With not a lot of major data on the docket, Asian session traders continued to price in risks from North Korea and took profits ahead of major central bank events.
- Japan’s average cash earnings (y/y) slips by 0.3% vs. 0.5% growth expected, 0.4% previous
- Australia’s GDP rises to 0.8% as expected vs. 0.3% previous
- North Korean official warns of more “gift packages” to the U.S.
Australia’s Q2 2017 GDP
Australia’s economy grew by 0.8% in Q2 2017, which is higher than the 0.3% uptick in Q1 and matches the expected 0.8% increase. This translates to an annualized growth of 1.8% after rising by 1.7% in Q1 2017.
Household consumption grew by 0.7% during the quarter and contributed 0.4% to GDP growth as food, financial services, and rent and dwellings activities picked up. Government spending also contributed 0.2% while exports added 0.6%.
Partly offsetting these figures is non-residential construction dragging growth by 0.4% while inventories also subtracted 0.6% from the GDP.
One thing to note is that households are saving less, with the household saving ratio down from 5.3% to an eight-and-a-half-year low of 4.6% in Q2. Not a good sign especially since consumption continues to rise even as wage inflation remains tepid.
Overall the report disappointed market players especially those who had priced in stronger growth after yesterday’s current account numbers.
More North Korean jitters
Asian session traders remain wary of escalating tensions in the Korean peninsula.
Just yesterday Han Tae Song, ambassador to the United Nations in Geneva, confirmed that the Democratic People’s Republic of Korea (DPRK) has conducted nuclear bomb tests last Sunday.
The ambassador shared that “The recent self-defense measures by my country, DPRK, are a gift package addressed to none other than the U.S.,” adding that “The U.S. will receive more ‘gift packages’ as long as it relies on reckless provocations and futile attempts to put pressure on [North Korea].”
Not surprisingly, traders reacted by buying the yen and dumping Asian equities:
- Nikkei, which was double-slapped by risk aversion and strong yen, is down 0.19% to 19,348.50;
- Australia’s A SX 200 is down by 0.34% to 5,687.10;
- Hang Seng is down by 0.98% to 27,469.00, and
- Shanghai index is down by 0.82% to 12,086.58.
Major Market Mover(s):
A combination of weak data, risk aversion, and profit-taking ahead of BOC’s decision and other event risks weighed on high-yielding, commodity-related currencies.
AUD/USD is down by 9 pips (-0.11%) to .7988 after hitting a high of .8021;
AUD/JPY is down by 18 pips (-0.21%) to 86.79;
USD/CAD is up by 4 pips (+0.03%) to 1.2389;
CAD/JPY is down by 13 pips (-0.15%) to 87.70;
NZD/USD is down by 11 pips (-0.15%) to .7227, and
NZD/JPY is down by 22 pips (-0.28%) to 78.53.
Watch Out For:
- 7:00 am GMT: Germany’s factory orders (0.2% expected, 1.0% previous)
- 9:00 am GMT: Italy’s retail sales (-0.2% expected, 0.6% previous)
- 9:10 am GMT: Euro Zone’s retail PMI