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China Injects Capital into Financial Markets

The price of oil on Friday dropped to $49.25 per barrel of Brent, although it finished the day at around $50.60. Support for oil came from a US oil rig report which showed active rigs up for the week from 330 to 341. Monday morning has seen oil trading stably in a narrow corridor of $50.3-$50.5; slightly below last week’s closing price.

The stock markets are up after a rethink of when the Fed is likely to increase interest rates which has shifted to an undetermined time in the future due to the Brexit referendum. The stock markets are on the up, though. The Nikkei 225 rose by 0.6%. The ASX Australia was up 0.3%. The Shanghai Composite rose by 1.8%, and the Hang Seng increased by 1.5%. Futures for the S&P500 were trading at 2099; 0.1% up on the previous trading day.

Last week the People’s Bank of China injected 840 billion yuan (129 billion USD) into the financial market to increase liquidity. As such, on Thursday and Friday the central bank conducted seven-day reverse repos (purchasing securities which must be sold back at a fixed price) to the tune of 50 billion and 130 billion yuan respectively. The interest rate for reverse repos on these two days was 2.25%, with this rate being valid for the two previous capital injections  made by the central bank of 210 (Wednesday) and 180 billion yuan (Tuesday). On Monday the bank injected 270 billion yuan into the financial market.

The USD was trading slightly up against the yuan at 6.6623 (+0.0026 or +0.04%).

Last week, volatility for the EUR/USD was quite high and in favour of the euro. Throughout the day the pair lifted from 1.1070 to 1.1170 and completed the week at 1.1140. There’s no point expecting much activity today as it is Independence Day in the US. There’s just a Eurozone May PMI out which is expected to rise by 0.3% MoM whilst falling 4.1% YoY.

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