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ICBC Financial Market Daily Review-April 28, 2017
 

I. Yesterday's News
International News
1. The European Central Bank stuck to its ultra-easy policy stance on Thursday as inflation continues to undershoot its target but explicitly acknowledged the vigour of the euro zone economy, now on its best run since the global financial crisis. Despite calls from Germany, the euro zone's economic powerhouse, for a gradual reduction of stimulus, the ECB even left the door open to further rates cuts or an increase in asset buys. But ECB President Mario Draghi noted that the euro zone's economy had further improved and the risk of a new downturn had receded, a signal seen by many as foreshadowing a bolder change at the next meeting in June. Traders argued that Draghi's comments were more cautious than they had expected and the euro fell against the dollar while yields on euro zone government bonds dipped.

2. The Bank of Japan kept monetary policy unchanged on Thursday and offered its most optimistic assessment of the economy in nine years, signalling its confidence that a pick-up in overseas demand will help sustain an export-driven recovery. But the central bank slightly cut its inflation forecast for this fiscal year in a quarterly review of its projections, suggesting that it will maintain its massive monetary stimulus for the time being to achieve its ambitious 2 percent target.

3. The U.S. Congress took steps to extend until May 5 the deadline for reaching a deal on federal spending through September and head off a feared government shutdown at midnight on Friday. Republicans introduced a bill on Wednesday to fund government operations at current levels for one more week, giving them more time to finish negotiations with Democrats on a spending plan for the rest of the fiscal year ending Sept. 30. The legislation was likely to be voted on by the House of Representatives and Senate on Friday, meaning that if it passes, it would have to be rushed to President Donald Trump to sign into law promptly.

4. US President Donald Trump told the leaders of Canada and Mexico on Wednesday that he would not terminate the NAFTA treaty but seek to renegotiate it with them, a White House statement said. The White House said Trump spoke by phone with Mexican President Enrique Pena Nieto and Canadian Prime Minister Justin Trudeau, and that he would hold back from a speedy termination of NAFTA, in a "pleasant and productive" conversation. The announcement came as White House officials disclosed that Trump and his White House advisers were considering issuing an executive order to withdraw the United States from the trade pact with Canada and Mexico.

5. Sweden's central bank held its benchmark interest rate at -0.50 percent as expected on Thursday but said it would extend its bond buying programme by 15 billion Swedish crowns and pushed out its forecast for when rates may rise to the middle of 2018.

6. New orders for key U.S.-made capital goods rose less than expected in March, but a second straight monthly increase in shipments suggested business investment accelerated in the first quarter amid a recovering energy sector. The Commerce Department said on Thursday non-defense capital goods orders excluding aircraft increased 0.2 percent last month, shipments of these so-called core capital goods rose 0.4 percent. In separate reports, the trade gap in goods widened to 1.4 percent in March despite that retail inventories rose 0.4 percent. Wholesale inventories, meanwhile, fell 0.1 percent. The U.S. economy is on track to expand at a 0.2 percent annualized pace in the first quarter, the lowest pace in three years, the Atlanta Federal Reserve's GDP Now forecast model showed after the data.

7. Japan's core consumer price index (CPI) rose 0.2 percent in March and posted the third straight month of increase, Internal Affairs ministry's data showed on Friday. The growth was same with that of February, the fastest since April 2015. Separate government data showed on Friday that Japan's jobless rate held steady at 2.8 percent in March and the availability of jobs rose to the highest since November 1990.

8. Google parent Alphabet's profit rose 29 percent, boosted by a surge its core advertising business, such as its advertiser YouTube. Google's ad revenue rose 18.8 percent to $21.41 billion in the first quarter. Amazon.com Inc's net income rose to $724 million, or $1.48 per share from 513 million and $1.07 per share a year ago on strong retail and cloud-computing sales, marking the eighth straight quarter that the company posted a net profit, inching above Wall Street's expectations. Intel Corp reported lower-than-expected quarterly revenue due to an unexpected slowdown in growth at its data center business. Microsoft Corp slightly missed Wall Street's average revenue estimate for the latest quarter on Thursday, as sales of its Surface tablets and laptops slumped in the face of revamped competition in the personal computer market.

Domestic News
9.China's top leaders said the nation's financial situations are generally good with risk under control, while ensuring "systematic financial risks do not occur". They said china need to further its financial reform, increase coordinated oversight of major  financial institutions, ward off systemic financial risks, and strengthen financial supervision on financial market and e-finance.

