Aurelia Butler

Davos goes virtual for a second year and how long will the pound prove resilient to Britain’s rising political uncertainty?Here’s your week ahead in markets from Ira Iosebashvili https://www.reuters.com/journalists/ira-iosebashvili in New York, Kevin Buckland https://www.reuters.com/journalists/kevin-buckland in Tokyo, Vidya Ranganathan https://www.reuters.com/journalists/vidya-ranganathan in Singapore and Karin Strohecker https://www.reuters.com/journalists/karin-strohecker and Dhara Ranasinghe https://www.reuters.com/journalists/dhara-ranasinghe in London.1/ BANKING ON ITU.S. earnings season goes into full swing and this time it is the financial sector, with its blistering start to 2022, in focus.The S&P 500 Financials Index is up almost 6% so far this year, while the broader S&P 500 is down 2%, as investors bet on banks benefiting from new lending and the higher yields https://www.reuters.com/business/rise-real-bond-yields-may-slow-not-stop-stock-market-bulls-2022-01-12 expected to accompany a more aggressive Federal Reserve https://www.reuters.com/markets/us/wall-street-banks-see-four-us-hikes-2022-inflation-is-wild-card-2022-01-10. Goldman Sachs and BNY Mellon (NYSE:BK) report on Tuesday; Bank of America (NYSE:BAC), on Wednesday. Big non-financial firms reporting include Netflix (NASDAQ:NFLX) on Jan 20.Bank executives are expected to be optimistic https://www.reuters.com/markets/us/big-us-banks-expected-post-uptick-core-q4-revenues-economic-rebound-2022-01-10 on the outlook, whether that is enough to sustain demand for bank shares remains to be seen. As some note, bank stocks often do better ahead of rate hikes than they do during rate increases.2/ GOOD NEWS FIRST?The good news for Bank of Japan officials meeting Jan 17-18 https://www.reuters.com/markets/currencies/boj-may-raise-price-outlook-keep-ultra-loose-policy-2022-01-12: inflation is creeping higher, the economy is picking up.Consumer prices rose at their fastest pace in nearly two years https://www.reuters.com/markets/europe/japans-core-consumer-prices-rise-fastest-pace-nearly-2-years-2021-12-23 in November. Even Japan’s giant of affordable attire, Uniqlo says it has no choice but to raise prices – a change in a nation where deflation is the norm and firms deal with any rise in costs by tightening belts https://www.reuters.com/article/japan-companies-stimulus-idUSL4N2TR0EW rather than passing them on. The bad news? Inflation is rising for the wrong reasons.Instead of being the fruit of nearly a decade of super-charged monetary stimulus, rising prices are driven by surging energy prices and a weakening yen.The challenge https://www.reuters.com/world/asia-pacific/bojs-kuroda-says-inflation-likely-gradually-accelerate-2022-01-12 is preventing rising living costs from hurting weak household spending and a fragile recovery. So, the BOJ may debate how soon it can start telegraphing a rate hike https://www.reuters.com/markets/currencies/exclusive-boj-debates-messaging-eventual-rate-hike-inflation-perks-up-2022-01-13 but will also pledge to continue ultra-easy policy this year.3/ BALANCING ACT Data on Monday confirmed China’s economy rebounded in 2021, growing 8.1%, from its pandemic-induced slump but the pace slowed https://www.reuters.com/markets/asia/chinas-q4-2021-gdp-grow-faster-than-expected-2022-01-17 in Q4.China’s central bank unexpectedly cut https://www.reuters.com/markets/rates-bonds/china-cuts-rates-policy-loans-analysts-point-more-easing-ahead-2022-01-17 the borrowing costs of its medium-term loans for the first time since April 2020.Stop-go efforts at easing monetary conditions is a key focus for investors, alongside whether policymakers can balance cleaning up a bloated property sector while containing stress https://www.reuters.com/markets/deals/china-plans-relax-three-red-lines-encourage-state-led-property-ma-redd-2022-01-07 on home buyers and suppliers. With the Chinese New Year holiday in early February and the Winter Olympics in Beijing soon after, the central bank will be inclined to keep banks and markets flush with cash China’s overnight money rate jumps to 4-mth high, policy rate in focus. 4/ VIRTUAL IN DAVOSFor a second year, world leaders, policy makers and top corporate chiefs bound for the World Economic Forum (WEF) in the Swiss ski resort of Davos on Jan. 17-21 will tuck away snow boots https://www.reuters.com/business/world-economic-forum-defers-davos-meeting-amid-pandemic-2021-12-20 and hop on video calls https://www.weforum.org/events/the-davos-agenda-2022 to tackle the world’s big challenges.The mood is glum: Only one in 10 WEF members surveyed https://www.reuters.com/markets/europe/gloomy-outlook-global-recovery-world-economic-forum-survey-finds-2022-01-11 expects the global recovery to accelerate over the next three years, with only one in six optimistic about the world outlook. Climate change is seen as the number one danger while erosion of social cohesion, livelihood crises and deterioration of mental health are seen as the risks that have increased the most due to the COVID-19 pandemic.Japan’s Fumio Kishida, India’s Narendra Modi, the European Commission’s Ursula von der Leyen, U.S. Treasury Secretary Janet Yellen and ECB’s