Econintersect: Here are some of the headlines we found to help you start your day. For more headlines see our afternoon feature for GEI members, What We Read Today, which has many more headlines and a number of article discussions to keep you abreast of what we have found interesting.
Asia stocks mostly higher; Climb in Fast Retailing boosts Nikkei 0.2 pct despite stronger yen (CNBC) Asian markets were mostly higher Friday as markets awaited key U.S. jobs data, which will offer a key indicator of whether the Federal Reserve will pull the trigger in June. The Japanese yen was also on investors' radar after the dollar-yen fell below 109 Thursday. Despite the stronger yen, the Nikkei 225 was trading up 0.24%, breaking its two-day losing streak. The dollar-yen currency pair was trading at 108.64 at 12:15 p.m. HK/SIN time. Bolstering the benchmark index, shares of the heavily-weighed Fast Retailing surged 6.49%, after its apparel retail chain Uniqlo reported that within Japan, sales in May grew 5.9% from a year earlier. As of April, Fast Retailing had an 8.13% weighting in the Nikkei 225 index. Down Under, the ASX 200 was up 0.84%t, with its materials subindex up 1.15 percent and its financials subindex 0.84% higher. In South Korea, the Kospi was effectively flat. Hong Kong's Hang Seng index gained 0.37%. Mainland Chinese markets initially erased some of their early gains after the private Caixin Markit services purchasing managers' index (PMI) for May fell to 51.2 from 51.8 in April. The survey showed that new business and hiring in China's private sector slowed to a three-month low.
Oil futures little changed as decline in US inventories offsets OPEC dampener (CNBC) Crude oil futures were little changed in early Asian trade Friday, having risen in the previous session after a decline in U.S. oil inventories offset a non-eventful OPEC meeting. Benchmark front-month Western Texas Intermediate light, sweet crude oil futures on the New York Mercantile Exchange were last up 0.1% at $49.21 on Friday, after settling 0.3% or 16 cents higher at $49.17 a barrel on Thursday. European Brent crude was last also up 0.1% at $50.11 a barrel after settling 0.6% or 32 cents higher at $50.04 a barrel on Thursday - its first settlement above $50 a barrel in seven months.
Brexit fears loom large for Federal Reserve's next meeting (Financial Times) Britain's looming referendum on its EU membership has emerged as a central swing factor at the Federal Reserve's policy meeting this month that could push the US central bank towards holding fire on rates, recent statements by officials suggest. While an increasing range of US economic data including consumer spending numbers this week appear supportive of a second quarter-point rate increase as soon as June 15, the Fed's meeting comes just a week before the vote that could send shockwaves across the global financial system in the event of a "leave" result.
Trump calls for Clinton to be jailed (CNN) Donald Trump on Thursday called for his likely Democratic rival Hillary Clinton to be imprisoned. "I will say this, Hillary Clinton has got to go to jail," Trump told supporters here as he slammed Clinton's foreign policy speech earlier in the day in which Clinton called Trump dangerous and "temperamentally unfit" to be president.
U.S. small business borrowing fell in April -PayNet (Reuters) U.S. small business borrowing fell in April, data released on Thursday showed, pointing to dimmer prospects of stronger economic growth in coming months. The Thomson Reuters/PayNet Small Business Lending Index fell to 129.0, down from March's downwardly revised 135.1 and marking the index's seventh decline in the last 10 months. The PayNet index typically corresponds to U.S. gross domestic product growth one or two quarters ahead.
Currency Manipulation by the United States Is Alive and Well (Mises.org) Last month, central bankers and finance leaders from the Group of 7 (G-7) advanced economies met in Sendai to discuss the global economy at large. As expected, the United States cautioned Japan, a US currency watchlist country, to refrain from taking further steps to manipulate its currency. This warning came as a result of finance minister Taro Aso hinting that his country was "prepared to undertake intervention" in the foreign exchange market in order to weaken the yen. The author says:
The hypocrisy of US Treasury Secretary Lew's injunction is laughable. Historically, the US has been the world's leading cheerleader for currency manipulation. Not only has the US encouraged and aided Japan in its quest to keep the yen's value low, but it has also mimicked Japan's own export-friendly monetary policy in times of panic.
Draghi Vexed by Feeble Reforms as Inflation Remains Weak (Bloomberg) Mario Draghi unveiled largely unchanged inflation forecasts for the euro zone even as the European Central Bank's latest stimulus measures start to take effect, and said sluggish efforts by governments to upgrade their economies are making his task harder. Here is the video of the full ECB press conference yesterday:
We can control migration inside EU, says PM (BBC News) British Prime Minister David Cameron has said migration can be managed if the UK remains inside the EU and it would be "madness" to try to control it by voting to leave. He said he did not accept that his pledge to cut immigration below 100,000 could not be achieved within the EU.
