China to tolerate weaker yuan, wary of trade partners’ reaction – Reuters’ sources
China’s central bank is willing to let the yuan fall to 6.8 per dollar in 2016 to support the economy, which would mean the currency matching last year’s record decline of 4.5 percent, policy sources said. (…)
“The central bank is willing to see yuan depreciation, as long as depreciation expectations are under control,” said a government economist, who requested anonymity due to the sensitivity of the matter.
“The Brexit vote was a big shock. The market volatility may last for some time.” (…)
GM’s U.S. Market Share Shrinks as Auto Sales Peak U.S. market share for the nation’s largest car maker has tumbled to a more than three decade low amid strong demand as its dealers say they are saddled with too many cars and too few pickups and SUVs.
(…) Its current 16.7% chunk of the domestic market is a more-than-three-decade low for the nation’s largest auto maker. In contrast, No. 2 U.S. auto maker Ford Motor Co. has crept up to 15.3% and should inch closer in June, say analysts.
While GM executives have pinned the decline on a decision to sell fewer low-margin fleet vehicles, its inability to keep up with sizzling demand for pickup trucks and sport-utility vehicles also plays a major role in the decline. (…)
IMF Says Brexit Clouds Germany’s Growth Outlook
(…) The IMF further forecast that German economic growth will slow to 1.5% next year from an estimated 1.7% this year, but cautioned that its estimates are already outdated and that it will release new forecasts as part of its World Economic Outlook in mid-July. (…)
ECB No Closer to Inflation Target After Series of Stimulus Measures
(…) Eurostat said consumer prices were 0.1% higher than in June 2015, having been 0.1% below their year-earlier level in May. (…) In June, core inflation—which excludes items such as food and energy, the prices of which are set mainly in world markets—picked up to 0.9% from 0.8% in May, but remained below the 1.0% rate recorded at the start of the year. (…)
SENTIMENT WATCH
U.S. funds hold portfolios steady, equities near survey lows: Reuters poll
(…) The survey of 13 U.S. fund managers conducted June 15-30 but with all responses coming in after the Brexit vote, showed that global equity allocations accounted for 51.1 percent of the model portfolio in June.
That was unchanged after four months of falls. Bond allocations came to 35.7 percent, according to the survey.
Those allocations have been steady this year but are down considerably compared with early 2013, when they stood above 60 percent for equities and below 35 percent for bonds, suggesting a shift towards assets seen as safer over the past three years. (…)
Soros: Brexit Has ‘Unleashed’ a Financial-Markets Crisis
Britain’s decision to leave the European Union has “unleashed” a crisis in financial markets similar to the global financial crisis of 2007 and 2008, George Soros told the European Parliament in Brussels.
“This has been unfolding in slow motion, but Brexit will accelerate it. It is likely to reinforce the deflationary trends that were already prevalent,” the billionaire investor said on Thursday. (…)
Fed Clears 31 of 33 Big Banks to Boost Returns to Investors The largest U.S. banks got permission from regulators to return profits to investors, but the U.S. units of Deutsche Bank and Banco Santander were held back again.
(…) Overall, the 2016 stress tests reflect the Fed’s view that the banking sector is much stronger than it was leading up to the 2008 bailouts. Bank regulators have steadily raised capital requirements for the largest banks since the crisis to make banks—and the financial system—more resilient and better able to absorb losses. The changes have forced banks to fund themselves with less borrowed money and more investor funds, such as common equity that can’t flee when market turmoil strikes, and many analysts said those changes helped contain the damage from the Brexit market rout. (…)
Banks that received approval for their capital plans will be able to pay out as much as around two-thirds of projected net income for the coming four quarters, a senior Fed official said. That also means, though, that banks will continue to retain capital, which could also reassure investors worried about their ability to withstand any continuing Brexit-related market tumult. (…)
(…) Gerard Cassidy at RBC said Citigroup was set to distribute $10.4bn in dividends and buybacks, Bank of America $8bn and JPMorgan Chase $17.4bn — each up more than half from a year ago. (…)
From the FT’s Lex column:
