The People's Bank of China (PBoC) left its benchmark interest rates for corporate and household loans steady for the 14th straight month at its June fixing, as the economy continues to recover from the downturn caused by the COVID-19 shocks. The one-year loan prime rate (LPR) was left unchanged at 3.85%, while the five-year remained at 4.65%.
The US Dollar Index held at 92.285 in early trade Monday, trading at 10-week highs after notching its best week since March 2020 following a surprisingly hawkish tone from the Fed last week. Such a move marks a dramatic reversal from an over four-month low of 89.30 touched in late May. The US central bank has sharply raised its forecasts for inflation this year and flagged two rate increases by the end of 2023. The scale of the change in outlook came to benefit bullish investors who expect that Jay Powell and his rate-setting colleagues will need to think about scaling back quantitative easing to prevent the US economy from overheating. On top of that, comments from James Bullard, president of the St Louis Fed, about the prospects of an even earlier interest rate increase have supercharged existing upward momentum for the greenback.
The NIKKEI 225 fell 855.41 points or 2.95% to 28108.67 on Monday, extending declines of 0.64% last week and trading at 4-week lows as investor sentiment soured after the US Federal Reserve's hawkish pivot last week increased market worries about an early tapering of its accommodative policies. Locally, the BoJ maintained its massive monetary stimulus last week in order to support the country's economic recovery, while extending a deadline for asset-buying and loan programmes introduced last year to channel funds to pandemic-hit firms. Policymakers also unveiled a plan to boost funding for fighting climate change in a surprise move. Local 10-year bond yields were at 0.06% while US 10-year rates lifted to 1.426%. Meantime, the Japanese government decided Thursday to end the COVID-19 state of emergency covering Tokyo, Hokkaido, Osaka and six other prefectures Sunday, while keeping Okinawa under the measure for three more weeks.
The KOSPI fell 19.38 points or 0.59% to 3248.55 in early Monday deals, reversing gains of 0.56% last week and retreating from near record highs as investor sentiment soured after the US Federal Reserve's hawkish pivot last week increased market worries about an early tapering of its accommodative policies. Local 10-year bond yields were at 2.06% while US 10-year rates were at 1.423%. On the coronavirus front, The KDCA reported 429 more COVID-19 cases as health officials Sunday unveiled new social distancing rules that center on allowing gatherings of more people and lifting regulations for businesses amid the country's aggressive inoculation program. Amid local data, exports rose 29.5% on-year in the first 20 days of June on the back of robust demand for chips, autos and petroleum products, while imports increased 29.1% on-year.
The ASX 200 dropped 123.40 points or 1.67% to 7245.50 in early Asian trade on Monday, reversing gains of 0.86% in the previous week as investors retreated after Federal Reserve official James Bullard spooked US equity markets, saying that the US central bank might raise interest rates sooner than previously expected. Among stocks, Commonwealth Bank was down 3.66% while Westpac fell 2.23% and NAB dropped 2.29%. Rio Tinto lost 2.02%, while Fortescue Metals was down 0.89%. Traders will also be focused on local preliminary retail sales data and China’s PBoC interest rate decision later in the session. Among recent data, Australia's seasonally adjusted unemployment came in at 5.1% in May 2021, the 7th straight month of fall in the jobless rate and the lowest reading since February 2020. Westpac’s chief economist Bill Evans noted that the report is a major ‘game changer’ for policy, underscoring the strength of momentum in the economy.