10. China says its Silk Road initiative is helping create "a new era of globalization" open to all, according to a draft communique for a summit next month on the project, as Beijing burnishes its free trade credentials amid protectionist forces elsewhere.

11. Profits at China's major industrial companies rose slower in March from the first two months in 2017, damped by easing profit growth in coal, oil and steel industries and high base of the same period last year. This is still a high growth rate, on track back to normal. The slower profit growth echoed market expectations as analysts have expected the rise in upstream and midstream firms, and industrial firms to cool. China's major industrial firms are expected to see slower profit growth as a result.

II. Market Overview
FX
1. Global Market
The euro was last down 0.3 percent against the dollar at $1.0875. The dollar was last 0.2 percent higher against the yen at 111.22 yen. The dollar index, which measures the greenback against a basket of six major rivals, was last up 0.1 percent at 99.104. The dollar rose as much as 1.3 percent higher against the Swedish crown to a session peak of 8.8730 crowns per dollar. The dollar was down 0.8 percent against the Mexican peso at 19.0300 pesos after U.S. President Donald Trump said he would not scrap the North American Free Trade Agreement (NAFTA).

2. Home Market
China's yuan continued to slide against the dollar with the midpoint rates falling to a two-week low and offshore CNH slipping, despite that U.S. President Donald Trump's tax plan pulled the dollar index slightly lower. But yuan pared losses on large forex settlement by large Chinese banks.

Precious Metals
Gold resumed its downward slide from a five-month high in mid-April, giving up gains that came after U.S. President Donald Trump announced unfunded tax cuts, while comments from European Central Bank President Mario Draghi weakened the euro. Spot gold was down at $1,263.70 an ounce, while U.S. gold futures settled up 0.1 percent at $1,265.90.

Commodities
1.Crude Oil
Crude prices were slightly lower after a volatile session on Thursday, as the restart of two key Libyan oilfields and concerns about lackluster gasoline demand fed concern over whether major oil producers can alleviate the glut of global inventories. Brent crude settled down 38 cents a barrel at $51.44. U.S. light crude was down 65 cents to $48.97 a barrel. U.S. gasoline tumbled almost 3 percent in a choppy trade, led the energy market.

2.Base Metals
Three-month copper on the London Metal Exchange closed down 0.4 percent at $5,692 a tonne. The LME price of the metal mainly used for galvanizing steel ended down 1.1 percent at $2,597. LME nickel finished up 1.2 percent at $9,335 after touching a fresh 10-month low of $9,185. LME aluminium closed down 2 percent at $1,924, the biggest one-day fall since November.

U.S. Treasuries
1. U.S. bonds
U.S. Treasury prices rose on Thursday, as investors sought the safety of bonds in the face of doubts about President Donald Trump's unimpressive tax plan and persistent geopolitical tensions in North Korea and Syria. In late trading, benchmark 10-year notes were up 4/32 in price to yield 2.294 percent. U.S. 30-year bond prices rose 4/32, yielding 2.962 percent. On the front end of the curve, U.S. two-year yields were at 1.257 percent.

2. Chinese bonds
China's interbank money rates were little changed, and interest rates swap edged higher in the morning session. Seven-day repo rates rallied 50 bps, sending interest rates swap up 2-3 bps after the central bank snapped fund injection at month-end. Cash bonds were also little changed with yields of major interest rates bonds moving within 1 bp.

Stock Market
1. U.S. Equities
The Nasdaq Composite ended at a record high on Thursday, boosted by results-related gains in Comcast, PayPal and Intuit, while the S&P 500 and the Dow were little changed. The Dow Jones Industrial Average rose 6.24 points, or 0.03 percent, to 20,981.33, the S&P 500 gained 1.32 points, or 0.06 percent, to 2,388.77 and the Nasdaq Composite added 23.71 points, or 0.39 percent, to 6,048.94.

2. Hong Kong Equities
Hong Kong's benchmark stock index closed at its highest level in 20 months on Thursday as investor sentiment remained supported by prospects of better global growth and receding worries about political risks in Europe. The market also drew support from continuous flows of money from mainland Chinese investors. The Hang Seng index rose 0.5 percent to 24,698.48 points, its strongest close since August, 2015. But the China Enterprises Index lost 0.6 percent to 10,261.25.

3. China Equities
China's stocks edged higher on Thursday, extending its gains to the third consecutive day. The Shanghai Composite Index opened lower, crossing below 3,100 during one point, before seeing technical rebound on bargain hunting. Trading volume enlarged. The index is expected to consolidate above 3,100.


(2017-04-28)
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