There were no economic bombshells in the past few hours, but traders cautiously took some risk after getting spooked early in the Asian session.
- Japan’s retail sales (y/y) slows down to 2.1% as expected vs. 2.7% growth in August
- Australia’s HIA new home sales increases by 1.1% vs. 2.9% decline in August
- Far-right candidate Jair Bolsonaro wins Brazil’s Presidential elections
- Angela Merkel’s CDU/CSU coalition sees significant loss of support in key regional elections
Slower profits for China’s industrial firms
Profit growth for China’s industrial companies slowed for a fifth consecutive month in September, as sales of raw materials and manufactured goods continued their declines.
Industrial profits edged 4.1% higher from a year earlier in September, which is less than half of August’s growth and marks the slowest uptick since March.
The slowdown supported an earlier factory output report reflecting weaker demand for China’s goods.
Lower corporate profits can translate to weaker job prospects and slower consumer activity, so you can bet that last weekend’s report has gotten the attention of market bears.
Japan’s retail sales
A report from Japan’s Ministry of Economy, Trade and Industry showed retail activity slowing for the first time in four months in September.
Japan’s retail fell by 0.2%, in line with expectations, after a 0.9% increase in August. On an annualized basis, this translates to a 2.1% uptick after August’s 2.7% growth.
A closer look tells us that sales of food & beverages, fuel, fabrics apparel & accessories, and machinery & equipment grew but sales of motor vehicles, and general merchandise declined for the month.
The weakness in consumer spending is unwelcome news for the Bank of Japan (BOJ), which is scheduled to print its policy decision and outlook later this week. If you recall, the central bank has been throwing the kitchen sink on the economy to stimulate consumer prices.
Mixed risk sentiment in the markets
The Asian bourses started the week on a weak note as traders continued to price in concerns over a mostly disappointing earnings season as well as weaker global growth prospects.
Luckily for the bulls, risk-takers soon stepped in and pushed stock prices higher. China’s equities missed the boat, however, thanks to a weekend report showing that industrial profits had slowed for a fifth consecutive month in September.
- Nikkei is up by 0.21% to 21,228.8
- A SX 200 is up by 1.26% to 5,717.3
- Hang Seng is down by 0.07% to 24,701.0
- Shanghai index is down by 1.47% to 2,560.737
Commodity prices were a little more mixed, with gold taking advantage of the earlier risk-off vibe while crude oil prices got caught up in small intraday volatility.
- Gold is up by 0.02% to $1,233.35 per troy ounce
- Brent crude oil is down by 0.15% to $77.55 per barrel
- U.S. WTI is up by 0.04% to $67.59 per barrel
Major Market Mover(s):
A bout of risk-taking did the comdolls good, as it boosted the Aussie and Kiwi across the board. Heck, even the Loonie caught some of the bullish move despite the mixed crude oil prices.
AUD/USD is up by 12 pips (+0.16%) to .7098; AUD/JPY is up by 14 pips (+0.17%) to 79.43; AUD/CHF is up by 16 pips (+0.23%) to .7082; EUR/AUD is down by 30 pips (-0.18%) to 1.6052, and GBP/AUD is down by 9 pips (-0.05%) to 1.8084.
NZD/USD is up by 11 pips (+0.17%) to .6532; NZD/JPY is up by 14 pips (+0.19%) to 73.09; EUR/NZD is down by 38 pips (-0.22%) to 1.7444; GBP/NZD is down by 15 pips (-0.08%) to 1.96151, and NZD/CHF is up by 16 pips (+0.24%) to .6517.
USD/CAD is down by 4 pips (-0.03%) to 1.3100; CAD/JPY is up by 6 pips (+0.07%) to 85.42, and CAD/CHF is up by 9 pips (+0.12%) to .7617.
The common currency took hits against its counterparts after a regional election in Germany showed both parties in Angela Merkel’s governing coalition suffering heavy losses over the weekend.
EUR/USD is down by 9 pips (-0.08%) to 1.1395; EUR/JPY is down by 7 pips (-0.06%) to 127.50; EUR/GBP is down by 10 pips (-0.11%) to .8877, and EUR/CAD is down by 17 pips (-0.11%) to 1.4926.
CHF and JPY
Not surprisingly, a relatively risk-friendly trading environment translated to dips for the lower-yielding, safe-haven currencies.
USD/CHF is up by 8 pips (+0.08%) to .9978 and GBP/CHF is up by 16 pips (+0.13%) to 1.2807 while USD/JPY is up by 3 pips (+0.02%) to 111.90 and GBP/JPY is up by 17 pips (+0.12%) to 143.64.
Watch Out For:
- 9:30 am GMT: U.K.’s net individual lending (4.1B GBP expected, 4.0B GBP previous)
- 9:30 am GMT: U.K.’s mortgage approvals (65K expected, 66K previous)
- 11:00 am GMT: U.K.’s CBI realized sales (27 expected, 23 previous)