With most bullish post-NFP positioning wiped out overnight, Asia spent the session consolidating off yesterday’s lows with a pickup in risk appetite helping.
On the data front, Australian businesses saw economic conditions deteriorate in September as NAB’s business conditions index slid to -3 from zero previously as the strong AUD, tighter fiscal policy and softer commodity prices weighed on sentiment. However, the prospect of further RBA cuts helped business confidence improve to zero from -3 last month despite a particularly gloomy return from the mining and manufacturing sectors.
While on Australia, and ahead of Thursday’s important employment report for September, RBA’s Lowe said in a speech that the last cut was driven primarily by the weak global outlook and a softening in the domestic labour market. He particularly highlighted the construction sector which has seen a 70,000 reduction in jobs over the past 12 months and noted it had been one of the weak surprises of late. He cautioned that the low, steady unemployment rate over the last two years may have been influenced by a decline in labour force participation and he suggested there may be more spare capacity in the economy than the unemployment rate alone implies.
The AUD was generally supported during the session with a strong rebound in China equities (Shanghai Composite up over 2 percent by lunch) with EURAUD still looking particularly heavy.
EURCHF was also active during the session, rallying strongly (50 pips, a big move for the Asian time-zone) apparently in reaction to a headline that US banking giant State Street was to charge a 0.25 percent fee on Swiss Franc deposits. Negative interest rates for all?
There was more verbal pressure on the Bank of Japan to undertake further stimulus. New economic minister Maehara said he wants to see quick results from the BOJ in its task of 1 percent inflation. He also said the government and the central bank should consider additional policy options if necessary and thought an accord on monetary policy between the government and the BOJ was one option to help Japan escape deflation. Elsewhere, Asian Development Bank’s Kuroda noted that Japan was the only country among advanced, developing nations that is suffering from deflation and it is the job of the central bank to tackle it and still had “many tools” to resolve it.
The USD continued to rise in the early part of yesterday’s European session, helping to wipe out all of EURUSD’s post-nonfarm payrolls advance. EUR’s slide was halted after German industrial production and exports beat forecasts by a small margin. GBP was under pressure throughout the session, hitting a 2-month low on a trade-weighted basis, following a rather tepid speech on the growth outlook from Chancellor Osborne at the Conservative Party conference.
Despite the Columbus Day holiday, US stock markets were open and slid slightly in very light trade, as you might expect, on fears of weaker Q3 earnings reports. DJIA closed down 0.19 percent, S&P -0.35 percent and the Nasdaq -0.76 percent.
Data Highlights
- GE Aug. Exports out at +2.4% m/m vs. -0.6% expected and revised +0.4% prior
- GE Aug. Industrial Production out at -0.5% m/m vs. -0.6% expected and revised +1.2% prior
- NZ Q3 NZIER Business Opinion out at +8 vs. -4 prior
- NZ Sep. Total Credit Card Spending out at -0.6% m/m vs. revised +2.1% prior
- UK Sep. BRC Like-for-Like Sales out at +1.5% y/y vs. -0.2% expected and -0.4% prior
- UK Sep. RICS House Price Balance out at -15% vs. -20% expected and revised -18% prior
- JP Aug. C/A Balance out at +¥454.7 bln vs. ¥421.1 bln expected and ¥625.4 bln prior
- JP Aug. Trade Balance – BOP out at -¥644.5 bln vs. -¥928.6 bln expected and -¥373.6 bln prior
- AU Sep. NAB Business Conditions Index out at -3 vs. 0 prior
- AU Sep. NAB Business Confidence Index out at 0 vs. revised -3 prior
(All Times GMT)
- JP Bankruptcies (0430)
- JP Economy Watchers’ Surveys (0500)
- EU ECB’s Draghi to speak (0730)
- UK Industrial/Manufacturing Production (0830)
- UK Trade Balance (0830)
- US NFIB Small Business Optimism (1130)
- CA Housing Starts (1210)
- US IBD/TIPP Economic Optimism (1400)
- UK NIESR GDP Estimate (1400)