The market was quiet in terms of macroeconomic data. However, a bounce was seen as driven by comments from policymakers. China's Premier Wen Jiabao pledged to adopt a proactive fiscal policy and a prudent monetary policy and stressed that maintaining growth is crucial for the country. In the Eurozone, Germany's Finance Minister Schaeuble said that that the country would do everything necessary to keep Greece in the euro. Although what measures are included in the everything basket are not discussed in greater details, investors appeared to be more relieved. In the commodity sector, oil prices rebounded with the front-month contract for WTI crude gaining +1.19% while the equivalent Brent crude contract up +1.56%. Gold remained steady, hovering around a 1-week high through the day.
Chinese Premier Wen Jiabao urged officials to put more efforts in maintaining economic growth which has moderated rapidly since the last quarter of 2011. He stated that the country 'should properly handle the relationship between maintaining growth, adjusting economic structures and managing inflationary expectations'. The government would 'continue to implement a proactive fiscal policy and a prudent monetary policy, while giving more priority to maintaining growth'. Wen's comments indicated that the country has placed growth in a higher priority than before and more easing measures are anticipated to be put forward. We expect further RRR reduction. Yet, besides this, ways the government to bolster growth include structural tax reforms, electrical appliances and building material rural subsidy program, strategically important infrastructure projects, private capital investments into railway, public administrative, finance, energy, telecom, education and medical services.
Ahead of the informal EU meeting on Wednesday, finance ministers made some comments regarding the Greek situation. According to the new French finance minister Pierre Moscovic, he has discussed with Germany's Finance Minister Wolfgang Schaeuble about various issues including Eurobonds and the discussion did not move beyond the old German and French positions. Schaeuble stated that both countries would engage all ideas constructively and find solutions in order to strengthen sustainable growth. There was no sign that France has pushed Germany to renegotiation the fiscal plans in Greece. For the French fiscal policy, Moscovici reaffirmed the new President Francois Hollande's commitment that the deficit to GDP ratio will be lowered to 3% in 2013 and then to 0% by 2017.
On the dataflow today, the RBNZ would release its 2-year inflation expectation report. In the European session, the UK headline inflation probably gained +3.1% y/y in April, easing from +3.5% a month ago. Core CPI is expected to have dropped to +2% in April from +2.5% in March. The Eurozone's consumer confidence might have slipped to -20.5 in May from -19.9 in the prio month. In the US session, existing home sales probably increased to 4.6M in April from 4.48M in March.