Christine Lagarde are all scheduled to speak. The full in-person meeting has been postponed to early summer.5/ STERLING HIGH Sterling is sailing high thanks to signs the Omicron COVID surge https://www.reuters.com/world/uk/englands-nhs-tells-private-health-providers-prepare-help-us-2022-01-10 is easing and expectations that British interest rates https://www.reuters.com/markets/europe/inflation-risk-omicron-slowdown-boe-rate-move-balance-2021-12-16 will likely rise again in February. It is at two-month peaks against the dollar and one of the best performing major currencies early in 2022.If upcoming data boosts rate hike bets, currency bulls will have another reason to push sterling higher. November jobs numbers are out on Tuesday, followed by December inflation on Wednesday and retail sales figures on Thursday. Meanwhile the pound appears unfazed by growing political uncertainty. Boris Johnson’s position as prime minister appears vulnerable after revelations https://www.reuters.com/world/uk/party-over-uk-pm-johnson-faces-crunch-day-parliament-2022-01-12 he attended a Downing Street party during a 2020 lockdown. Did someone not once say that a week is a long time in politics? The same might prove true for trading the pound. More

BRUSSELS (Reuters) – Influenza has returned to Europe at a faster-than-expected rate this winter after almost disappearing last year, raising concerns about a prolonged “twindemic” with COVID-19 amid some doubts about the effectiveness of flu vaccines.Lockdowns, mask-wearing and social distancing that have become the norm in Europe during the COVID-19 pandemic knocked out flu last winter, temporarily eradicating a virus that globally kills about 650,000 a year, according to EU figures.But that has now changed as countries adopt less strict measures to fight COVID-19 due to widespread vaccination.Since mid-December, flu viruses have been circulating in Europe at a higher-than-expected rate, the European Centre for Disease prevention and Control (ECDC) reported this month.In December, the number of flu cases in European intensive care units (ICU) rose steadily to peak at 43 in the last week of the year, ECDC and World Health Organization data show. That is well below pre-pandemic levels – with weekly flu cases in ICUs peaking at over 400 at the same stage in 2018, for example. But it is a big increase on last year, when there was only one flu case in an ICU in the whole of December, data show.The return of the virus could be the start of an unusually long flu season that could stretch well into the summer, the ECDC’s top expert on influenza Pasi Penttinen told Reuters.”If we start to lift all measures, the big concern I have for influenza is that, because we have had such a long time of almost no circulation in the European population, maybe we will shift away from normal seasonal patterns,” he said. He said dismantling restrictive measures in the spring could prolong the circulation of flu far beyond the normal end of the European season in May. A “twindemic” could put excessive pressure on already overstretched health systems, the ECDC said in its report.In France, three regions – including the Paris region – are facing a flu epidemic, according to data published by the French health ministry last week. Others are in a pre-epidemic phase.This season, France has so far recorded 72 serious cases of flu, with six deaths.DOMINANT STRAINFurther complicating matters, the dominant flu strain circulating this year appears so far to be the H3 of the A virus, which usually causes the most severe cases among the elderly.Penttinen said it was too early to make a final assessment of flu vaccines because a larger number of ill patients was needed for real-world analyses. But lab tests show the vaccines available this year “are not going to be optimal” against H3.That is largely because there was very little or no virus circulating when the vaccines’ composition was decided last year, making it harder for vaccine makers to predict which strain would be dominant in the coming flu season. Vaccines Europe, which represents top vaccine makers in the region, acknowledged the strain selection was made more difficult by very low flu circulation last year, but added there was not enough data yet to assess the effectiveness of this season’s shots.Flu vaccines are adapted every year to make them as effective as possible against ever-changing flu viruses. Their composition is decided six months before the flu season kicks in, based on circulation of viruses in the opposite hemisphere. That gives time for drugmakers to develop and make the shots. Europe-wide data on flu vaccine uptake is not yet available. But national figures for France show coverage is not as broad as authorities hoped for.The authorities there extended by one month the vaccination period to the end of February to boost inoculations. According to figures released last week, 12 million people have so far been vaccinated, about 45% of the targeted population. “There is still a large room for improvement to limit the impact of the flu epidemic,” the health ministry said in a statement on Jan. 11. This year’s target is to vaccinate 75% of people at risk. Vaccines Europe said the industry had supplied large numbers of flu shots, despite the strain on production facilities posed by the pandemic. More

