St George Economics economy and finance update
After a weak start, US equity markets ended their session flat. Disappointing earnings results were offset by some mildly positive economic news. In Europe, the FTSE and the Dax fell 0.5% and 0.7% respectively.
There was little change in bond markets given the mixed economic news. US 10 year bonds closed at a yield of 2.56% while 2 year paper ended at 0.31%, both 1 basis point lower than their previous close. In Australia, 3 year bonds are currently yielding 2.66%.
The US dollar fell against most currencies on expectations that the Federal Reserve will hold monetary policy steady at its meeting next week. It fell to a five-week low against the euro and a four-week low against the yen.
The Australian dollar is trading around 92.7 US cents. Its key short-term risks include the RBA Governor Stevens speech tomorrow.
It remains under pressure against the NZD after the RBNZ hinted the next move in rates would be up.
Oil and copper were down on concerns that China is cutting back its industrial capacity in certain industries while gold was essentially steady.
No data was released.
The Governor of the Chinese central bank Zhou Xiaochuan wrote an article in China's official newspaper which published on Friday. Zhou noted that current domestic, international economic situation was complicated and that there was greater downward pressure on the Chinese economy.
He also mentioned that the central bank would improve the availability of credit to small enterprises and promote interest rate reform.
These comments follow the removal on controls on bank lending rates about a week ago and indicate China is on the path to slowly liberalising its financial system.
The MNI business sentiment index fell from 53.7 to 51.3 in July, which adds to the range of indicators suggesting that Chinese growth is slowing.
No data was released.
National consumer prices rose 0.2% in the year to June, the first increase in prices in just over the year. It provides a positive sign that Japan may be emerging from deflation.
Prices excluding food and energy (core-core inflation) however, remained in decline, falling 0.2% in the year to June, although this was a step up from the 0.4% decline in the year to May.
While a step closer, inflation remains far from the Bank of Japan's 2 percent inflation target.
The University of Michigan consumer sentiment index was revised up from 83.9 to 85.1 on the final July reading, taking it to a new 6 year high.