The Shanghai index fell modestly but closed at a 4 1/2 month low after new bank loans in May rose almost 100b yuan below expectations and M2 money supply growth in May of 15.1% y/o/y was the slowest since Nov ’08. Bank loan growth has now totaled 3.5T yuan in the 1st 5 months of ’11 vs 4.02T in the same time frame in ’10. The central planners in China are certainly walking a tightrope in trying to conduct a smooth landing from the previous heady growth rates that has led to dangerous levels of inflation, where May levels of PPI and CPI get reported tonight. CDS and the yields of Greece, Portugal and Ireland are trading at or near the recent wides ahead of a meeting tomorrow of European Finance Ministers where some resolution with the ECB must be agreed to. The Japanese disaster in March led to a 3.3% fall in April machinery orders, worse than the unwarranted optimistic expectations of a 1.7% rise considering what’s gone on there.

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