China's new bank loans in June exceeded expectations, with Chinese banks extending 3 trillion yuan in new loans, more than double May's figure. Economists caution that more time and information are needed to interpret the strong credit figures, emphasising the importance of assessing housing sales where Household loans, primarily mortgages, and corporate loans saw significant increases in June. Fitch Ratings warned that Chinese homebuyers' mortgage payment boycotts on properties with suspended construction could weaken banks' asset quality and test the banking system's resilience, with smaller regional banks most vulnerable. The central bank extended certain policies to support the property sector and pledged further policy support, including potential rate cuts, to stimulate credit growth amid weakening demand. Although it's a short-term solution, it may be enough to weather the storm.
EQUITY
Stocks closed higher as the energy and big tech sectors led the gains, while investors awaited inflation reports. Energy stocks rose on expectations of tightening oil markets and potential stimulus measures in China, while banks rallied ahead of the earnings season. Activision jumped 10% on a court ruling that may permit one of the largest potential mergers this decade.
GOLD
Gold prices rose to a three-week high as investors anticipated that the Federal Reserve was nearing its peak interest rates and might shift their investments away from the dollar towards stocks and commodities. Anticipation of a lower U.S. Consumer Price Index (CPI) will indicate a decrease in inflationary pressures.
OIL
Oil prices rose on Wednesday as the dollar weakened while Chinese stimulus measures and tightening supplies supported the market. However, anticipation of lower headline inflation and potential interest rate hikes from the Federal Reserve, along with an unexpected increase in U.S. crude stockpiles, tempered the recent rally.
CURRENCY
The US dollar fell to a two-month low as Federal Reserve officials hinted at the end of their tightening cycle, while the British pound reached a 15-month high after strong wage growth. The dollar also weakened against the yen and Swiss franc, and market participants are eagerly awaiting the US CPI report for more insight into the Fed's policy. Bond yields retreated after briefly touching dangerous territory last week.
