China moves to tame inflation

<p>China’s move to tame inflation by increasing its interest rates modestly did little to dent regional sentiment. The MSCI  Asia  Pacific Index rose 0.2% at […]</p>

China’s move to tame inflation by increasing its interest rates modestly did little to dent regional sentiment. The MSCI  Asia  Pacific Index rose 0.2% at noon in  Tokyo , after earlier slipping 0.4%. Standard & Poor’s 500 Index futures added 0.3% after weaker overnight leads. About nine shares advanced for every seven that fell on MSCI’s Asia Pacific Index.  Japan ’s Nikkei 225 Stock Average slipped 0.1%, halting a seven-day rally, while  South Korea ’s Kospi index climbed 0.4%.

China’s two-year swap rate, the fixed cost to receive the one-year deposit rate, climbed 9 basis points to 3.64% in  Shanghai , reflecting expectations benchmark  interest rates  will be raised another 28 basis points in the coming year. Market expectations are for China’s inflation rate to top 6% in June. The Yuan traded at 6.467 per dollar, little changed from yesterday’s close of 6.467. The currency touched 6.459 on July 4, the strongest level since the country unified official and market exchange rates at the end of 1993.

Monthly jobs data in Australia saw the unemployment rate remain stable at 4.9% with around 59,000 full time jobs added in June. The addition of full time jobs was above most market expectations. The Australian dollar jumped to $1.073 against the US dollar upon the announcement in Sydney, from $1.069 before the data. The two-year government bond yield rose to 4.71% from 4.65%.

In corporate news,  Industrial & Commercial Bank of China  – the world’s largest lender by market value – advanced 1.2% in  Hong Kong . The quarter-point increase in deposit and lending rates announced yesterday will boost banks’ net interest margins and earnings, Citigroup Inc. and Deutsche Bank said in reports. Japanese stocks broke their recent winning streak after the nation’s top energy official said some of the country’s nuclear reactors may not be restarted until stress tests are completed, driving down utilities and sparking concern manufacturers may face power shortages.

Kansai Electric Power – a utility that uses nuclear plants to generate almost half of its power – fell 6.9%. Toyota Motor Corp – which has had its supply chain disrupted by Japan’s March earthquake disaster – dropped 1.2%. Stanley Electric Co., a headlight maker, declined 3%.

Spot gold held steady – at around $1,526 an ounce – below a two-week high hit in the previous session. ICE Brent crude climbed 49 cents to $114.11 a barrel after initial falls on the China rate rise. In the U.S., crude stocks fell 3.2 million barrels last week, more than a projected 2.3 million-barrel drawdown, industry group American Petroleum Institute (API) said yesterday.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.