Traders continued to price in catalysts from the previous session even though Japan and China both printed top-tier reports in the last couple of hours.
- Japan’s preliminary GDP dips by 0.3% as expected vs. 0.7% uptick in Q2 2018
- Australia’s Westpac consumer sentiment increases by 2.8% vs. 1.0% growth in October
- Australia’s wage price index (q/q) shows 0.6% growth as expected vs. 0.5% in Q2 2018
- China’s industrial production (y/y) up by 5.9% vs. 5.8% expected and previous
- China’s fixed asset investment (ytd/y) jumps by 5.7% vs. 5.5% expected, 5.4% previous
- China’s retail sales (y/y) slows down from 9.2% to 8.6% in October
- China’s unemployment rate steady at 4.9% in October
- Japan’s industrial production improves from -1.1% to -0.4% in September
Japan’s GDP miss
A preliminary reading of Japan’s GDP showed the economy contracting by 0.3% in Q3 2018 after growing by 0.8% in the previous quarter.
The economy shrank by 1.2% on an annualized basis, which is weaker than the 1.0% slip that markets had estimated.
Turns out, a combo of natural disasters and global trade tensions weighed on export and consumer activity between July to September.
Private demand was the biggest drag as private consumption and private inventories both declined. Public demand and net exports also gave negative contributions, while business spending gave no contributions during the period.
China’s data dump
Reports from the world’s second-largest economy came in mixed, with long-term investment and industrial activity showing improvements while consumer-related data missed expectations.
China’s fixed asset investment shot up by 5.7% in the first 10 months of the year, faster than the 5.4% growth seen in the January-September period.
Industrial output also expanded by 5.9% from a year earlier in October, which is 0.1% better than last month’s reading and market estimates of a 5.7% increase.
Retail activity wasn’t as bullish, as it only grew by 8.6% when analysts saw a 9.2% annualized growth for the report.
Today’s reports support speculations that the government’s infrastructure-related stimulus programs are starting to propel economic activity. However, the retail sales miss also highlighted consumer-related challenges amidst China’s trade war with the U.S.
Mixed risk sentiment
There were no new market themes to price in today, so Asian session traders mostly took their cues from their U.S. counterparts.
If you recall, jitters over the impact of the U.S.-China trade war and recent declines in commodity prices steered traders away from higher-yielding bets like equities in the previous trading sessions.
- Nikkei is up by 0.34% to 21,884.0
- A SX 200 is down by 1.34% to 5,757.8
- Shanghai index is down by 0.06% to 2,653.244
- Hang Seng is down by 0.13% to 25,758.1
Commodity prices actually shot HIGHER today. Gold took advantage of a slight dollar weakness, while crude oil prices inched higher on a bit of profit-taking and/or bargain-hunting after the previous days’ losses.
- Gold is up by 0.12% to $1,203.59 per troy ounce
- Brent crude oil is up by 0.17% to $65.33 per barrel
- U.S. WTI is up by 0.38% to $55.45 per barrel
Major Market Mover(s):
Asian session traders caught up to their U.S. and London counterparts to price in Theresa May and her team finally having a Brexit deal text to present to her cabinet ministers.
GBP/USD is up by 37 pips (+0.28%) to 1.3005; GBP/CHF is up by 44 pips (+0.34%) to 1.3093; EUR/GBP is down by 12 pips (-0.12%) to 1.6669; GBP/AUD is up by 36 pips (+0.20%) to 1.7999; GBP/CAD is up by 43 pips (+0.25%) to 1.7211, and GBP/NZD is up by 17 pips (+0.09%) to 1.9184.
A combo of risk-taking and Japan’s weaker-than-expected GDP report weighed on the low-yielding yen across the board.
USD/JPY is up by 12 pips (+0.10%) to 113.92; EUR/JPY is up by 24 pips (+0.19%) to 128.72; GBP/JPY is up by 59 pips (+0.40%) to 148.16; AUD/JPY is up by 17 pips (+0.20%) to 82.31, and CHF/JPY is up by 15 pips (+0.13%) to 113.15.
High-yielding currencies like the Kiwi were supported by forex bulls despite China releasing mixed economic reports.
NZD/USD is up by 16 pips (+0.24%) to .6779; NZD/JPY is up by 27 pips (+0.35%) to 77.23; AUD/NZD is down by 12 pips (-0.11%) to 1.0657; NZD/CHF is up by 15 pips (+0.22%) to .6825, and EUR/NZD is down by 20 pips (-0.12%) to 1.6668.
Watch Out For:
- 7:00 am GMT: Germany’s preliminary GDP (q/q) (-0.1% expected, 0.5% previous)
- 7:45 am GMT: France’s final CPI to maintain 0.1% growth in October?
- 9:30 am GMT: U.K.’s inflation reports. Read our mini trading guide if you’re planning on trading the event!
- 9:30 am GMT: U.K.’s house price index (y/y) (3.3% expected, 3.2% previous)
- 9:30 am GMT: U.K.’s PPI output (0.2% expected, 0.4% previous)
- 10:00 am GMT: Euro Zone’s flash GDP (q/q) estimated to maintain 0.2% increase
- 10:00 am GMT: Euro Zone’s industrial production (-0.4% expected, 1.0% previous)