The US dollar is narrowly mixed ahead of the FOMC meeting, where a dovish hike seems widely expected. The Australian dollar is leading the dollar bloc and Scandis higher. The Aussie had to shrug off soft consumer confidence a day before the monthly employment report and perhaps was encouraged by the recovery in iron ore prices after initial weakness.  

China’s data may have also been supportive. Chinese consumers continue to shop. Retail sales rose 10.7% year-over-year in May, and the year-to-date pace of 10.3% is the highest this year. Industrial output rose 6.5%, the same as in April, and a little more than expected. Fixed asset investment slowed to 8.6% from 8.9%. While a slowing in investment in China is seen a healthy development, reducing a significant imbalance, the details are a bit worrisome. Investment growth in the primary sector increased more than investment in manufacturing and services.  

Separately, China’s lending increased, but the deleveraging,which officials saw is behind the slowing of M2 (to 9.6% from 10.5%), is seen in the shadow banking. New yuan loans increased by CNY1.11 trillion, a little more than April and an 11% more than expected. However, aggregate financing rose a little less (CNY1.06 trillion); the difference being a small contraction in non-banking lending.  

It was not enough for Chinese shares. The Shanghai Composite cut this year’s gains nearly in half was a 0.75% decline, and the 1.3% loss by the CSI 300 is the largest this year. Despite these losses and a small decline in Tokyo and Taiwan, the MSCI Asia Pacific Index rose for a second session (~0.12%). European shares are also higher; led by a recovery in the information technology space. Perhaps aided by the 0.5% rise in the eurozone’s April industrial output, and an upward revision to the March series (0.2% rather than -0.1%), is helping the industrial equities.