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Asian Shares Advance As Fed Jitters Ease

Asian stocks advanced on Tuesday after New York Fed President John Williams noted the recent inflation surge is likely a temporary phase, helping ease investor concerns about the pace of expected monetary tightening.

Chinese shares ended notably higher, with the benchmark Shanghai Composite index rising 28.23 points, or 0.80 percent, to 3,557.41. Hong Kong’s Hang Seng index dropped 179.24 points, or 0.63 percent, to 28,309.76.

Japanese shares posted strong gains on economic recovery hopes. The Nikkei average jumped 873.20 points, or 3.12 percent, to 28,884.13, marking its biggest percentage gain since June last year. The broader Topix index closed 3.2 percent higher at 1,959.53, reversing Monday’s 2.4 percent slide.

Shipping stocks surged, with Mitsui OSK Lines climbing more than 10 percent after the company more than tripled its half-yearly net profit forecast. Rivals Kawasaki Kisen and Nippon Yusen also gained more than 10 percent each.

Automaker Suzuki Motor surged 7.4 percent, Honda Motor rallied 3.6 percent and Toyota Motor added 3.3 percent as the yen fell against the dollar on improved risk sentiment.

Market heavyweight SoftBank Group advanced 1.9 percent and Uniqlo operator Fast Retailing climbed 3.1 percent.

Australian markets rallied as investors favored value stocks on hopes they will do well in an economic recovery. The benchmark S&P/ASX 200 index climbed 106.90 points, or 1.48 percent, to 7,342.20 while the broader All Ordinaries index ended up 107.50 points, or 1.44 percent, at 7,592.70.

Energy stocks such as Woodside Petroleum and Santos jumped 2-3 percent as Brent oil hit $75 a barrel for the first time in more than two years amid signs of a rapidly tightening market.

The big four banks rose 1-2 percent while mining heavyweights BHP and Rio Tinto rallied 2.4 percent and 1.6 percent, respectively. Gold miner IGO surged 6.2 percent after saying it plans to invest A$1.4 billion into its local unit.

Seoul stocks rebounded on expectations the Fed is going to be relatively slow in tapering its asset purchase program. The Kospi average inched up 23.09 points, or 0.71 percent, to 3,263.88. Automaker Hyundai Motor jumped 3.4 percent and chemical firm LG Chem advanced 2.4 percent.

Producer prices in South Korea were up 6.4 percent year-on-year in May, the Bank of Korea said – accelerating from the upwardly revised 6.0 percent increase in April.

New Zealand shares eked out modest gains, with the benchmark NZX 50 index finishing up 35.44 points, or 0.28 percent, at 12,534.80. Fisher & Paykel Healthcare gained 1.9 percent, while Trustpower slumped 4.3 percent, a day after it agreed to sell its electricity, gas, broadband and mobile retail business.

U.S. stocks advanced overnight as banks and energy companies recovered some of last week’s steep losses following the Federal Reserve policy update.

U.S. Treasury yields dropped and the dollar’s rally paused after New York Federal Reserve Bank President John Williams said that the current economic recovery may be choppy and that he isn’t ready for the U.S. central bank to dial back the support it is giving the economy.

The Dow rallied as much as 1.8 percent to snap its five-day losing streak and post its best performance since early March, while the S&P 500 climbed 1.4 percent and the tech-heavy Nasdaq Composite index rose 0.8 percent.

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Australian Jobless Rate Drops To 5.1% In May

The jobless rate in Australia came in at a seasonally adjusted 5.1 percent in May, the Australian Bureau of Statistics said on Thursday – well below expectations for 5.5 percent, which would have been unchanged from the April reading.

The Australian economy added 115,200 jobs last month to 13,125,100, blowing away forecasts for an increase of 30,000 following the loss of 30,600 in the previous month.

Full-time employment gained 97,500 jobs in May after adding 33,800 in April. Part-time employment gained 17,700 after shedding 64,400 jobs in the previous month.

The participation rate was 66.2 percent, exceeding expectations for 66.1 percent and up from 66.0 percent a month earlier.

Unemployed people decreased by 53,000 to 701,100, while the youth unemployment rate increased by 0.1 percent to 10.7 percent.

Monthly hours worked in all jobs increased by 25.2 million hours (1.4 percent) to 1,814 million hours, while the underemployment rate decreased by 0.3 percent to 7.4 percent.

The unemployment rate was 1.9 percent lower than May 2020; over the year to May 2021, employment increased by 987,200 people (8.1 percent).

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Singapore’s Non-Oil Domestic Exports Dip 0.1% In May

The value of Singapore’s non-oil domestic exports were down a seasonally adjusted 0.1 percent on month in May, Enterprise Singapore said on Thursday – coming in at SGD15.4 billion.

That was well shy of expectations for an increase of 4.7 percent following the 8.8 percent decline in April.

On a yearly basis, NODX climbed 8.8 percent – missing forecasts for an increase of 16.0 percent following the 6.0 percent increase in the previous month.

NODX to the top 10 markets as a whole rose in May, mainly due to China, Hong Kong and Malaysia – although NODX to the United States, Japan and the EU 27 declined.

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(Australia) Westpac Leading Index Signals Above Trend Growth

Australia’s economy is set to log a more sustainable above trend growth through the remainder of 2021 and 2022, according to Westpac report, released Wednesday.

The six-month annualized growth rate in the Westpac-Melbourne Institute Leading Index, slowed to 1.47 percent in May from 2.86 percent in April.

Over the second half of 2021, Westpac expects that annualised pace to slow further to 4.5 percent, while the next year growth is forecast at a more normal but still healthy 3.2 percent.

The second half growth forecast is still well above trend but more in line with the six month annualized growth rate of 1.47 percent which the leading index has printed for May.

The index growth rate has moderated to 1.47 percent in May from just under 5 percent six months ago.

Two components account for most of the move, namely US industrial production and total hours worked. Both saw extremely strong ‘reopening rebounds’ as COVID restrictions were eased late last year.

Other components showed a more mixed performances over the six month period. On the plus side, commodity prices continued to surge. Most other components tended to follow the wider them of normalising growth.

Bill Evans, chief economist at Westpac said, given the improved pulse of the economic data in 2021, as signaled by the Leading Index, it seems unlikely that the central bank would expect to have to wait until 2025 before it achieves the objectives necessary to justify the first cash rate increase since November 2010.

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Australia Business Conditions At Record High: NAB

Australia’s business conditions rose to a record high in May, while business sentiment weakened moderately from the previous month, survey results from National Australia Bank showed on Tuesday.

The business conditions index climbed to 37 in May from 32 in the prior month. Meanwhile, the business confidence indicator came in at 20 in May, down from a record high of 23 in the previous month.

The survey showed that the employment, profitability and trading sub-components all reset last month’s highs – with trading conditions at exceptional levels. Forward orders also remained at a record level.

The survey measure of reported capex rose further suggesting that the strong rise over 2021 is more than just a rebound from disruptions to activity and uncertainty during 2020. Overall, this was another very strong read for the business sector – and forward indicators point to ongoing strength in the near-term, NAB Group Chief Economist, Alan Oster, said. This is a pleasing result coming after last week’s national accounts which showed that the economy has now surpassed its pre-COVID level. The economy now appears to be entering a new period of growth after a very rapid rebound, Oster added.

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Japan’s GDP Contracts 3.9% On Year In Q1

Japan’s gross domestic product shrank an annualized 3.9 percent on year in the first quarter of 2021, the Cabinet Office said in Tuesday’s final reading.

That exceeded expectations for a decline of 4.8 percent following the 11.7 percent surge in the three months prior.

On a quarterly basis, GDP was down 1.0 percent – again beating forecasts for a decline of 1,2 percent following the 2.8 percent increase in the previous three months.

Capital expenditure was down 1.2 percent on quarter, matching expectations following the 4.3 percent gain in the previous quarter.

External demand was down 0.2 percent on quarter after rising 1.1 percent in the previous three months, while private consumption dropped 1.5 percent on quarter after gaining 2.2 percent three months earlier.

The GDP price index was down 0.1 percent on year after rising 0.2 percent in the three months prior.

Also on Tuesday:

• The Ministry of Finance said that Japan posted a current account surplus of 1,321.8 billion yen in April. That missed expectations for a surplus of 1,500.6 billion yen following the 2,650.1 billion yen surplus in March.

Exports were up 38.0 percent on year at 6,825.5 billion yen and imports gained an annual 11.3 percent at 6,536.0 billion yen for a trade surplus of 289.5 billion yen.

\The capital account showed a surplus of 3.4 billion yen, while the financial account saw a shortfall of 242.7 billion yen.

