· Risk-on move dents dollar; yuan set for best day since December
The yuan on Monday was on track for its best day against the dollar since December as investors lapped up risky assets on growing expectations of a strong Chinese economic rebound and as glimmers of good news in U.S. data drove down demand for the safe-haven dollar.
An index of blue-chip Chinese shares soared to its highest in five years as traders bet on a revival in China, pushing the offshore yuan up 0.75% to its highest level since March 18 and on track for its best daily performance since Dec. 12. It was last at 7.015 yuan per dollar.
A broad-based risk-on move also weakened the U.S. dollar. Against a basket of six rival currencies , it was last down 0.42% at 96.76, having earlier hit its lowest since June 24.
Monday’s move followed a significant technical event on Friday called a death cross - in which the dollar index’s 50-day moving average crossed below its 200-day moving average - indicating the potential for a sell-off.
The euro rose to a two-week high of $1.1345, supported by the positive sentiment about a revival in Chinese economic activity as well as strong data. German industrial goods production rose by 10.4% in May, rebounding from their biggest drop since records began in 1991 and the bloc’s retail sales figures rose above pre-coronavirus levels in some countries.
· 10-year Treasury yield rises above 0.7% after better-than-expected economic data
Treasury yields climbed on Monday as stronger-than-expected economic data signaled a recovering economy amid the coronavirus pandemic
The yield on the benchmark 10-year Treasury note rose 3 basis points at 0.700% and the yield on the 30-year Treasury bond was up at 1.467%. Yields move inversely to prices.
Data on Monday showed the Institute for Supply Management’s nonmanufacturing index rose more than expected in June. The index jumped to 57.1 last month, topping a Dow Jones estimate of 50.1. The gauge signaled the first expansion within the sector in three months and also posted the biggest month-over-month increase on record.
Investors are still closely monitoring the continued rise in new coronavirus cases in the U.S.
· CORONAVIRUS UPDATES:
· U.S. pandemic aid program saved 51.1 million jobs, but wealthy and connected also benefited
A high-profile pandemic aid program protected about 51.1 million American jobs, the Trump administration said on Monday, as it revealed how $521.4 billion in taxpayer cash was injected into small businesses but also into the pockets of the rich and famous.
The data on the small business Paycheck Protection Program (PPP) seemed to confirm worries among Democrats and watchdog groups that in addition to mom-and-pop shops, the funds went to well-heeled and politically-connected companies, some of which were approved for between $5 million and $10 million.
Those include several firms that lobby on public policy, such as Wiley Rein LLP and APCO Worldwide, as well as prominent law firms like Kasowitz Benson Torres LLP, which has represented President Donald Trump, and Boies Schiller Flexner LLP.
· U.S. trade groups urge China to increase purchases of U.S. goods, services
The U.S. Chamber of Commerce and over 40 trade associations on Monday urged top American and Chinese officials to redouble efforts to implement a Phase 1 trade agreement signed by the world’s two largest economies in January despite pandemic-related strains.
In a letter to U.S. Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He, the groups said they were encouraged by the progress so far, but urged a significant increase in China’s purchases of U.S. goods and services.
They said combating the novel coronavirus pandemic and restoring global growth depended in part on successful implementation of the U.S.-China trade deal, which helped defuse a nearly 18-month trade war marked by tit-for-tat tariffs.
The agreement called for China to purchase $200 billion in additional U.S. goods and services over the next two years.
· Tensions heat up in South China Sea as US makes significant show of force
For the first time in six years, two US Navy aircraft carriers are in the South China Sea, the latest show of military might from Washington as it pushes back against China's sweeping claim to much of the contested region.
The two US carriers arrived in the region as China wrapped up its own set of naval exercises near a disputed island chain, an apparent synchronicity not lost on Beijing's state media, which carried reports boasting of the country's readiness to repel any US attempt to challenge its claims.
Operating under the name the Nimitz Carrier Strike Force, the American carriers, the USS Nimitz and USS Ronald Reagan, "conducted several tactical exercises designed to maximize air defense capabilities, and extend the reach of long-range precision maritime strikes from carrier-based aircraft," a US Navy statement said.
It is the first time two US carriers have operated together in the South China Sea since 2014 and only the second time since 2001, according to Lt. Cmdr. Sean Brophy, a spokesperson aboard the Reagan.
"These efforts support enduring US commitments to stand up for the right of all nations to fly, sail, and operate wherever international law allows." a US Navy statement said.
As the US force was putting on its display on America's Independence Day holiday, China's People Liberation Army Navy was wrapping up five days of drills around the Paracel Islands, known in China as the Xisha, a chain also claimed by Vietnam and Taiwan.
· Japan May real wages fall at quickest pace in nearly five years
Japan’s May inflation-adjusted real wages dropped at the fastest pace in nearly five years, government data showed on Tuesday, in a sign of labour market stress as the economy takes a heavy blow from the novel coronavirus pandemic.
The world’s third-largest economy is bracing for its worst postwar slump in the quarter through June, with economists expecting an annualised contraction of over 20% after a massive demand shock due to lockdown measures in response to the virus outbreak.
Real wages, a gauge of household purchasing power, tumbled 2.1% in May from a year earlier, labour ministry data showed, falling at the fastest pace since a 2.8% decline in June 2015.
“The impact from the coronavirus led to a reduction in overtime pay which caused real wages to fall a lot,” a labour ministry official told Reuters.
· Japan May household spending tumbles 16.2% year/year
Japanese household spending fell 16.2% in May from a year earlier, government data showed on Tuesday, as consumers heeded authorities’ calls to stay home to help contain the coronavirus pandemic.
The decline was larger than a median market forecast for a 12.2% drop.
· Oil steady as hopeful economic data face spike in virus cases
Oil futures ended largely steady on Monday as positive economic data supported prices, while a spike in coronavirus cases in the United States that could curb fuel demand pressured prices.
Brent crude LCOc1 settled at $43.10 a barrel, up 30 cents. U.S. West Texas Intermediate (WTI) crude CLc1 settled at $40.63 a barrel, down 2 cents.
U.S. services industry activity rebounded sharply in June, almost returning to its pre-COVID-19 pandemic levels, while China’s economy was recovering and its capital markets attracting money, setting the scene for a healthy bull market, the official China Securities Journal said in an editorial.
German data, however, showed that the recovery from COVID-19 will be slow and painful. Germany’s industrial orders rebounded moderately in May and a fifth of firms in Europe’s biggest economy said in a survey published on Monday they feared insolvency.
Reference: CNBC, Reuters, Worldolmeters, CNN
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