Commodities climbed a tad in European session amid speculations of Chinese stimulus. The direct-trading of Japanese yen and Renminbi has also further paved the way for internationalization of the Chinese currency. While the situation in the Eurozone remains uncertain, the market has temporarily shifted the focus to other regions. Moreover, anticipations of improvement in the US consumer confidence lifted market sentiment. In the commodity sector, the front-month contract for WTI crude oil rose for a third trading day with price climbing to a 4-day high of 91.99 while the equivalent Brent crude contract continued to fluctuate below 108. The Comex gold contract also rose to a 4-day high of 1583.5 earlier in the day.
Speculations that the Chinese government would announce more stimuli to boost domestic economic growth overshadow concerns over the sovereign debt crisis in the Eurozone. It's expected that the government would implement measures amounted from RMB 1-2 trillion to bolster growth. The forecasts were indeed made by Credit Suisse on Monday. The bank also anticipated a -25 bps reduction in the policy lending rate, but no cut in the deposit rate. Moreover, bank lending is expected to rebound in June and July to about RMB 1 trillion, before trending down in 2H12. Credit Suisse's growth forecast for 2012 is 8.0%.
Meanwhile, the Chinese government announced that direct trading of Renminbi against the Japanese yen will begin on Friday, marking the first time that China allows a major currency other than USD to trade directly against the RMB. The rate of RMB/JPY would be based on the average price of offers made by registered dealers before the opening of the market each business day. The move is a signal that the Chinese government has taken a step further to transform the RMB to a global currency.
On the dataflow, Japan's unemployment rate surprisingly climbed to 4.6% in April, compared with 4.5% in March. The disappointing figure indicated weakening of the job market in Japan. Retail sales also softened in April with the growth rate moderating to 5.8% from 10.3% in the prior month. The market had anticipated a slowdown to +6.0%. In the US session, consumer confidence probably improved to 69.5 in May from 69.2 in the prior month. The S&P/Case-Shiller Composite-20 Index probably slipped -2.7% y/y in March, following a -3.5% contraction in February.