China’s gross domestic product grew at its slowest pace in 18 months in the fourth quarter as the government grappled with its most daunting economic challenges since the beginning of the coronavirus pandemic.Gross domestic product expanded 4 per cent year on year, data from the National Bureau of Statistics revealed on Monday, exceeding economists’ forecasts but short of the 6.5 per cent growth over the same period in 2020.The People’s Bank of China also cut an important lending rate for the first time since April 2020, adding to a series of easing measures over recent months that have coincided with a property slowdown and restrictions to curb the spread of coronavirus.The data and policy move indicated a continuing loss of momentum across China’s economy, which recovered from the initial impact of the virus far more quickly than other big economies but has struggled to maintain its pre-pandemic growth rate over the past year.China’s economy added 8.1 per cent over the whole of 2021, but the figure was distorted by a historic collapse in activity at the start of 2020, and year-on-year growth slowed in each quarter last year. Quarter-on-quarter growth, however, improved to 1.6 per cent, compared with a revised 0.7 per cent in the July-to-September period.Ning Jizhe, head of the NBS, said that in 2021 China “sustained the continuous and steady recovery of the national economy and maintained the leading position in economic growth and epidemic prevention and control in the world”.But he added that “the domestic economy is under the triple pressure of demand contractions, supply shock and weakening expectations”.The country’s strict measures to eliminate all coronavirus cases, with big cities implementing lockdowns in recent weeks, have highlighted lingering weaknesses in consumption. A nationwide slowdown in the crucially important property sector has weighed on the wider economy and sparked a global reckoning over the health of the industry.China’s longer-term growth challenges include a deteriorating demographic profile. Births fell 12 per cent year on year to 10.6m, the lowest number recorded since the Chinese Communist party took power in 1949. The number of people aged 60 or below also declined for the first time, while overall population growth was just 480,000.Although exports have boomed as a result of China’s dominance of global trade in goods, industrial production, which rose 7.3 per cent year on year in December 2020, gained 4.3 per cent in the same month last year, although it still exceeded forecasts. Property investment rose 4.4 per cent in 2021, while fixed-asset investment added 4.9 per cent, though both metrics slowed later in the year. In the fourth quarter, property investment fell 7.7 per cent.In a sign of continued concerns among consumers, retail sales added just 1.7 per cent in December year on year, the slowest rate in 14 months.

China’s government last year unveiled a drive towards so-called common prosperity, highlighting a willingness to close the inequality gap at the expense of economic growth.In 2020, Beijing introduced policies designed to reduce leverage at its biggest real estate developers, which last year contributed towards a cash crunch across the sector that hit land sales and construction.Growth had already slowed markedly by the third quarter last year, leading the government to unveil easing measures, including a reduction in reserve requirement ratios for banks.Last month, the People’s Bank of China cut its benchmark one-year loan prime rate for the first time since early 2020, but only by five basis points. It left the five-year benchmark used to price mortgages unchanged.On Monday, the central bank added to a pattern of gradual easing by cutting the one-year policy loans rate 10 basis points to 2.85 per cent and the rate on seven-day reverse repurchase agreements to 2.1 per cent.“The surprising cut in the seven-day reverse repo rate reflects the policymakers’ strong intention to stabilise GDP growth pre-emptively” said Zhaopeng Xing, senior China strategist at ANZ. “Slowing growth and developers’ mounting risk of default are both drivers of the cut.”Chaoping Zhu, global market strategist at JPMorgan Asset Management, noted that “an escalation in stimulus policies is highly anticipated”.Additional reporting by Emma Zhou in Beijing, Tom Mitchell in Singapore and Hudson Lockett in Hong Kong

Video: Is China’s economic model broken? More

