WORLDWIDE: HEADLINES 

Japan Household Spending Slips Again As Chip Shortage Hits Consumers 

Japan’s household spending posted a surprise drop in May, falling for the third consecutive month as the global chip shortage hurt car sales in a worrying sign for the outlook of the world’s third-largest economy. 

Households are also facing pressure from the yen’s sharp decline that is pushing up prices of imported fuel and food at a time when consumer confidence still has to fully shake off the drag of the coronavirus pandemic. 

Spending slipped 0.5% in May from a year earlier, government data showed on Friday, dragged down by lower expenditure on vegetables as well as cars, where supplies have been hit by chip shortages and supply chain disruption. 

The data, which was much weaker than the median estimate for a 2.1% increase in a Reuters poll, showed people dialled back on spending on fish and vegetables to eat at home, while loosening their purse-strings on services such as eating out. 

“The survey shows that consumer spending is on a declining trend,” said Takeshi Minami, chief economist at Norinchukin Research Institute. 

“While it may not be fully capturing actual spending, there’s a good likelihood that rising prices are suppressing consumption.” 

Full coverage: REUTERS 

China Tightens Rules On $1.3 Trln Credit Card Business

China unveiled tighter rules late on Thursday to better regulate its $1.3 trillion credit card industry, urging lenders to adopt a “prudent” growth strategy, and monitor risks more closely. 

Banks are also barred from using the number of cards issued or market share as main performance metrics, and are required to cap the number of dormant cards at 20% of total, according to rules jointly published by China’s central bank, and the country’s banking regulator. 

“China’s credit card business has been growing rapidly, playing a key role in facilitating payment and consumption,” the China Banking and Insurance Regulatory Commission (CBIRC) said in a statement on its website accompanying the release of the new rules. 

“Recently, however, some banks … are lax in risk management, and have behaved in ways that hurt customers’ interest,” the regulator said. 

Full coverage: REUTERS 

WORLDWIDE: HEADLINES 

Asian Stocks Track Wall Street Gains Ahead Of U.S. Payroll Data 

Asian shares tracked overnight Wall Street gains in early trading on Friday as fears of an economic slowdown cooled and sterling began to claw back recent losses following British Prime Minister Boris Johnson’s decision to resign. 

Japan’s Nikkei index (.N225) was up 1.23% at 26,817.24 in morning trade, its highest mark since June 29th. 

MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) gained 0.8% to its highest level in a week, and South Korea’s KOSPI index (.KS11) was up 1.18% and set for its best week in five months. 

All three major U.S. indices made gains overnight on positive signals from Federal Reserve officials. Governor Christopher Waller called recession fears “overblown,” while St. Louis Fed Bank President James Bullard said he saw a “good chance” of a soft landing for the economy. 

Waller suggested the Fed would likely attempt to tackle inflation with a 75-basis-point interest rate hike in July and a 50-basis-point hike in September. Though he said, “if inflation just doesn’t seem to be coming down, we have to do more,” allowing for possible future 25-basis-point hikes. 

This provided some relief to share markets after recent heavy sell-offs caused by fears global central banks will push economies into recession to curb runaway inflation. The Asian regional benchmark is still down 16% so far this year. 

Full coverage: REUTERS 

Euro On Thin Ice Ahead Of U.S. Labour Data 

The euro was pinned at a 20-year low on Friday, licking its wounds at the end of its worst week in two months as investors braced for Europe to tip in to recession, while markets awaited U.S. jobs data to set the next direction for the dollar.  

The euro is down more than 2% this week on fears that gas shortages loom in Europe and economic growth will suffer. It hit a two-decade trough of $1.0144 overnight and is barely clinging on above parity, last buying $1.0185. 

The euro’s slide has vaulted the U.S. dollar index to a two-decade high of 107.270 this week, and the index was last just below that level and down 0.1% in Asia at 106.840. 

“Europe is exposed to large risks around energy dependency, a cost of living crunch on the consumer, and fragmentation risk. This spells euro/dollar lower,” said analysts at Citi. 

The Australian dollar rose 0.3% on Friday to $0.6850, scraping from a two-year low of $0.6762, with help from a infrastructure-led stimulus program announced in China that traders hope will boost demand for raw materials. 

Full coverage: REUTERS  

Oil Dips As Investors Torn By Tight Supply Worries And Recession Fears 

Oil prices slipped in early Asian trade on Friday, following a rebound in the previous session, as investors remained torn between worries over tight global supplies and fears a recession could dampen oil demand. 

Brent crude futures fell 39 cents, or 0.4%, to $104.26 a barrel by 0013 GMT, dropping away from a near 4% rebound on Thursday. U.S. West Texas Intermediate crude slipped 35 cents, or 0.3%, to $102.38 a barrel, having settled 4.2% higher a day earlier. 

Both contracts are set to decline for a second week. Trade this week was marked by a sharp sell-off on Tuesday, where WTI slid 8% and Brent tumbled 9%. Brent’s $10.73 drop was the third biggest for the contract since it started trading in 1988. 

“The sell-off in the commodity markets got a reprieve as traders shrugged off recession fears and turned their focus back to the undersupply issues,” CMC Markets analyst Tina Teng said in a note. 

Full coverage: REUTERS