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Positive data from Canada and the U.S. carried over to the Asian session, which supported a start-of-month risk-taking that boosted equity prices. Despite that, price action remained subdued ahead of the much-awaited NFP report.

  • NZ terms of trade index grows by 1.5% vs. 3.2% expected, 3.9% previous
  • AU AIG manufacturing index rises from 56.0 to 59.8 in August
  • Japan’s capital spending (q/y) up by 1.5% vs. 8.0% growth expected, 4.5% previous
  • Japan’s final manufacturing PMI dips from 52.8 to 52.2 vs. 52.8 expected
  • China’s Caixin manufacturing PMI rises from 51.1 to 51.6 in August
  • 6:00 am GMT: Japan’s consumer confidence dips to 43.3 vs. 43.5 expected, 43.8 previous

Major Events/Reports:

PMI reports from China, Australia, and Japan

Earlier today we saw not one, not two, but THREE manufacturing PMI reports from different countries.

First up was the Land Down Under, which printed an improvement of 3.8 points to 59.8 in August. This marks the highest reading since 2002 and extended the longest streak of monthly expansion to 11 months.

6 out of 7 sub-indices showed improvement with inventories and new orders leading the charge. A strong currency is a growing concern, though, as its dampening effect on export sales is not enough to offset its impact on higher (USD-denominated) energy prices.

Meanwhile, China’s Caixin’s manufacturing PMI came in at 51.6 in August, higher than July’s 51.1 reading and marks the third consecutive month that the industry hit expansionary territory.

Increased foreign demand was the biggest driver, as it helped push new work orders to its 37-month highs and export sales to its sharpest increase since March 2010. Not only that, but business confidence also rose to a five-month high. Wowza!

Interestingly, staff numbers continued its downward trend for the month thanks to increased efforts at efficiency. Faster inflation is a trend to watch, though, as higher input prices could soon pinch profits of those in the middle of the supply chain.

Overall, the numbers confirm yesterday’s official PMI release, which also pointed to increased demand as the reason for the industry’s fast expansion.

Last but not the least is Japan, which downwardly revised its August manufacturing PMI by a smidge. It’s now at 52.2 for the month, lower than the previous 52.8 reading.

Still, the numbers suggest that the sector is moving along its slow but steady uptrend with stronger demand from both domestic and international (read: China) sources pushing output, new orders, and employment higher.

Subdued trading ahead of the NFP report

Asian bourses woke up to the right side of the charts as traders began a new trading month. Of course, it also didn’t hurt that Uncle Sam and Canada both printed mostly better-than-expected news in the previous session.

Traders didn’t go all cray on their buying spree, though, thanks to the closely-watched NFP report coming up in a few hours.

  • Nikkei is up by 0.05% to 19,656.50
  • Australia’s A SX 200 is up by 0.14% to 5,722.30;
  • Hang Seng is up by 0.36% to 28,072.00, and
  • Shanghai index is up by 0.45% to 12,135.38.

Major Market Mover(s):

JPY

Major yen pairs started the day on a strong note before profit-taking ahead of the NFP release inspired a mid-session reversal for most of them.

USD/JPY shot up to 110.15 before settling down to 110.01;
EUR/JPY jumped to 131.19 before slipping to 130.92;
GBP/JPY hit a high of 142.57 before falling to 142.32, and
AUD/JPY rose to 87.57 before closing at 87.43.

CAD

AUD and NZD only received a few squiggles despite a positive Chinese PMI report. Instead, traders focused on catching up to yesterday’s oil price increases AND Canada’s positive GDP report.

USD/CAD fell by another 28 pips (-0.22%) to 1.2459;
CAD/JPY jumped to 88.42 before settling down to 88.30;
NZD/CAD dropped by 22 pips (+0.25%) to 89.45; and
EUR/CAD fell by 39 pips (-0.26%) to 1.4827.

Watch Out For:

  • 7:30 am GMT: AU commodity prices (y/y)
  • 8:15 am GMT: Switzerland’s retail sales (y/y) (1.7% expected, 1.5% previous)
  • 8:30 am GMT: Spain’s manufacturing PMI (54.4 expected, 54.0 previous)
  • 8:45 am GMT: Italy’s manufacturing PMI (55.3 expected, 55.1 previous)
  • 8:50 am GMT: France’s final manufacturing PMI expected to remain at 55.8
  • 8:55 am GMT: Germany’s final manufacturing PMI expected to remain at 59.4
  • 9:00 am GMT: Euro Zone’s final manufacturing PMI to remain at 57.4?
  • 9:30 am GMT: U.K.’s manufacturing PMI (55.0 expected, 55.1 previous)