Good morning. Here’s what you need to know.
- Markets in Asia were mixed in overnight trading. The Japanese Nikkei rose 1.8%, the Hong Kong Hang Seng fell 1.1%, and the Shanghai Composite retreated 0.6%. Markets in Europe are mostly lower with the exception of the German DAX, up 0.1%. In the United States, futures point to a negative open.
- Japanese merchandise trade exports rose 10.1% in May from the previous year after a 3.8% advance in April, topping estimates of 6.4% growth. Imports only rose 10% in May, below consensus estimates for an 11% advance.
- Short-term interbank lending rates surged 200 basis points to an all-time high of almost 8% on Wednesday after the PBoC refused to inject liquidity into the market. “The only explanation is that the central bank wants to send a warning signal to commercial banks and other credit issuers that unchecked credit expansion, particularly through the shadow banking system, will not be accommodated,” says CNC Asset Management’s Na Liu.
- Today’s release of the minutes from the latest Bank of England monetary policy meeting revealed that the Monetary Policy Committee voted 6-3 to keep the central bank’s asset purchase target unchanged at 375 billion pounds. Some members were in favour of increasing it, though, and the pound fell on the news. Incoming BoE Governor Mark Carney, seen as dovish, takes over at the BoE at the end of this month.
- At 2 PM, the Federal Reserve releases the FOMC statement from its June monetary policy meeting and updates to its macroeconomic forecasts. At 2:30, Fed Chairman Ben Bernanke will hold a press conference and Q&A with reporters. The discussion will likely centre on the recent rise in interest rates, and market participants will be listening for Bernanke to strike a dovish tone to counter it.
- The Congressional Budget Office said the immigration bill currently before the Senate would reduce the federal budget deficit by $875 billion over 20 years. $175 billion of deficit reduction would happen in the first 10 years, while $700 billion of deficit reduction would take place over the second decade.
- Mass protests in Brazil over inflation and eroding standards of living continued Tuesday night, drawing 50,000 people into the streets to demonstrate. Small groups of protesters clashed with police and broke into stores.
- Concerns over a growth slowdown in China have emerged as a major theme in global markets. Today, HSBC knocked its China growth forecasts down to 7.4% in 2013 and 2014 from 8.2% and 8.4%, respectively.
- In what Magic Johnson called one of the two or three best NBA games ever, the Miami Heat staged an epic comeback to beat the San Antonio Spurs 103-100 in overtime in Game 6 Tuesday night, forcing Game 7 on Thursday. The Heat were trailing 10 points behind at the beginning of the fourth quarter and 5 points down in the final minute, but a couple of clutch three-pointers helped them pull out the win.
- Global shipping giant FedEx reported better-than-expected first quarter earnings this morning. EPS came in at $2.13 versus expectations for $1.96. Revenues were right in line with expectations at $11.4 billion.
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