TOKYO (Reuters) – Japan will issue government bonds (JGBs) worth 215 trillion yen ($1.89 trillion) in the next fiscal year in a stable manner through dialogue with markets, its finance minister said on Monday, after stimulus to offset the impact of COVID-19 saw bonds worth 224 trillion yen issued this year.With its population rapidly ageing, Japan’s public finances are facing structural problems over imbalances between benefits and burdens in the social security system, Finance Minister Shunichi Suzuki said in his fiscal policy speech, while vowing to bring in a primary budget surplus by the fiscal year 2025.Japan has set a goal of achieving a primary budget surplus, excluding new bond sales and debt servicing costs, by 2025, as a step towards curbing the industrial world’s heaviest debt that is more than twice the size of its $5 trillion economy.Fiscal reform is an urgent task, but Prime Minister Fumio Kishida, known as fiscal hawk, has prioritised a recovery from the health crisis in the near-term over long-term fiscal reform since he took office in October.”As overall JGB issuance including rollover debt remains at a high level, we will try to issue JGBs stably based in close dialogue with the market,” Suzuki told a lower house plenary at the beginning of parliament’s regular sessions.”Public finances are the cornerstone of the country’s confidence … We will proceed with reform on both the revenue and spending sides so as to achieve the fiscal 2025 primary surplus target without abandoning fiscal reform.”The economy was facing the spread of the Omicron variant of the coronavirus, which is affecting people’s livelihoods, although it was gradually recovering from the severe situation caused by the pandemic, Suzuki said.The economy was expected to pick up due to policy support measures and improving overseas economies, but downside risks warranted careful attention, he said.”There’s no crisis that Japan cannot overcome after getting over many difficulties … We must first overcome the current crisis, restore the economy and tackle fiscal reform so that we can hand the future to the next generation.”Kishida vowed in his policy speech to carry out necessary fiscal spending “without hesitation” to restore the economy and then tackle fiscal reform.He said he wanted to reverse a downtrend in wage increases in labour negotiations early this year, which hold the key to sustaining an economic recovery backed by a favourable cycle of growth and wealth distribution.Japan would do the utmost to bring minimum wages to 1,000 yen or more per hour, as a national average, as early as possible. The government is laying the ground by extending tax breaks to encourage wage increases, raising public sector-set wages and helping small firms pass rising commodity costs to customers.($1 = 113.9000 yen) More

During a visit to Alsace in the east, Macron will announce a 300-million-euro ($342 million) industrial project by German chemical giant BASF, one of 21 new projects worth 4 billion euros and 10,000 jobs as part of a drive to attract foreign investors, his office said.U.S. drugmaker Pfizer (NYSE:PFE) also announced on Monday a 520 million euros investment plan in France.As the presidential race heats up, his aides are keen to shift the debate away from immigration and law-and-order issues and put the spotlight on the economy, which has been recovering strongly from the COVID-19 pandemic. “This is the result of all the reforms that were carried out since the start of the mandate,” a presidential aide told reporters. “Three months before an election, we could have expected investors to be in wait-and-see mode because of the uncertainty of an election. Instead, we see very strong confidence from foreign investors in the president’s economic policy,” he said.Since 2017, Macron has pushed through a cocktail of supply-side economic reforms meant to boost businesses’ competitiveness, cut taxes on investors and loosen strict labour market rules. Critics say he has acted as “president of the rich” who wants to do away with France’s cherished social safety nets and has cut welfare benefits for some of the poorest. But three months ahead of the April election, indicators show the French economy is booming, with growth expected to have hit 6.7% in 2021 and France having returned closer to pre-pandemic levels than any G7 peer bar the United States.Macron supporters also received an unexpected boost from economist Paul Krugman on Friday. “In fact, among major advanced economies, the star performer of the pandemic era, arguably, is … France,” he wrote in his New York Times column https://www.nytimes.com/2022/01/14/opinion/france-economy-pandemic-socialism.html.($1 = 0.8761 euros) More

The writer is global head of economics and research at Credit SuisseUS policymakers and companies looking to prepare for a more sustainable future in the wake of the coronavirus pandemic may want to look at the success of a smaller, developed state — Switzerland. Switzerland regularly tops innovation, competitiveness and quality-of-life rankings despite being a $706bn economy and home to just 8.7m people. It is also the richest country in the world as measured by wealth per adult. Its public sector is lean, with public debt only 43 per cent of gross domestic product. Institutional and real infrastructure is strong.The Swiss record on dealing with Covid-19 is not significantly better or worse than elsewhere. It recently reported 2,468 new cases daily per million people, with 67.2 per cent of its total population fully vaccinated. This compared with 1,994 cases per million in the US, which has a vaccination rate of 62 per cent. But its economic record and outlook for the years to come, regardless of whether or not Covid-19 becomes endemic, seems bright. The reasons for that success are as relevant for large states as for small