Market update: PBoC’s soothing comments help restore a degree of calm – 26.06.2013

Source: Henderson Global Investors

Wall Street stocks rose on Tuesday (Dow Jones 0.7%, S&P 500 1.0%) as markets took comfort from soothing remarks by the People’s Bank of China (PBoC) that the liquidity crunch was a temporary issue, pledging they would prevent any lasting credit crunch. Markets took further comfort from a set of macroeconomic data that revealed US business investment and housing recovery remained on track. The recent drop in the prices added extra appeal, fuelling further buying. The gains in stocks were led by financials, despite the fact that US Treasury yields, (which, as with all fixed income investments, move inversely to prices) climbed on the upbeat data.

Asian trading overnight was firmer for the majority of bourses, as sentiment improved on PBoC’s comments. Australian shares advanced, further helped by miners. In Hong Kong, the Hang Seng rose (2.4%) but in mainland China shares continued to drop (Shanghai Composite down 0.4%). Japan’s Nikkei 225 also went down (1.0%) on a stronger yen. Trading in Europe is firmer this morning helped by the easing of the cash crunch in China as well as reports that German consumer confidence will be higher than expected in July. At the time of writing the FTSE Eurofirst 300 rose 0.5% while the FTSE 100 gained 0.2%. Meanwhile the price of gold continues to drop as markets prepare for a world with less liquidity injection by central banks.