Concerns over escalating tensions between the U.S. and North Korea kept a lid on risk appetite and sent traders into the arms of lower-yielding assets.
The yen got the bulk of the risk aversion moves though gold and Swiss franc also saw some of the action. Not surprisingly, higher-yielding currencies like the euro, pound, and comdolls took hits across the board.
- AU Westpac consumer sentiment drops by 1.2% vs. 0.4% uptick in July
- AU home loans rises by 0.5% vs. 1.5% growth expected, 1.1% increase in May
- China’s CPI (y/y) up by 1.4% vs. 1.5% expected and previous
- China’s PPI (y/y) up by 5.5% vs. 5.6% expected, 5.5% previous
- North Korea concerns weigh on risk appetite
Australia’s home loans report
Australia’s home loans only grew by 0.5% in June, which is below analysts’ expectations of a 1.5% increase and May’s 1.1% uptick.
Apparently, lending to owner-occupiers rose by 0.3% after rising by 2.9% in May, while loans to investors ticked higher (1.6%) after registering declines in the past two months.
Bad news for the RBA, which has been pushing regulatory agencies to reduce owner-investors in order to limit further appreciation of house prices.
China’s inflation reports
Data from the world’s second largest economy saw consumer prices just missing analysts’ estimates for the month of July.
China’s CPI rose by 1.4% from a year earlier in July after hitting 1.5% in June. On a monthly basis, prices had increased by 0.1% after seeing a 0.2% dip in June. A closer look tells us that food prices – CPI’s biggest component – dropped by 1.1% from last year.
Meanwhile, factory prices held its gains for a third straight month and marked its 11th straight month of growth in July.
Producer prices grew by another 5.5% when market players had priced in a 5.6% uptick. Analysts expect prices to unwind as the rally in domestic steel prices retraces and the government continues to reign in debt risks.
North Korea concerns sparks risk aversion
Looks like Trump can produce nail-biting drama even while on vacation!
As mentioned in my U.S. session recap, the Donald threatened “fire and fury” and “power the likes of which the world has never seen before” on North Korea after he has learned that the hermit country has nuclear weapons small enough to fit on a missile.
Not one to be out-threatened, North Korea has now shared that it is “carefully examining” plans for a missile strike on the U.S. Pacific territory of Guam and is just waiting for the green light from Kim Jong-Un.
Market players took the threats seriously, however, and traders ended up running towards safe havens such as the yen, franc, and gold while dumping higher-yielding assets like equities and comdolls.
- Nikkei is down by 1.43% to 19,710.50
- Australia’s A SX 200 is up by 0.50% to 5,772.50
- Shanghai index is down by 0.06% to 11,751.02 and
- Hang Seng is down by 0.74% to 27,65.00.
Major Market Mover(s):
The yen was king of pips during the Asian session thanks to concerns over a nuclear war sparking (heh) risk aversion in the markets.
USD/JPY is down by 53 pips (-0.48%) to 109.81,
EUR/JPY is down by 78 pips (-0.60%) to 128.87, and
GBP/JPY is down by 74 pips (-0.52%) to 142.61.
Overall risk aversion and not-so-hot consumer and producer prices from China weighed on the higher-yielding, commodity-related currencies.
AUD/USD is down by 43 pips (-0.54%) to .7871,
AUD/JPY is down by 89 pips (-1.02%) to 86.43,
USD/CAD is up by 26 pips (+0.21%) to 1.2690,
CAD/JPY is down by 59 pips (-0.68%) to 86.54,
NZD/USD is down by 7 pips (-0.10%) to .7319 and
NZD/JPY is down by 46 pips (-0.57%) to 80.38.
The low-yielding Swiss franc also caught some of the moves in the risk-averse trading environment.
USD/CHF is down by 81 pips (-0.83%) to .9660,
EUR/CHF is down by 112 pips (-0.98%) to 1.1333,
GBP/CHF is down by 110 pips (-0.87%) to 1.2544, and
CHF/JPY is up by 40 pips (+0.35%) to 113.68.
Watch Out For:
- 7:00 am GMT: Japan’s preliminary machine tools orders (y/y)
- 9:00 am GMT: Italy’s industrial production (0.2% expected, 0.7% previous)