Market sentiment was lifted amid speculations about China's stimulus. According to China Securities Journal, the world's biggest growth driver may introduce 'more proactive measures, such as foreign trade stabilization, tax reduction and infrastructure investment, to maintain stable growth. The PBOC sold 14-day reverse repurchase agreements worth of RMB 95B and at a yield of 4.2%. The money market rate fell amid hopes of further rate cut. Financial markets were boosted. Wall Street climbed a tad with the DJIA and the S&P 500 indices gaining +0.74% and +0.9% respectively. In the commodity sector, the front-month contract for WTI crude oil added +1.09% while the equivalent Brent crude contract was also modestly higher. The benchmark Comex contract for gold continued to trade below 1600.
EU ministers will be meeting for the EU summit today. While the agenda will likely be focused on the sovereign debt crisis in the Eurozone, Spanish PM Rajoy spoke to the Parliament that 'the most important thing today is being able to finance ourselves in the markets, that's the main issue... And on that point Spain, Italy and other countries are going to push for reasonable decisions to be made. In Germany, Chancellor Merkel reiterated her opposition on joint Eurobonds. Regarding the meeting today, she was concerned that 'there will be too much talk about mutual liability and far too little about improved oversight and structural measures. Merkel stated that 'oversight and liability have to go hand in hand and there can only be joint liability when adequate oversight is ensured.
Spain's request for financial assistance from the EU to extend a state guarantee to Bankia was approved ahead the bailout package. Bankia was allowed temporarily to convert 4.465B euro of preference shares in order to boost the bank's core capital. Meanwhile, Italy's parliament approved the labor reform which can be used as claim in the EU summit that the country is committed to recover the economy.
On the dataflow, US economic indicators were encouraging. Durable goods orders rose +1.1% in May, better than consensus of +0.5 and April's +0.2%. Excluding transportation, durable goods orders also climbed +0.4%, following a -0.6% drop in the prior month. Pending home sales soared +5.95 m/m in May, compared with expectations of +1.3% and a -5.5% decline in April. Final US GDP growth probably stayed unchanged at annualized +1.9% in 1Q12. Initial jobless claims might have dipped -1K to 385K in the week ended July 23.