The Bank of Japan said that overall bank lending in Japan was up 2.9 percent on year in May, standing at 578.366 trillion yen. That follows the 4.8 percent increase in April.

Excluding trusts, bank lending gained an annual 2.2 percent to 501.954 trillion yen, slowing from the 4.3 percent expansion in the previous month.

Lending from trusts climbed 7.5 percent on year to 76.411 trillion yen after rising 8.3 percent a month earlier. Lending from foreign banks rose 2.5 percent on year to 3.381 trillion yen, up from 1.2 percent in April.

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India’s Central Bank Holds Key Rates As Expected

India’s central bank decided to keep its key interest rates unchanged and to continue with its accommodative stance as long as necessary.

At the end of three-day rate setting meeting, the Monetary Policy Committee of the Reserve Bank of India unanimously voted to hold the benchmark policy rate at 4.00 percent. The reverse repo rate was retained at 3.35 percent.

The Marginal Standing Facility rate and the Bank Rate were also left unchanged at 4.25 percent at the meeting.

Also, the committee unanimously decided to continue with accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward.

The central bank forecast the real GDP to grow 9.5 percent in the financial year 2021-22. Consumer price inflation inflation was projected at 5.1 percent during 2021-22.

Governor Shaktikanta Das unveiled additional steps to mitigate the adverse impact of the second wave of the pandemic. He announced a separate liquidity window of INR 150 billion to certain contact-intensive sectors.

Under the scheme, banks can provide fresh lending support to hotels and restaurants, tourism, aviation ancillary services, and other services that include private bus operators, car repair services, rent-a-car service providers, event/conference organizers, spa clinics, and beauty parlours/saloons.

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Singapore’s PMI Picks Up Steam In May – Markit

The private sector in Singapore continued to expand in May, and at a faster pace, the latest survey from Markit Economics showed on Thursday with a services PMI score of 54.4.

That’s up from 51.8 in April and it moves further above the boom-or-bust line of 50 that separates expansion from contraction.

Both manufacturing and services registered stronger performances in May, but the construction sector saw a sharp downturn. The finance and insurance sub-sector registered another rapid rate of expansion in activity.

The key domestic event that took place in May had been the reintroduction of Phase 2 restrictions mid-month. Some respondents noted an increase in output ahead of the setting of new restrictions contributing to the overall improvement of business activity. Foreign demand supported the increase in new orders, with renewed export growth in May following a marginal fall in April.

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Japan’s Services PMI Sinks To 46.5 In May

The services sector in Japan continued to contract in May, and at a faster pace, the latest survey from Jibun Bank revealed on Thursday with a services PMI score of 46.5.

That’s up from 49.5 in April and it moves further beneath the boom-or-bust line of 50 that separates expansion from contraction.

New business declined at a faster pace in the latest survey period, extending the current sequence of contraction to 16 months. The latest reduction was the quickest for three months and modest.

Panel members highlighted that the rise in COVID-19 cases and the reimposition of a state of emergency to curb the spread of infections caused the fall in new work. Moreover, international demand for Japanese services deteriorated further as key markets around Asia faced stricter restrictions due to a surge in infection rates.

The survey also said its composite index slipped to 48.8 in May from 51.0 in April.

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China’s Service Sector Growth Moderates In May

China’s service sector growth moderated in May as activity and new order growth softened since April, survey results from IHS Markit showed on Thursday. The Caixin services Purchasing Managers’ Index dropped to 55.1 in May from a four-month high of 56.3 in April. Nonetheless, the score remained firmly above the neutral 50.0 level to suggest a marked growth in activity.

Business activity as well as new orders rose sharply in May, despite rates of expansion softening since April. Customer demand continued to expand due to the successful containment of COVID-19 in China, while there were also reports of new product offerings boosting sales.

Employment across China’s service sector rose for the third consecutive month, with a number of firms adding to their payrolls due to rising sales.

Cost pressures at service providers build further in May amid reports of higher prices for raw materials, energy, staff and transport. Consequently, prices charged by services companies increased again in May with the rate of inflation the quickest recorded in 2021 to date and solid.

The 12-month outlook for services activity remained strongly positive but the overall degree of positive sentiment dipped to a four-month low. Further, the composite output index fell to 53.8 in May from 54.7 in April, to signal a softer expansion of overall Chinese business activity. Growth in both services and manufacturing sectors moderated in May.