While escalating violence in Iraq brought about nerves for the US and European markets late last week, Asian markets finished the week in the green. Chinese and Hong Kong markets in particular, were buoyed by positive Chinese data while Japan was helped by further governement initiatives to boost growth.

Chinese, Hong Kong markets buoyed by Chinese data
Last Friday, Asian markets were buoyed by Chinese data that suggested stabilising growth. Factory production rose 8.8% in May from a year earlier and up from the 8.7% increase in April. Retail sales gained 12.5% in May from a year earlier, beating the 12.1% consensus. China’s factory-output growth for the month of May accelerated to 8.8% from a year earlier, meeting economists expectations and higher than the 8.7% rate in April.

Some view these data as evidence that the Chinese government’s support measures are working. The Chinese State Council had in April announced a series of policies to support the economy after first-quarter gross domestic product growth slowed to 7.4%, the country’s weakest pace since 2012. The measures include help for exporters, tax cuts, faster fiscal spending and a reduction in reserve requirements for some banks to spur lending to targeted sectors.

The central bank has also moved to rein in shadow banking risks and encourage credit to move through the official banking sector. Last Thursday’s new yuan loans report showed new local-currency loans in China last month rose to 870.8 billion yuan (US$140 billion), topping the 750 billion yuan median estimate on Bloomberg.

Japan to cut corporate taxes in 2015
Japan stocks also ended the week in the green. The Bank of Japan had on Friday kept intact its policy of expanding the monetary base at a pace of 60 trillion yen to 70 trillion yen (US$686 billion) per year, in line with consensus’ prediction.  At the same time, its Prime Minister Shinzo Abe announced his latest initiative to boost growth in Japan with a plan to trim corporate taxes in 2015. The corporate tax cut will be “growth-orientated” and “will help create jobs and improve peoples’ livelihoods.”

 Japan’s corporate levy of about 35% is the second highest among Group of Seven nations. It compares with levels of about 24% in South Korea and 23% in the U.K., according to the Japanese finance ministry data.

US economic releases the focus this week
Looking at the week ahead, the market will be focused on US economic releases concerning manufacturing as well as the FOMC rate decision, although consensus is expecting the rate to be kept at 0.25%.

Mon 16 Jun: US Empire Manufacturing (Jun), Industrial Production (May)
Tue 17 Jun: S’pore Non-oil Domestic Exports (May), US CPI & Housing Starts (May)
Wed 18 Jun: China Property Price (May)
Thu 19 Jun: US FOMC Rate Decision