Chinese stocks rose on Monday despite growing fears in the west that an unsustainable equity bubble is ripe to burst in the largest Asian economy. China’s Shanghai Composite Index rose 1.75% by late afternoon trading, extending the index’s rally. In the last twelve months, the index has risen nearly 138%, or 44% year-to-date.
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Turkish governing party, AKP, has come under fire over such economic problems as high household debt and unemployment. Despite the party’s growing unpopularity and attacks from the opposition, the AKP is set to win the government by a slight majority. The general election in Turkey takes place on June 7.
The strong upside momentum for the US dollar seen last week is carrying into today’s activity. It was firm in the holiday-thinned trading yesterday but has jumped higher today. There are two chief drivers.
While the markets in the United States and parts of Europe were closed on Monday, four things took place that global investors need to know.
Seldom has the death of a great Asian leader commanded as much appreciation in the West as the passing of Lee Kuan Yew. The mind numbs at the number of well-earned tributes to the man who led Singapore to become a successful and influential nation-state.
Emerging markets currencies are somewhat directionless at the moment, caught between an unclear trend for the dollar and oil prices in a broad yet volatile range since the start of the month. Moreover, the uncertainty about the timing of the first Fed hike and festering risks in Europe (Greece and rise of the anti-establishment parties in Spain) will continue to detract from risk appetite. We see EM trading with a mildly negative tone in the week ahead, though we don’t seen many idiosyncratic risk events in the near them.
As Australia moves away from a decade of resource-driven prosperity, it is even more important that it avoid mistakes that previously might have been papered over by the boom times. Yet there are loud voices calling for the mistakes of the past to be made again. One of the loudest is that of Australian mining company Fortescue’s non-executive chairman, Andrew ‘Twiggy’ Forrest.
Australian federal government policymakers need to have broader and more robust consultations with business, consumers and state governments when it comes to trade treaties. As an open economy that is heavily dependent on trade for its well-being, it is important for Australia to get trade and economic integration right.
The US dollar had a good week. Indeed, the Dollar Index’s 3.3% rise was its best weekly performance since last September. After looking rather bleak, the divergence theme struck back with a vengeance.
1) Petrobras reported stronger than expected Q1 earnings, 2) A Colombian court ordered a delay to the sale of the government’s 57.6% stake in hydropower company Isagen, 3) The Mexican government cut its growth forecast for the year by a full percentage point, 4) Bank Indonesia kept rates steady at 7.5%, as expected, but eased via macroprudential policies, 5) S&P moved the outlook on Indonesia’s BB+ rating from stable to positive, 6) Press reports that China is readying plans to boost local government borrowing, 7) Russian Finance Ministry started buying USD
