No top-tier data? No problem! Traders went back to pricing in their global growth concerns while the PBOC stepped up its efforts to weaken the yuan.
- AU NAB business confidence improves from 5 to 6 in September
- Japan’s current account surplus narrows down from 1.48T JPY to 1.43T JPY in August
- Japan’s Economy Watchers Sentiment at 48.6 vs. 47.3 expected, 48.7 previous
- IMF cuts global growth forecasts for 2018 and 2019
IMF downgrades global growth prospects
The biggest story of the hour is the International Monetary Fund (IMF) downgrading its global growth forecasts by 0.2% to 3.7% in 2018 and 2019 in its latest World Economic Outlook. That’s the first downgrade since 2016, yo!
The downgrade was also broad-based. While the IMF maintained Uncle Sam’s GDP forecast at 2.9% this year, it also cut its 2019 estimate by 0.2% to 2.5% over “recently announced measures” and predicted that “US growth will decline as fiscal stimulus begins to unwind in 2020.”
China also saw a 0.2% downgrade to 6.2% next year thanks to the recent tariffs, while “surprises that suppressed activity in early 2018” earned the euro area and the U.K. the same 0.2% downgrade in 2019.
Overall, IMF believes that
“The balance of risks to the global growth forecast is tilted to the downside, both in the short term and beyond.”
Duhn duhn duhn.
Mixed market reaction
Thanks to a lack of fresh catalyst and the IMF’s recent report, Asian session traders went back to pricing in their global growth concerns.
Specifically, market players are worried over the high U.S. bond yields draining capital for the emerging markets; the U.S.-China trade war affecting export-dependent economies, and political skirmishes over Brexit and Italy’s budget weighing on risk sentiment.
China’s markets were spared the bloodbath, however, thanks to the People’s Bank of China (PBOC) setting its yuan mid-point rate above the psychological 6.9 mark at 6.9019 per dollar. Seems like the central bank isn’t done providing support this week!
- Nikkei is down by 1.15% to 23,510.6
- A SX 200 is down by 0.75% to 6,028.5
- Shanghai index is up by 0.49% to 2,729.805
- Hang Seng is up by 0.42% to 26,312.0
Commodity prices were a bit more optimistic, with crude oil extending its last-minute rally from the previous session while gold took advantage of a bit of dollar weakness and risk aversion in the markets.
- Gold is up by 0.25% to $1,191.05
- Brent crude oil is up by 0.70% to $84.34
- U.S. WTI is up by 0.62% to $74.65
Major Market Mover(s):
The high-yielding Aussie was spared from the overall risk aversion thanks to Dalian iron ore futures hitting three-week highs after a week-long holiday in China.
For newbies out there, you should know that Australia exports A LOT of iron ore to China, so higher iron ore prices means more Aussie needed to complete transactions.
AUD/USD is up by 9 pips (+0.13%) to .7087; AUD/NZD is up by 33 pips (+0.30%) to 1.0988; AUD/CHF is up by 13 pips (+0.19%) to .7036; EUR/AUD is down by 20 pips (-0.12%) to 1.6214, and GBP/AUD is down by 19 pips (-0.10%) to 1.8473.
With the dollar taking a chill pill after days of gains, the low-yielding yen soaked up most of the risk aversion flow in the markets.
USD/JPY is down by 13 pips (-0.12%) to 113.10; GBP/JPY is down by 15 pips (-0.10%) to 148.07; EUR/JPY is down by 16 pips (-0.12%) to 129.96, and CHF/JPY is down by 17 pips (-0.15%) to 113.91.
The high-yielding Kiwi didn’t find as much support from higher iron ore prices, so the bears got busy pricing in their concerns for global (especially China’s!) growth.
NZD/USD is down by 14 pips (-0.19%) to .6449; NZD/JPY is down by 14 pips (-0.19%) to 72.93; EUR/NZD is up by 22 pips (+0.12%) to 1.7816, and GBP/NZD is up by 14 pips (+0.07%) to 2.0298.
Watch Out For:
- 6:00 am GMT: Germany’s trade balance (15.9B EUR expected, 15.8 EUR previous)
- 8:30 am GMT: BOE’s FPC statement