China offers verbal support as growth hits lowest in nearly a decade

 

China to the rescue

Asian equity markets fared much better than their US counterparts did yesterday, mostly helped by comments out of China. Before the markets opened, we heard coordinated voices from the heads of China’s securities regulator (CSRC), the banking and insurance regulator and the central bank. The chief of CSRC said that China will support non-state backed listed companies, while the PBOC governor said low market valuations and market volatility are caused by investor sentiment and were not in line with China’s economic fundamentals. He added that the central bank will support financing to non-state backed firms.

 

China50 Daily Chart

Source: Oanda fxTrade

 

Investors interpreted the comments to imply official money would be flowing into the market, so the local index started off in the black, and powered ahead to gains of more than 1.8% at one stage. This filtered through Asian bourses, with the Japan225 index currently up 0.3%, the HongKong33 index gaining 1.1% and the Australia200 index adding 0.8%. The NAS100 index, the worst hit of the US indices yesterday, rose 0.2%.

 

China data disappoints

China recorded GDP growth of 6.5% y/y for the third quarter, below estimates of 6.6% and down from Q2’s 6.7% rate. That was the slowest rate of growth since Q1 2009, when the Global Financial Crisis was in full swing. China’s Statistics Bureau laid the blame squarely on the trade war, saying the “extremely complex and severe international situation” was a drag on growth.

In other data, industrial production slowed to +5.8% y/y in September, the weakest since February 2016, while retail sales provided the only bright spot, rising 9.2% y/y, better than the 9.0% predicted in a poll of economists, and the fastest pace in five months.

The Aussie took an initial knee-jerk dip after the GDP numbers, hitting the lowest in more than a week, but soon recovered amid the positive sentiment across equity markets. However, AUD/USD has yet to regain the 200-hour moving average at 0.7113, which has actively guided the pair over the past five sessions.

 

AUD/USD Hourly Chart

Source: Oanda fxTrade

 

Asia Market update: China data

Canada’s consumer prices on tap

Euro-zone current account data for August is the only main event on the European calendar today, which is expected to show a larger surplus of EUR21.4 billion from EUR21.3 billion in July. Consumer prices from Canada for September headline the North American session, with both the official readings and the Bank of Canada core readings due.

Watch out for speeches from Fed’s Kaplan (dove, non-voter) and Bostic (dove, voter) today, though neither is expected to deviate from the Fed’s current view on the rate path amid a strong economy. A speech from Bank of England’s Carney completes the week.

You can view the full MarketPulse data calendar at https://www.marketpulse.com/economic-events/

 

Have a great weekend from Asia.

Euro rebounds as markets find relative calm

After the Monday Mayhem from the Turkey contagion, a sense of calm descended on FX markets during today’s Asian session. USD/TRY headed lower from its record high yesterday as the markets digested the impact and effectiveness of the central bank’s measures announced yesterday.

Selling of emerging currencies eases

The move in USD/TRY prompted other emerging currencies to stage a bit of a comeback against the US dollar with USD/ZAR dropping 8.4%, USD/MXN 2.7% and USD/INR 0.75%. EUR/USD also benefited from the US dollar’s retreat, rising 0.16% to regain the 1.14 handle. Equity markets also had a respite, with the Nikkei225 gaining 1.23%, Australian shares rose 0.66% while the Singapore30 added 0.54%. The only black spot was China where disappointing data knocked 0.51% off the index.

EUR/USD Daily Chart

Source: Oanda fxTRade

China data disappoints

China released a set of second-tier data for July today and each data point came in below expectations. Retail sales grew 8.8% y/y after 9% growth in June and missed analysts’ expectations of steady 9% growth again. Industrial production held steady at +6.0% y/y though was also mellow forecasts of an increase of 6.3% while fixed asset investment missed with 5.5% annual growth versus expectations of a 6.0% gain. The jobless rate rose to 5.1% in July from 4.8% but Chinese officials were quick to point out that this was due mainly to seasonal factors.

Officials also commented that the other data pointed to a steady economy even though the domestic and international environment had become tricky with the effects of global trade tensions starting to show up in the global economy.

Australia’s second-tier data was mixed with the NAB business conditions index sliding to 12 in July from 15 in June though the more forward-looking confidence index improved a notch to 7 from 6. The Aussie has move higher on the day though this is more likely due to the US dollar’s dip rather than anything from the data.

Source: MarketPulse

The full data calendar can be viewed at https://www.marketpulse.com/economic-events/

Euro-zone Q2 GDP revision on tap

There is not much of an expectation for Euro-zone Q2 GDP to be revised from the provisional reading of +0.3% q/q and +2.1% y/y. That said, industrial production could show a contraction of 0.4% m/m in July, according to economists’ forecasts. From Germany we can expect ZEW sentiment surveys which have been generally trending lower over the past six months while the UK releases unemployment and average earnings data. The US data calendar is relatively mundane with export/import prices followed by the weekly API crude inventories.

OANDA Market Beat: Risk Aversion Boosts Dollar

Source: Oanda MarketPulse

US Futures Higher After Second Plunge This Week

Indices Remain Vulnerable After Entering Correction

US futures are trading slightly in the green ahead of the open on Friday, a day after stock markets once again tumbled leaving indices in correction territory.

As we saw on Thursday, this isn’t necessarily indicative of calm returning to the markets. The Dow recorded declines of more than 1,000 points for the second time this week, having never done so before, despite futures prior to the open being relatively unchanged on the previous days close.

Equities Lose $5 Trillion as Bulls Slay Bulls

Clearly there remains a lot of volatility and nervousness in the markets and I don’t expect this to ease up heading into the weekend. Stock markets will likely remain vulnerable to further shocks heading into today’s close and possible even next week. That said, with a 10% correction having now completed, I wonder whether investors will now start looking to buy the dips as the fundamental backdrop remains strong.

OANDA fxTrade Advanced Charting Platform

US Congress Passes Funding Bill Ending Brief Government Shutdown

On a more positive note, the House and the Senate approved a new funding bill in the early hours of Friday morning that will see the government through to 23 March and increase spending limits for two years, ending a showdown that came into effect overnight.

Markets haven’t been too concerned about the prospect of a shutdown since the start of the year despite two having now taken place so I don’t expect to see any boost now that a deal has been reached. This is merely just another self-inflicted risk that’s been temporarily averted.

CAC Loses Ground as Global Sell-Off Continues

Sterling Dips After Worrying Manufacturing Data

It’s a slightly quieter day in terms of notable economic events. The Canadian jobs data will be of interest given that the central bank has been relatively aggressively raising interest rates over the last six months. The UK GDP estimate from NIESR will also be of interest, given that the pound has continued to rise even as the economy experiences a notable slowdown.

The manufacturing and industrial production figures from the UK this morning showed another dip in December, with the latter in particular experiencing no year on year growth. Given that these are among the areas that have benefited since the referendum, it may be a minor concern. The pound dipped after the releases having failed to hold above 1.40 against the dollar in recent days.

GBPUSD Daily Chart

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.