states ones. First, Switzerland has a high share of “teleworking” activities. During the pandemic, 34.1 per cent of employees worked remotely at least occasionally, with sectors such as information technology (76.3 per cent), financials (61.4 per cent) and education (54.7 per cent) reaching even higher shares in 2020. This allowed the country to adopt a pragmatic and generally less heavy-handed approach to Covid containment, with the result that its economy contracted less than others in 2020 and rebounded more rapidly in 2021. Indeed, by the end of last year, the Swiss labour market had overcome the Covid shock, with unemployment standing very close to pre-pandemic levels at just 2.4 per cent. The order books of Swiss companies are full, consumer sentiment is strong and GDP is expected to grow by 2.5 per cent in 2022, above pre-pandemic levels.In the US and elsewhere, enabling more remote work would appear to be an important precondition of raising labour market participation. This would be welcomed by workers and families, who could relocate to safe and affordable places to live while making metropolitan areas less congested. Second, Switzerland has benefited from considered and sensible fiscal policy. While highly supportive of sectors negatively affected by the pandemic — notably tourism, hospitality and personal services — the government has kept some of its fiscal firepower in reserve. The budget deficit was only minus 2.2 per cent in 2020 and minus 2 per cent in 2021 compared with minus 12.4 per cent in the US in 2021. This kept government debt down to 42.7 per cent of GDP in 2021, compared with 133 per cent in the US, and meant the economy did not overheat, despite still encountering the kind of supply-chain and delivery difficulties experienced by other developed nations.As a result, inflation, which ran at 0.6 per cent in 2021, is expected to remain comfortably within the Swiss National Bank’s price stability range throughout 2022. Indeed, the central bank does not have to raise interest rates, whereas the US Federal Reserve must now do so to restore price stability and maintain credibility.The final significant factor in Switzerland’s success is its energy policy, which is focused on ensuring grid resilience. The country has the good fortune to be poor in fossil fuels but rich in water. As a result, 55 per cent of its domestic electricity production is hydraulic. Yet, importantly, Switzerland has also maintained a 35 per cent share of nuclear power generation, supplemented by 5 per cent in other renewables. Risks of an energy crisis are contained in Switzerland.The risk is more of a threat elsewhere in Europe and the US. Here rethinking the optimal energy mix to maintain stable and competitive electricity prices should be a key priority. Another way to ensure a resilient and financially sustainable future is to avoid boom-and-bust cycles of stimulus followed by austerity. Switzerland’s record on this is reflected in the Swiss franc’s status as a safe-haven currency. This has meant that sometimes the franc is overvalued in times of crisis, requiring the Swiss National Bank to intervene in currency markets. But it has also resulted in Switzerland having a more benign inflation outlook than faced by many countries. As such, the Swiss National Bank can now maintain its very expansionary monetary policy and allow the Swiss franc to appreciate against the euro. This means Swiss yields should remain low, providing attractive conditions for Swiss companies to invest, innovate and maintain their competitive edge. More

The writer, Morgan Stanley Investment Management’s chief global strategist, is author of ‘The Ten Rules of Successful Nations’After their worst decade since the 1930s, emerging stock markets continued to underperform as a group in 2021, deepening the isolation that surrounds this sprawling asset class. So it will come as a surprise to many that eight of the top 10, and 13 of the top 20, best-performing markets of 2021 were in the developing world.How can that add up? Given its size, China dragged down the emerging market index. With Beijing cracking down on its big technology companies, and self-isolating in the name of economic self-reliance, the country’s stocks were hammered. China was the world’s second worst-performing market last year, ranking 58th out of 59, just ahead of Pakistan. Every region lagged behind the US, as investors poured money into American tech giants. But, excluding China, emerging markets were up 10 per cent, in line with returns for the rest of the world outside the US. This may foreshadow a quiet comeback. Money tends to flow into the fastest-growing economies, notably those pulling away from the pack. Emerging economies grew more than five percentage points faster than developed ones at the peak of their boom in 2009. That lead had narrowed to one point by 2020, which goes a long way to explaining a dismal decade for emerging stock markets.Last year, however, signs of a revival outside China started to show, driven by rising prices for commodities, manufacturing strength in a few countries, rapid growth in the digital economy and the relative financial conservatism of emerging world leaders. In 