A pretty busy day for Asian session traders, as they price in China’s trade data just as the U.S. announced a specific date for a fresh set of tariffs.
- Japan’s bank lending (y/y) down from 2.2% to 2.0% in July
- Japan’s current account surplus tightens from 1.85T JPY to 1.76T JPY vs. 1.84T JPY expected
- Japan’s Economy Watchers sentiment slips from 48.1 to 46.6 vs. 47.8 expected
- AU home loans down by 1.1% vs. 0.1% increase expected 1.0% growth in May
- NZ inflation expectations (q/q) retains 2.0% figure in Q3 2018
- China’s trade surplus down from 262B CNY to 177B CNY in July
- China’s USD-denominated trade surplus tightens from 41.6B to 28.1B vs. 39.1B expected
China’s trade data
Somebody holler at the Donald! An official report printed earlier showed China’s trade surplus narrowing from $41.6B to $28.1B in July. A closer look, however, detailed that BOTH imports and exports shot higher.
Exports grew by 12.2% from a year earlier in June, which is FASTER than the 11.2% gain seen in June and the 10.0% uptick that analysts had expected. If you recall, the first set of U.S. tariffs took effect at the beginning of July.
Even imports showed strength. Shipments surged by 27.3% for the month and hinted that demand from the world’s second largest economy remains solid despite trade war fears.
Interestingly, China’s trade surplus with the U.S. also narrowed slightly from a record high of $28.97 to $28.09 in July. Small win for #MAGA?
Next round of U.S. tariffs to hit this month
On late Tuesday the U.S. Trade Representative confirmed that Uncle Sam will impose 25% tariffs on an additional $16 billion worth of Chinese goods.
The collection of duties will start on August 23 and will cover 279 product lines including motorcycles, steam turbines, railway cars, and semiconductors.
The move is a follow-up of the additional tariffs implemented on $34 billion worth of goods on July 6 and came days after China has threatened to increase tariffs on an additional $60 billion of U.S. goods.
BOJ to allow wider 10-year yield ranges?
Are Bank of Japan (BOJ) members feeling more chill about JGB’s 10-year yield fluctuations?
A scan of the Summary of Opinions report showed one member saying that “long-term yields may move upward and downward at about double the range of around plus or minus 0.1%…”
Meanwhile, another member thinks it’s “appropriate” to “allow the yields to move upward and downward by around 0.25%.”
If y’all recall, the BOJ’s July statement only recognized that yields may move upward and downward “to some extent” and didn’t mention any specific range.
NZ inflation expectations
A survey from none other than the RBNZ showed firms expecting consumer prices to hit 1.86% over the coming year, up from 1.80% predicted in early Q2 2018.
Two-year inflation expectations also inched higher, up from 2.01% to 2.04% and is almost right smack in the middle of the RBNZ’s 1% to 3% target band.
Analysts don’t expect the central bank to make any changes in its monetary policy statement scheduled later today, but they are interested on how Governor Adrian Orr will respond to faster inflation.
Will Orr and his friends shrug off faster inflation and focus on lower growth expectations? Or will today’s headlines keep them firmly in the neutral territory?
Overall risk appetite
Asian session traders had a bearish moment when the U.S. finalized its next set of tariffs for China’s products.
Thankfully for the bulls, markets soon focused on China’s better-than-expected trade data and speculations that the Chinese government is making moves to cushion domestic markets from the U.S.-China trade war and a lower yuan.
- Nikkei is up by 0.43% to 22,760.8
- A SX 200 is up by 0.26% to 6,266.5
- Shanghai index is down by 0.32% to 2,770.493
- Hang Seng is up by 0.42% to 28,368.8
Even commodities joined the fray, with gold once again taking advantage of overall dollar weakness while oil prices gained a bit more from a surprise draw in yesterday’s API report.
- Gold is up by 0.23% to $1,213.57
- Brent crude oil is up by 0.31% to $74.66
- U.S. WTI is up by 0.35% to $69.29
Major Market Mover(s):
Trade and geopolitical tensions between Canada and Saudi Arabia continued to weigh on the Loonie.
NZD/CAD is up by 24 pips (+0.27%) to .8814; AUD/CAD is up by 13 pips (+0.13%) to .9699; CAD/CHF is up by 9 pips (+0.12%) to .7618; EUR/CAD is up by 28 pips (+0.18%) to 1.5166, and GBP/CAD is up by 15 pips (+0.09%) to 1.6904
A better-than-expected inflation reading inspired speculations that the RBNZ won’t be as dovish in its upcoming statement as market had expected.
NZD/USD is up by 21 pips (+0.30%) to .6753; AUD/NZD is up by 11 pips (+0.10%) to 1.1003; GBP/NZD is down by 25 pips (-0.13%) to 1.9178, and NZD/CHF is up by 10 pips (+0.15%) to .6715.
Risk-taking and a bit of profit-taking from the previous session’s gains dragged the Greenback lower against some of its counterparts.
USD/JPY is down by 3 pips (-0.02%) to 111.35; USD/CHF is down by 12 pips (-0.12%) to .9943; GBP/USD is up by 12 pips (+0.10%) to 1.2951, and EUR/USD is up by 21 pips (+0.18%) to 1.1620.
Watch Out For:
- No major economic reports released during the European session. Make sure you pay attention to other themes driving price action!