Strong China Lending Numbers
A reasonable set of BTP auctions and some strong Chinese lending numbers saw risk assets turn around as the US walked in. New Yuan loans rose to 1010 Bln yuan in March, significantly above all of the economists surveyed on Bloomberg. These numbers underline our house view of a soft landing in China, and any fears for GDP growth later in the year due to credit growth appear, at least from these numbers, to be slightly unfounded. The reaction of AUD was surprisingly weak, though the currency had rallied earlier due to some stronger than expected employment numbers. As equity markets turned around later in the European session, AUD also found a bid. Thursday’s Italian auctions generally passed without incident. The amounts allotted were at the upper end of the targets across the 15s, 20s, 23s. There was also strong demand heading into the auctions, particularly from the domestics. Although the 2015 bonds were not the strongest results, the overall outcome is good considering the environment. On the AUD employment report, 44k new jobs were created against expectations of only 6.5k, and the unemployment rate held steady at 5.2% despite fears it would tick higher. Our Australian economics team sound a note of caution though – they point out that when averaged across several months jobs growth is still relatively soft and not strong enough to keep the unemployment rate as low as it currently is. The team sticks to its view that the RBA will cut 25 bp at each of its May and June meetings, thanks to what is expected to be a low enough CPI reading for Q1.
Click here to read the full report: UBS Morning Adviser America
UBS Investment Bank