China

All eyes remain on anecdotal news on how depositors in Greece and outside the country are reacting to the recent events. In terms of economic data releases, the main focus will be on flash PMIs for May.

The central bank (PBoC) cut reserve requirements by 50 bp last weekend, thus continuing to ease monetary policy. However, the pace remains slow, and we do not think the PBoC is done yet.

Chinese inflation slowed in April in line with expectations. This leaves room for fruther reserve requirement cuts.

The expected slowdown in Chinese commodity imports finally showed up in preliminary April trade data and seems in-line with both our and the market’s expectations.

The Chinese trade surplus surprised on the upside, while the weak import figures raise worries regarding domestic demand. We expect growth to remain slow in Q2.

Outlook for next week’s key figures and events in the US, the euro area, China, Japan, UK, Canada, Switzerland, Australia and New Zealand.

The CNY has in recent days taken advantage of its broadened band, as the fixing has been pushed clearly higher. We still expect a gradually stronger CNY towards the end of the year.

Both manufacturing sector PMIs – the HSBC/Markit index and the NBS’s official PMI – rose in April. The indices remain, however, at very divergent levels, increasing the uncertainty of the Chinese economic outlook.

After a strengthening early on in the year, many Asian currencies have held steady over the past month or two.

Bond markets appear due for a correction, but we expect next week’s events and economic data only to add to the gloomy sentiment.