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Higher-yielding bets started the week strong thanks to easing concerns over nuclear threats from the U.S. Meanwhile, New Zealand and Japan print strong numbers while China’s data dump missed expectations.

  • NZ retail sales jumps by 2.0% in Q2 2017 vs. 1.6% in growth Q1
  • NZ core retail sales up by 2.1% vs. 0.5% in Q1
  • Japan’s preliminary GDP (q/q) up by 1.0% vs. 0.3% in Q1 2017
  • China’s industrial production (y/y) down from 7.6% to 6.4% in July
  • China’s fixed asset investment (ytd/y) up by 8.3% vs. 8.5% expected and previous
  • China’s retail sales (y/y) increased by 10.4% vs. 10.9% expected, 11.0% previous
  • Risk appetite improves on improvement in geopolitical tensions

Major Events/Reports:

Sporting events boost NZ retail sales

Statistics New Zealand printed a 2.0% increase in retail sales volume in Q2 2017, which is higher than the previous quarter’s 1.6% uptick and the expected 0.7% improvement. The value of sales rose by 1.6% compared to the previous quarter’s 2.5% gain.

Apparently, huge sporting events such as the World Masters Games and the Lions rugby tour helped boost the numbers.

Food and beverage, which includes cafes, restaurants, bars, takeaways, and catering services, saw a record volume increase of 4.2%, while accommodation sales also shot up by 6.1%, the strongest in three years.

Other numbers ain’t lookin’ bad either. 12 out of 15 industries posted higher sales volumes while 11 out of 15 reported higher sales values. I guess players were heroes to more than their fans, huh?

Japan’s GDP boosted by consumer demand

Economic activity in Japan accelerated at the fastest pace in more than two years in Q2 2017 thanks to better consumer demand and higher capital expenditure.

Japan’s GDP rose by an annualized rate of 4.0%, the fastest since Q1 2015 and marks the 6th consecutive quarterly expansion. If we compare to the previous quarter, the economy had grown by 1.0% against analyst expectations of a 0.6% uptick.

Domestic demand clocked in a 1.3% gain from Q1, which is a lot better than Q1’s 0.2% growth. Private consumption, which comprises about two-thirds of Japan’s GDP, popped up by 0.9% when analysts had already expected a 0.5% uptick. What’s more, it looks like consumers spent more on durable goods (long-term investments, which is a positive sign for Japan’s consumer spending patterns.

Capital expenditure also carried its weight, as it jumped by 2.4% when analysts had only been expecting a 1.2% increase. Meanwhile, external demand deducted 0.3% from GDP growth thanks in part to higher oil prices and import demand.

China’s data dump

Medium-tier reports from the world’s second largest economy left investors feeling a bit disappointed.

China’s industrial production – a proxy for the export-based economy’s growth – grew by 6.4% from a year earlier in July after rising by 7.4% in June. This marks the slowest pace of gain since January this year.

Fixed asset investment also disappointed with an 8.3% increase in the first seven months of the year, which is a tad weaker than last month’s 8.6% growth. Analysts estimated a steady growth from the report.

Last but not the least is retail sales, which showed a 10.4% improvement from a year earlier in July when June’s growth clocked in at 11.0% and analysts had expected a 10.8% growth.

A month’s worth of data doesn’t make a trend, but already market bees are buzzing about the possibility that increasing lending costs and a cooling property market are finally making an impact on growth. If you recall, the government is pushing to crack down on companies’ financial risks even as it aims for a 6.5% growth in 2017.

Improved risk sentiment

As busy as other countries were in printing economic data, Asian session traders paid more attention to risk sentiment. Specifically, they cheered the diminished prospects of nuclear war between U.S. and North Korea.

Last Saturday Chinese President Xi Jinping urged Trump to “avoid remarks and actions that escalate tensions on the Korean peninsula.” This comes after Trump tweeted that “military solutions are now fully in place, locked and loaded, should North Korea act unwisely.”

CIA Director Mike Pompeo added his reassurance that a war with North Korea is not “imminent,” though he admitted that “we are closer to war than we were a decade ago.”

Add to that the not-so-hawkish remarks from FOMC members all week and you’ve got a mix of factors that attracted more than a few risk-takers.

Nikkei, which really didn’t like the yen’s previous gains (it was closed on a holiday last Friday), fell by 0.74% to 7,148.21 while Australia’s A SX 200 is up by 0.57% to 5,725.40. Meanwhile, Hang Seng is up by 1.23% to 27,214.00 while Shanghai index is up by 0.36% to 11,506.20.

Major Market Mover(s):

JPY

Yen crosses saw broad-based recovery during the Asian session, as threats of escalating tensions between North Korea and the U.S. receded.

USD/JPY is up by 36 pips (+0.33%) to 109.52,
EUR/JPY is up by 48 pips (+0.37%) to 129.53,
GBP/JPY is up by 61 pips (+0.43%) to 142.54, and
AUD/JPY is up by 45 pips (+0.52%) to 86.61.

CHF

Though not as volatile as the yen, fellow low-yielder franc also lost pips against its higher-yielding counterparts.

USD/CHF is up by 16 pips (+0.17%) to .9641,
EUR/CHF is up by 20 pips (+0.18%) to 1.1401,
AUD/CHF is up by 26 pips (+0.34%) to .7623, and
GBP/CHF is up by 33 pips (+0.26%) to 1.2547.

Watch Out For:

  • 10:00 am GMT: Euro Zone’s industrial production (7.1% expected, 7.6% previous)