- Financial markets rebounded after yesterday’s decline on prospects of resumed trade talks between China and the US in order to halt trade strains. The Chinese Vice Minister Wang Shouwen said that the country would open its markets wider and deeper. In this context, Chinese stocks climbed back from their recent biggest losses, driving other Asian markets slightly higher. Both the US and European stock markets also bounced back today, led by the slight improvement in market mood coupled with positive 3Q18 company earnings results expectations and the increase in EZ industrial production.
- Despite the improvement in the financial market mood, caution remains. The US 10Y yield remained broadly stable, despite the robust US CPI figures for June (2.9%), while the 10Y Bund inched lower. ECB minutes, did not provide additional information but reinforced the roll for the forward guidance as a tool of adjusting monetary policy. Regarding the strong guidance on interest rate, the minutes suggested they wanted a good balance between providing sufficiently precise guidance and maintaining adequate flexibility. Peripheral risk premia remained unchanged.
- The USD remained steady against its major peers: the JPY depreciated (showing the risk aversion mood) and both the EUR and the GBP appreciated against the US dollar. In addition, the stability of the USD favoured EM currencies which slightly appreciated across the board, led by the MXN. Crude oil prices continued below $75 per barrel and copper recovered slightly.
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