Risk aversion was the name of the game during the Asian session, as bearish reports made it easy for traders to take profits on their higher-yielding bets.
- IEA downgrades oil demand for 2017 and 2018
- AU Westpac consumer sentiment dips by 1.7% vs. 3.6% growth in October
- Japan’s preliminary GDP (q/q) up by 0.3% vs. 0.4% expected, 0.6% previous
- Japan’s GDP price index (y/y) up by 0.1% as expected vs. 0.4% decline in Q2 2017
- Australia’s wage price index (q/q) up by 0.5% vs. 0.7% expected, 0.5% previous
- Japan’s revised industrial production slips by 1.0% vs. 1.1% decline expected and previous
Lower oil demand forecasts
Earlier today (or late U.S. trading) the International Energy Agency (IEA) rocked the oil markets by downgrading its demand forecasts for 2017 and 2018.
According to the report,
“The oil market faces a difficult challenge in 1Q18 with supply expected to exceed demand by 600,000 barrels per day (bpd) followed by another, smaller, surplus of 200,000 bpd in 2Q18.”
It now expects demand to hit 1.5 million bpd in 2017 and 1.3 million bpd in 2018, both 100,000 bpd lower than its previous estimates.
The report contrasts with an earlier statement from the Organization of the Petroleum Exporting Countries (OPEC) painting a tighter oil market in 2018.
All eyes will be on the U.S. inventory data, which is expected to show some drawback from its previous release.
For now, crude oil prices slid a slippery slope across the board.
- Brent crude oil is down by 1.22% to $61.45 while
- U.S. WTI is down by 1.06% to $55.11.
Better-than-expected Japanese GDP
Japan’s initial GDP printed at 0.3% in Q3 2017, which is lower than Q2’s 0.6% growth. The annualized pace outperformed expectations, however, clocking in at 1.4% when analysts had only estimated a 1.3% uptick after Q2’s 2.6% growth. That’s marks the longest period of continuous growth in almost a decade!
Making the report even sweeter is the fact that it was exports that propelled the economy faster. Net exports added 0.5% to the GDP after growing by 1.5%, while business spending rose by another 0.2%.
On the other hand, private consumption fell by 0.5% – a first since Q4 2015 – while government expenditure also contracted by 0.1%.
Overall, the picture painted in the report is consistent with expectations of a legit recovery for the world’s third largest economy.
Wage miss in Australia
A few hours ago we saw that wages had climbed by 0.5% from the previous quarter in Q3 2017, which translates to an increase of 2.0% from a year earlier.
The numbers are a tad lower than the expected 0.7% and 2.2% growth respectively. More importantly, they challenge the Reserve Bank of Australia (RBA)’s conviction that wages will pick up.
Overall risk aversion
Whether it’s a continuation from the U.S. session’s concerns or profit-taking from the previous days’ rallies, Asian bourses saw weaknesses today.
- Nikkei is down by 1.34% to 22,081.00;
- Australia’s A SX 200 is down by 0.44% to 5,942.30;
- Hang Seng is down by 0.78% to 28,926.00, and
- China’s A50 is down by 0.50% to 13,043.63.
Major Market Mover(s):
The low-yielding yen took advantage of a stronger-than-expected GDP release from Japan and overall risk aversion in the markets.
USD/JPY is down by 29 pips (-0.26%) to 113.50;
CAD/JPY is down by 22 pips (-0.25%) to 88.86;
GBP/JPY is down by 60 pips (-0.40%) to 148.70, and
CHF/JPY is down by 21 pips (-0.18%) to 114.42.
A surprisingly weak wage report got mixed in with overall risk aversion to drag the Aussie lower against its major counterparts.
AUD/USD is down by 43 pips (-0.56%) to .7587;
AUD/JPY is down by 74 pips (-0.86%) to 85.84;
AUD/NZD is down by 61 pips (-0.55%) to 1.1038, and
GBP/AUD is up by 70 pips (-0.41%) to 1.7321.
Watch Out For:
- 7:45 am GMT: France’s final CPI to remain at 0.1%?
- 8:00 am GMT: FOMC’s Evans to speak in a panel discussion in London
- 9:30 am GMT: U.K.’s unemployment rate to stay at 4.3%?
- 9:30 am GMT: U.K.’s claimant count change (2.0K expected, 1.7K previous)
- 9:30 am GMT: U.K.’s average earnings (3m/y) (2.1% expected, 2.2% previous)
- 10:00 am GMT: Euro Zone’s trade balance (21.1B EUR expected, 21.6B EUR previous)