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 Equity markets in the Far East experienced mixed performance, highlighted by strong gains in Hong Kong and Mainland China indices, which were counteracted by losses in Japanese and Australian stocks. The surge in Chinese stocks occurred despite US President Biden’s weekend announcement of quadrupling tariffs on Chinese electric vehicles. Additionally, weekend data from China revealed a decline in credit in April, indicating weakened economic demand. There is a cautious sense of optimism about China’s economy, but this may be put to the test by the release of monthly activity data for April on Friday. It is anticipated that there may be a slight improvement in industrial output, retail sales, and urban investment, following last month’s lower-than-expected figures. The unemployment rate is expected to remain unchanged, while house prices are likely to continue their weak trend after a significant drop in March. Additionally, April credit data may also be made available this week.Despite sluggish loans and credit data, the People’s Bank of China is expected to maintain the one-year medium-term lending facility rate at 2.50% on Wednesday, as it continues to prioritise currency stability.The upcoming light data schedule in Japan will be headlined by the release of preliminary GDP on Thursday, with the market’s attention focused on the Bank of Japan.Europe is expected to have a relatively quiet week, with only the EZ ZEW economic sentiment, flash GDP, and industrial production being the notable data releases. Similarly, the UK will also have a quiet week with only jobs data and a presentation by Bank of England chief economist Huw Pill on Tuesday, which may provide valuable insights following the expected dovish hold by the BOE. Optimism regarding a potential interest rate cut by the Bank of England received a further boost from this week’s monetary policy update. A second policymaker voted for a rate cut in a 7-to-2 split, while the Monetary Policy Committee’s forward guidance was more dovish than previously. Governor Bailey mentioned that a rate cut in June was “not ruled out or planned,” a remark that markets deemed significant. Market expectations of a rate cut in either June or August were already increasing before the update, but they escalated further afterward. The probability of a June move now stands close to 60%, with a reduction by August fully anticipated. However, for the year overall, markets still assign less than a 50% probability to a third rate reduction. Governor Bailey emphasized that there will be two full monthly datasets between now and June to inform policymakers’ views, with a particular focus on inflation and labor market data. The latest jobs market report will offer further insights into a potentially loosening labor market. Employment in the three months to March is projected to have decreased by 250k, and the unemployment rate is expected to rise to 4.3% from 4.2%. Of utmost importance to the Bank of England is the forecasted slowdown in annual regular pay growth to 5.9% from 6.0%, continuing its decline from the recent peak close to 8%. However, it’s worth noting that this data will not yet reflect the impact of the April increases in the National Living Wage and the National Minimum Wage. Policymakers are likely to view this as another indication of easing inflation pressures but may also feel that further progress is necessary to achieve their 2% inflation target sustainably. Moreover, they will need to assess whether the labor market will continue to weaken if economic activity continues to recover.The upcoming U.S. data schedule is packed, with key releases including core PPI, core CPI, and retail sales. Additionally, the week will feature the release of weekly job data, the Philly Fed manufacturing index, and industrial production on Thursday, offering a comprehensive view of the economy. Several Federal Reserve officials are scheduled to speak, starting with Chair Jerome Powell on Tuesday, followed by Minneapolis Fed President Neel Kashkari and concluding with Cleveland Fed President Loretta Mester and Atlanta Fed President Raphael Bostic on Thursday.In terms of today’s economic agenda, there are no notable releases. Fed members Mester and Jefferson are scheduled to speak this afternoon to discuss central bank communication.
 Overnight Newswire Updates of Note

(Sourced from Bloomberg, Reuters and other reliable financial news outlets)
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