresh doubts about whether the bank can start rolling back its stimulus measures soon. Wage growth has been unexpectedly weak for a bloc that is enjoying its best economic run in a decade and the ECB has argued that better wage dynamics are needed for the inflation rebound to become sustainable, a key condition for cutting back stimulus. Explaining the apparent disconnect between the rapid unemployment drop and weak growth in pay, the ECB said headline jobless figures exclude people who fail to meet strict statistical criteria and also exclude part time workers seeking more hours, even though both groups add to labour market slack. Once adjusted for these categories, the labour market slack is around 15 percent, well above the official 9.5 percent unemployment rate and only Germany appears to be displaying signs of labour market tightness.
http://www.reuters.com/article/us-eurozone-unemployment-ecb-idUSKBN1860UU

U.S.:

U.S. Commerce’s Ross says 3 percent GDP growth not achievable this year
The U.S. economy will fall short of the Trump administration’s goal of 3 percent growth this year and will only achieve that when its regulatory, tax, trade and energy policies are fully in place, Commerce Secretary Wilbur Ross said on Tuesday. The GDP target “is certainly not achievable this year,” Ross told Reuters in an interview. “The Congress has been slow-walking everything. We don’t even have half the people in place.” But Ross said it ultimately could be achieved in the year after all of Republican President Donald Trump’s business-friendly policies are implemented. He noted that delays were possible if the push for tax cuts was slowed down in Congress. Ross also signalled the Trump administration would try to use existing tools to aggressively enforce trade rules and insist on fairer treatment for U.S. goods, rather than adopt the slash-and-burn approach Trump discussed on the campaign trail in 2016. The comments appear to represent another move to the centre by the administration, with Ross acknowledging that trade deficits for things like imported oil are “blameless” and not inherently bad.
http://www.reuters.com/article/us-usa-trade-ross-idUSKBN1852E4

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