EU Referendum: Are the Western Isles the most Eurosceptic part of Britain? (BBC News) In 1975, when voters last gave their verdict on European membership, the Western Isles returned a decisive "no" by a 70/30 margin. Ahead of the EU referendum on 23 June this reporter visited the remote islands and found there is still strong feelings against the EU but perhaps opinion is more evenly divided.
We are increasing India's weight in our portfolio: Mark Mobius (Business Standard) Termed as "the pied piper of emerging markets", Mark Mobius, Executive Chairman, Templeton Emerging Markets Group, is positive on India and believes the Indian economy is on a strong footing. In an exclusive chat with Vishal Chhabria and Sheetal Agarwal, he talks about the themes he likes in India, other emerging markets, impact of global events such as Brexit, Fed rate hike on global economies. Edited excerpts accompany this article.
Rajan wins over Prime Minister Modi (The Hindu) Modi and Rajan have developed a close working rapport, government officials and people close to the governor say, and that could be crucial to the $2 trillion economy. With Modi's patronage, it is more likely the government will reappoint Rajan, whose three-year term expires in September, should he wish to stay on, the sources said. That would allow him to try to revive India's banking sector that has been smothered by distressed debt, which, in turn, is choking off economic recovery. It seems that rappointment is Rajan's for the asking. But see next article.
Media report on Rajan's re-appointment hits forex markets (Business Standard) The rupee fell to a one week low at 67.45 per dollar, down 0.3% from its close on Wednesday, after the Anandbazar Patrika reported that the Reserve Bank of India (RBI) Chairman, Raghuram Rajan, would prefer to go back to the United States on completion of his term in early September, citing sources close to him. The RBI did not immediately reply to requests for comment. See also preceding article.
Japan's monetary base increases for 6th straight month, hits record high in May (Xinhuanet) Japan's monetary base increased in May to a new record-high marking the sixth successive month of increase as ongoing liquidity has started to aid inflation efforts, the Bank of Japan (BOJ) said in a report on Thursday. According to the central bank's latest data, the monetary base stood at ¥386.73 trillion ($3.5 trillion), up almost 26 percent on year, as of the end of May. The Bank of Japan has been battling to reverse decades of deflationary pressure that has mired the world's third-largest economy with a number of aggressive qualitative and quantitative easing measures, including the bank, in its latest move, plunging its interest rate into negative territory. The BOJ has continued with its policy of targeting an increase to the monetary base at an annual pace of around ¥80 trillion yen ($730 billion).
No need to panic, China's banks are in pretty good shape (Financial Times) While lending more to corporates unable to pay interest and principal on previous loans means financial risks are clearly rising, it is likely that China is years away from a potential banking crisis, providing it with a window to slow the growth of credit to a sustainable level. A key reason for this judgment is that while the ratio of debt to gross domestic product is quite elevated, China also enjoys a high rate of national savings. The level of debt a country can sustain depends significantly on the share of domestic savings in GDP.
Why Malaysia Stays Quiet About Its Claims In The South China Sea (Forbes) You would expect more noise out of Kuala Lumpur. The Malaysian government claims a dozen Spratly islands in the disputed South China Sea. China and Taiwan claim them as well along with the rest of the 3.5 million-square-kilometer sea that's packed with fish, gas and oil. Malaysia even opened one islet, Layang Layang, to diving tourism. The Southeast Asian country has reserves of 5 billion barrels of crude oil and 80 trillion cubic feet of natural gas in sea, more than other claimants, the U.S. Energy Information Administration says. But Malaysia says little about its claims compared to ever-vociferous neighbors such as China, Taiwan, Vietnam and the Philippines. The reason Malaysia tries to avoid rocking boats is the claimant most likely to splash disputed water on it is China. China happens to be Malaysia's chief economic partner and one with a record of withdrawing economic support elsewhere when friends turn hostile.
US ire switches from renminbi to Chinese industrial overcapacity (Financial Times) For years, currency concerns were at the top of the agenda for US economic policymakers visiting Beijing. But as the Obama administration's economic team prepares for its final "strategic and economic dialogue" with Chinese counterparts next week, there are signs the renminbi has been usurped by a new worry. US officials have been expressing anxiety over Chinese industrial overcapacity and runaway production by the largely state-owned steel sector and other heavy industry that Beijing has pledged to rein in.
China Toxic Debt Solution Has One Big Problem (Bloomberg) On paper, China's latest effort to rid its banks of bad loans looks sensible. By packaging the debt into securities, lenders hope to unload them onto risk-hungry investors, a potential win-win solution that garnered praise from billionaire Wilbur Ross. But if the first deals in this 50 billion yuan ($7.6 billion) program are any guide, the whole exercise may end up just shuffling bad debt between banks, doing little to improve the health of China's financial system as a whole.
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