Overview: Worries about an escalation in the Gulf following US accusations that Iran was behind yesterday’s two attacks and weaker growth impulses, while trade tensions remain high, are dampening risk appetites ahead of the weekend. Equities are lower. Nearly all the stock markets in the Asia Pacific region fell today with Japan and Australia being the notable exceptions. The MSCI Asia Pacific Index will take a three-day losing streak into next week. Europe’s Dow Jones Stoxx 600 is giving back half of the week’s gains with a 0.4% loss through late morning turnover. Only utilities are posting gains, which is partly a reflection of the continued rally in bonds. Disappointing Chinese and New Zealand dollar has seen the Antipodean 10-year benchmark yields fall to new record lows, and pushing their currencies lower. European yields are mostly two to four basis points lower. The benchmark yields in Germany, Spain, Portugal, and Greece are at new record lows. The US 10-year yield is off about three basis points to almost 2.05%. The dollar is firmer against most of the major currencies. In addition to the heavier tone for the Australian and New Zealand dollars, sterling is also leading the pack lower. For the week, the US dollar has risen against all the majors, though against the yen, it is virtually flat. Oil is paring yesterday’s gains but is still off 3.8%-4.0% this week, and gold is higher for the 11th of the past 13 sessions and has moved above $1350 for the first time since April 2018.
Asia Pacific
China’s data disappointed, and although the recently announced stimulative measures have yet to be picked up by the data, additional steps to support the economy are likely. Another reduction in required reserves may be delivered in the coming weeks. Industrial output slowed to 5% in May from 5.4% in April. It was weaker than expected and is the slowest pace since 2002. Fixed asset investment slowed to 5.6% from 6.1%. It is the lowest since last September. The one upside surprise was retail sales. Helped by a long holiday at the beginning of the month, retail sales accelerated to 8.6% from 7.2% year-over-year rate in April.
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