Market Update Sept 28

  • China Biege Book: Warning Sounded Over Chinese Economy
  • China economy seen growing 6.6% in Q4: Govt Think Tank
  • Japan PM Abe says to work with BOJ to defeat deflation
  • China Westpac-MNI Consumer Sentiment Sep: 115.2 (prev. 111.5)
  • Oil prices climb after industry data shows U.S. stocks draw
  • Asia stocks edge down on Europe bank woes, lower oil
  • BoE Governor Carney: Still addressing principal uncertainty after Brexit
  • House Prices Lift U.K. Consumers Amid Residual Brexit Concerns
  • ECB’s Lane says up to supervisors to mitigate risks of low rates
  • Italy cuts growth outlook, hikes deficit, reverses debt pledge
  • Fed’s Williams says U.S. economy can handle rate hike
German lawmakers to quiz ECB’s Draghi over monetary policy

European Central Bank President Mario Draghi is set to face tough questions from German lawmakers on Wednesday about the bank’s ultra-loose monetary policy, just as the ECB is considering even more stimulus to revive inflation. Relations have cooled between Europe’s largest economy and the euro zone’s central bank, which has cut interest rates aggressively in recent years and pumped more than a trillion euros into the economy through asset purchases. But with growth in the 19-member euro zone still mediocre and inflation barely above zero – well short of the ECB’s target of nearly 2 percent – the bank’s critics say its monetary policy has reached its limits. Draghi will address the Bundestag lower house of parliament’s European Affairs committee behind closed doors from 1530 (1330 GMT) and address the public around 1700 (1500 GMT). Gunther Krichbaum, the head of the European affairs committee who invited Draghi to Berlin, told Reuters the Italian central banker should expect a frank discussion. “We’re parliamentarians, not diplomats a fantastic read. Of course there’ll be critical questions, but Draghi can handle this,” Krichbaum said, adding lawmakers would ask him about the ECB’s bond purchase programme and the health of Italy’s banking sector. Krichbaum said that the ECB’s monetary policy was actually like an invisible bailout for the indebted countries of southern Europe and that this was never authorised by parliaments. “Of course, the ECB is independent. But with its current monetary policy, the ECB under Draghi is going quite actively to the limits of its mandate,” Krichbaum added. (Rtrs) 

Asia Market Wrap:

Another thin session overnight saw Asia-Pac stocks trade lower from the off and deteriorate throughout the session. The Nikkei is currently down around 1.5% as USD/JPY held around the 100 mark; the Topix lagged its sister index currently down around 1.65% as more than half of the index trades ex-div. Mainland Chinese markets also moved lower though the move is viewed as simply a consolidation ahead of a relatively busy EU/US session. The Chinese Beige Book was released (to very muted fanfare) and highlighted risks to Chinese growth, noting in particular that the “old engines” were responsible for the majority of growth. Interestingly, the Chinese 7-day repo rate rose to 2.58% despite another CNY 150bln injection, the highest level in a year as institutions gear up for the Golden Week holiday on October 2. FX was extremely quiet with a slight risk-off undertone, USD was slightly firmer, USD/JPY ground out some minor gains and EUR/USD hovered around the 1.12 handle as lumpy option expiries act as a magnetic level. Oil continues to be in focus, Saudi Arabia signalled they were willing to compromise with Iran, but the Iranian oil minister poured cold water on the prospect saying he saw the meeting as consultative only. However, oil halted its losses and even rose slightly on a draw in API inventories against an expected build. The upcoming session promises to be an eventful one with a raft of central bank speakers liberally sprinkled with data.

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