2021, commodity prices saw their biggest annual gain in nearly a half century, boosting exporters. Among the top 20 hottest markets were major oil powers, including Saudi Arabia in ninth place and Russia in 19th, up 20 per cent for the year.Though manufacturing is in global decline, it is still an important source of growth in a few emerging countries, which are gaining as factories leave China in search of lower business costs. Also among the hot markets of 2021 were manufacturing powers led by the Czech Republic in 2nd place, Vietnam in 15th and Mexico in 18th.In the 2010s, an era of deglobalisation saw slowing flows of people, money and trade, alongside a continued explosion in data flows, which are growing fastest in emerging nations. Among the top-20 stock markets that had a boost from the ongoing digital revolution were Taiwan in 13th place, and India in 14th. Despite these signs of revival, many commentators fear that central bank plans to slow the pace of monetary stimulus will trigger a retreat from risk, including emerging markets, as happened during the taper tantrum of 2013. But there are big differences today. Global investors have pulled money out of emerging markets in most years since 2013, reducing the threat of capital flight now. Over the same period, most big emerging markets have grown more financially stable, not less. Currencies are more competitively priced. Foreign exchange reserves are larger. Most big emerging countries have avoided the cardinal risk — borrowing heavily from foreigners. Current account balances, which reflect how much nations need to borrow abroad to finance their purchases, have shifted into surplus.Talk of emerging market vulnerability now focuses on rising average debt levels, but these averages again skew the reality, distorted by China. After the 2008 financial crisis, China sucked in 70 per cent of all debt flowing to the emerging world; that share has risen to over 80 per cent during the pandemic.In most other big emerging countries, households and corporations have barely run up debt at all and governments have accrued it less dramatically than their peers in China. Since 2019, total debt, which includes that of governments, corporations and households, is up more than 24 per cent as a share of GDP in China — well above the EM median and two to four times the increase in India, Indonesia, Mexico, Egypt or South Africa.The global media tend to dwell on troubled cases like Turkey, but markets appear to be sensing the broader move to relative financial stability in many major emerging countries. Though economists are often a step behind, they too expect emerging nations to start re-establishing their growth lead over developed countries in coming years, according to consensus forecasts. If the fundamentals driving commodities, manufacturing, data flows and economic reform hold up, 2021 could be remembered as the year an emerging market comeback began, even if it was not widely recognised at the time. More

The People’s Bank of China (PBOC) said it was lowering the interest rate on 700 billion yuan ($110.19 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions by 10 basis points to 2.85% from 2.95% in previous operations.Thirty-four out of the 48 traders and analysts, or 70% of all participants, polled by Reuters last week predicted no change to the MLF rates in January, with the rest betting on a rate cut.The world’s second-largest economy has shown signs of slowing after a rapid rebound from the COVID-19 slump, with concerns about the financial health of property developers and the rapid spread of the Omicron coronavirus variant clouding the outlook.”The PBOC’s decision to ease early in January suggested that economic downward pressure intensified at end-2021 and room for improvements in the first quarter of this year is not huge,” said Ken Cheung, chief Asian FX strategist at Mizuho Bank.Cheung expects that the PBOC could deliver more easing measures this year than previously expected by market analysts.Such expectations were also reflected in the bond market, with China’s 10-year treasury futures rising to their highest level since June 2020 and the yield on China’s benchmark 10-year government bonds falling more than 2 basis points in early trade.Market analysts said the size of the rate cut and the timing were a big surprise, and they believe further monetary stimulus could follow. “The 1Y LPR signaled that another rate cut was coming,” said Carlos Casanova, senior Asia economist at Union Bancaire Privee in Hong Kong.”However, the 10 bps cut was larger than expected, suggesting that the authorities have become more preoccupied about weakness in the economy,” he said, adding he also expects an additional 100 bps reduction to banks’ reserve requirement ratio (RRR) this year.With 500 billion yuan worth of MLF loans maturing on Monday, the operation resulted in a net injection of 200 billion yuans into the banking system.The central bank also lowered the borrowing costs of seven-day reverse repurchase agreements, or repos, by the same margin to 2.10% from 2.20%, when it offered another 100 billion yuan worth of reverse repos into the banking system.($1 = 6.3524 Chinese yuan) More