Courtesy of Ran Squawk:
Overnight, China reported a 34-month high year-by-year CPI, which was not as high as many analysts anticipated, allied with higher than expected industrial production, which in turn provided support to Asian and European equities. However, the release was swiftly followed by the PBOC hiking its reserve requirement ratio by 50 basis points, which somewhat weighed on commodities, and commodity-linked currencies. Elsewhere, European peripheral debt concerns persisted, which allied with lack-lustre auctions from Italy and Greece saw widening of Eurozone peripheral government bond yield spreads, and Euro-era record highs in Greek, Portuguese, and Irish 10-year government bond yields. Bund futures also came off their earlier lows once supply from the Eurozone got cleared. In other news, an in-line year-by-year CPI data from the UK observed a knee-jerk reaction in GBP/USD, moving it up around 30 pips, however gains were quickly pared.
Moving forward, markets look ahead to a slew of key economic data from the US in the form of PPI, retail sales, and business inventories. In fixed income, another Fed's Outright Treasury Coupon Purchase operation is scheduled in the maturity range of Dec'12-Nov'13, with a purchase target of USD 2.5-3.5bln.
BoJ Target Rate (Jun) M/M 0.10% vs. Exp. 0.10% (Prev. 0.10%) (RTRS)
The BoJ slightly upgraded its assessment of the economy, saying it continues to face downward pressure but is showing some signs of picking up. It also decided to create a JPY 500bln new credit line for banks that extend asset-based lending.
- Chinese CPI (May) Y/Y 5.5% vs. Exp. 5.5% (Prev. 5.3%), 34-month high
- Chinese PPI (May) Y/Y 6.8% vs. Exp. 6.5% (Prev. 6.8%)
- Chinese Retail Sales (May) Y/Y 16.9% vs. Exp. 17.0% (Prev. 16.5%)
- Chinese Industrial Production (May) Y/Y 13.3% vs. Exp. 13.1% (Prev. 13.4%) (RTRS)
The PBOC said that EU sovereign debt crisis could spread and worsen, adding that global economy will get hurt if developed countries cannot contain their debt. It also said that emerging economies may face hard-landing if policy tightening can’t curb bubbles, adding that curbing inflation is its top priority. PBOC also said that CNY reforms will help curb inflation and asset bubbles. (RTRS)
Fed’s Fisher said the Fed must reverse its super-easy monetary policy or risk fuelling inflation, and repeated his view that the Fed has done enough to help the economy, and vowed he will not support any further monetary policy easing. He also said that the Fed must not keep monetising debt, and politicians must not use Fed to avoid tough budget decisions. (RTRS)
- NFIB Small Business Optimism (May) M/M 90.9 vs. Exp. 90.5 (Prev. 91.2)
EU and UK Headlines:
European finance ministers will hold an emergency meeting on Tuesday in an effort to narrow differences over a EUR 172bln rescue package for Greece. There are signs that no decision may be reached before a meeting on Friday between Angela Merkel and Nicolas Sarkozy. Official’s hope the two can strike a deal that could be finalised at the finance ministers’ meeting in Brussels next Monday, rather than waiting until a full EU summit on the 23rd, which would be the absolute limit for a decision. (FT-More)
In other news, IMF said it doesn't see an imminent danger that Austria could lose its AAA debt rating. (RTRS)
- UK CPI (May) Y/Y 4.5% vs. Exp. 4.5% (Prev. 4.5%)
- UK RPI (May) Y/Y 5.2% vs. Exp. 5.2% (Prev. 5.2%)
- UK DCLG House Prices (Apr) Y/Y -0.3% vs. Exp. -0.2% (Prev. 0.9%)
- UK RICS House Price Balance (May) M/M -28% vs. Exp. -20% (Prev. -21%) (RTRS)
- Italian BTP auction for EUR 3.5bln, 3.75% 15-Apr-16, bid/cover 1.28 vs. Prev. 1.45 (yield 3.90% vs. Prev. 3.770%)
- Spanish 12-month T-Bill auction for EUR 3.96bln, bid/cover 2.85 vs. Prev. 2.50 (yield 2.695% vs. Prev. 2.546%)
- Spanish 18-month T-Bill auction for EUR 1.46bln, bid/cover 3.91 vs. Prev. 4.12 (yield 3.260% vs. Prev. 3.095%)
- Greek 26-week T-Bill auction for EUR 1.625bln (incl. EUR 375mln in non-competitive bids), bid/cover 2.58 vs. Prev. 3.58 (yield 4.96% vs. Prev. 4.880%)
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