Tip:
Highlight text to annotate it
X
Asian markets are generally higher today but gains are limited by China's inflation data.
CPI rose more than expected by 2.7% year on year in June, compared to consensus of 2.5%
year on year. And, that's quite a sharp acceleration from May's 2.1% year on year. The figure is
still staying below government's target of 3.5% but there are concerns that the acceleration
is starting to limit scope for further policy easing. Meanwhile, PPI stayed negative at
-2.7% year on year, suggesting that the economy is still struggling with over-capacity and
weak demand. And, still, there are concerns over the drive to reform credit to restructure
the economy. Fitch noted in its Sovereign Review and Outlook
that recent talk of Fed's tapering and the uncertain exit path of the Fed will generate
periodic bouts of market volatility. And, it noted the emerging markets, including bonds,
currencies and equities were hit disproportionately hard. While Fitch doesn't expect widespread
credit distress, there will be concerns over slowing growth, China's financial stability,
softer commodity prices and a series of political shocks in some Emerging Markets. Fitch doesn't
expect a rate hike from the Fed before mid-2015 but the prospect of tightening will increase
risk facing weaker Emerging Markets. In the Eurozone, European Central Bank president
Draghi told the European Parliament in Brussels that the exit from the accommodative monetary
stance is "distant". And, he reiterated the forward guidance that the governing council
will keep rates at current or lower levels for an "extended period of time". Meanwhile,
he noted that the central bank will see "what the market reaction has been, is and will
be to this statement." On the data front, UK British Retail Consortium
sales monitor rose 1.4% year on year in June, Royal Institution of Chartered Surveyors house
price balance improved to 21 in June. Australia National Australia Bank business confidence
improved to 0 in June. UK data will be the focus today with industrial and manufacturing
production as well as National Institute of Economic and Social Research GDP estimate
being released. Whilst Switzerland will release retail sales and Canada will release housing
starts.