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Risk aversion was the name of the game in early Asian session trading, but traders soon kept calm and traded on as relatively strong reports came out.

  • NZ building permits down by 1.0% vs. 6.9% in May
  • Japan’s preliminary industrial production up by 1.6% as expected vs. 3.6% decline in May
  • AU HIA new home sales falls by 6.9% vs. 1.1% growth in May
  • AU MI inflation gauge down by another 0.1% in July
  • AU private sector credit up from 0.4% to 0.6% vs. 0.4% expected
  • China’s manufacturing PMI slips from 51.7 to 51.4
  • China’s non-manufacturing PMI dips from 54.9 to 54.5
  • NZ ANZ business confidence down from 24.8 to 19.4
  • Japan’s housing starts (y/y) up by 1.7% vs. 0.1% expected, -0.3% previous

Major Events/Reports:

Japan’s industrial production

Data from Japan printed earlier today showed industrial output recovering in June.

Industrial production rose by 1.6% for the month, which is a lot better than the 3.6% contraction in May. This translates to a 4.9% growth on an annualized basis following a 6.5% uptick in May.

Japan’s Ministry of Economy, Trade, and Industry tells us that the upshot was driven primarily by production of transport equipment, chemicals, and electric machinery.

Of course, it has also helped that investment and technology is picking up around the globe and that a weak currency is keeping Japan’s products competitive in the global markets.

Meanwhile, weaker production of electronic parts and devises, and other manufacturing, and iron and steel products dragged on overall production data

China’s PMI reports

Official manufacturing data from the world’s second largest economy missed analysts’ expectations but managed to stay within “expansionary” levels.

China’s manufacturing PMI came in at 51.4 in July, which is just shy of June’s 51.7 reading. Apparently, poor weather conditions and routine maintenance for some businesses contributed to the drag even as imports and exports continue to crawl higher.

The official services PMI also dipped for the month, this time from 54.9 to 5.45.

While the manufacturing sector is usually more closely-watched, China’s pivot towards domestic consumption means that the services sector will soon account for a bigger slice of the economic pie. Heck, the industry already accounted for over half of China’s economy last year!

Major Market Mover(s):

JPY

The low-yielding yen gained across the board on a bout of risk aversion in the markets.

USD/JPY is down by 11 pips (-0.10%) to 110.56, AUD/JPY is down by 24 pips (-0.27%) to 88.15, and EUR/JPY is down by 31 pips (-0.24%) to 129.71.

Watch Out For:

  • 6:00 am GMT: German retail sales (0.1% expected, 0.5% previous)
  • 8:00 am GMT: Italy’s unemployment rate (11.2% expected, 11.3% previous)
  • 8:30 am GMT: U.K. net individual lending (4.9B GBP expected, 5.3B GBP previous)
  • 8:30 am GMT: U.K. mortgage approvals to remain at 65K?