Traders mostly shrugged off positive Chinese data, believing that global trade frictions will eventually weigh on economic growth.
- Tokyo’s core CPI (y/y) up by 0.9% to 0.8% expected and previous
- Japan’s unemployment rate inches up from 2.4% to 2.5% in July
- Japan’s preliminary industrial production slips by 0.1% vs. 0.3% expected, -1.8% previous
- China’s manufacturing PMI improves from 51.2 to 51.3 in August
- China’s non-manufacturing PMI jumps from 54.0 to 54.2 in August
- Australia’s private sector credit up by 0.4% vs. 0.3% expected and previous
- Japan’s housing starts (y/y) down by 0.7% vs. -3.9% expected, -7.1% previous
Upbeat Chinese reports
Data from the world’s second largest economy showed the manufacturing AND non-manufacturing sectors picking up in August.
The official manufacturing PMI report inched higher from 51.2 to 51.3, a reprieve after the back-to-back decline in the last two months.
A closer look, however, showed export orders shrinking for a third month in a row. Does this mean the industry is starting to feel the pinch of the U.S.’ recent tariffs?
Meanwhile, non-manufacturers also saw faster expansion with the PMI rising from 54.0 to 54.2 when analysts had expected a dip to 53.8.
Risk aversion in play
Asian session market players took cues from their U.S. counterparts and mostly shrugged off positive economic data printed today.
See, many believe that the piling on of tariffs from the U.S., along with threats of more tariffs in the foreseeable future, will eventually weigh on China’s manufacturing and exporting activities.
Of course, it also didn’t help that the Trump administration is reportedly considering EVEN MORE goods to increase tariffs on and that we might hear about it as early as next week. Yipes!
- Nikkei is up by 0.07% to 22,885.7
- A SX 200 is down by 0.35% to 6,337.7
- Shanghai index is down by 0.08% to 2,735.515
- Hang Seng is down by 0.91% to 27.906.6
Commodities remained unfazed, however, with gold taking advantage of a bit of risk aversion while crude oil prices recovered some of their losses from the previous session.
- Gold is up by 0.29% to $70.28
- Brent crude oil is up by 0.39% to $78.02
- U.S. WTI is up by 0.36% to $70.28
Major Market Mover(s):
AUD and NZD
Trump threatening to walk out of the WTO, talks of additional U.S. tariffs heading China’s way, and a bit of profit-taking in the markets clouded over China’s better-than-expected reports.
Not surprisingly, commodity-related currencies that would suffer if demand from China were to weaken saw selling across the board.
AUD/USD is down by 11 pips (-0.15%) to .7252; AUD/JPY is down by 12 pips (-0.15%) to 80.48; AUD/CHF is down by 15 pips (-0.22%) t o.7023; EUR/AUD is up by 24 pips (+0.15%) to 1.6084, and GBP/AUD is up by 37 pips (+0.20%) to 1.7937.
NZD/USD is down by 15 pips (-0.22%) to .6642; NZD/JPY is down by 16 pips (-0.21%) to 73.72; GBP/NZD is up by 45 pips (+0.23%) to 1.9583, and NZD/CHF is down by 18 pips (-0.28%) to .6433.
Expectations are so high for Canadian Foreign Minister Chrystia Freeland to make a trade deal with the U.S. that investors got jittery when she ended Thursday without more bones to throw for the markets.
In an interview, she admitted that “No, we don’t have an agreement,” adding that talks would “reconvene in the morning.” Talk about buzzer-beater!
USD/CAD is up by 35 pips (+0.27%) to 1.3015; CAD/JPY is down by 20 pips (-0.20%) to 85.27; EUR/CAD is up by 33 pips (+0.22%) to 1.5181, and GBP/CAD is up by 46 pips (+0.27%) to 1.6930.
Watch Out For:
- 6:00 am GMT: Germany’s retail sales (-0.1% expected, 1.2% previous)
- 6:00 am GMT: U.K.’s Nationwide house price index (0.1% expected, 0.6% previous)
- 6:45 am GMT: France’s preliminary CPI (0.5% expected, -0.1% previous)
- 8:00 am GMT: Italy’s unemployment rate (10.8% expected, 10.9% previous)
- 9:00 am GMT: Euro Zone’s CPI flash estimate (y/y/) to remain at 2.1%?
- 9:00 am GMT: Euro Zone’s core CPI flash estimate (y/y) expected to stay at 1.1%
- 9:00 am GMT: Italy’s preliminary CPI (0.2% expected, 0.3% previous)
- 9:00 am GMT: Euro Zone’s unemployment rate (8.2% expected, 8.3% previous)