We saw more activity in Asia today with a couple of data points to keep us busy.
First off, Australia’s headline Q3 inflation report confounded median forecasts with a spike up to 1.4 percent q/q and 2.0 percent y/y resulting in a kneejerk reaction of AUD higher and bank bill futures lower. While some of the spike higher can be explained by the effects of the introduction of the government’s carbon tax, not all were linked with 7 out of the 10 components in the basket rising led by healthcare, food and communication.
The higher print, and upward revisions to previous data, has forced some to scale back expectations for the November RBA meeting with the odds of a 25bp rate cut slashed to 61 percent from 81 percent and only 72bp worth of cuts priced in over the next 12 months rather than 82bp beforehand.
With the AUD already looking a tad perkier after the CPI numbers, a strong China flash manufacturing PMI number cemented gains back through 1.03 versus the US dollar. The flash PMI from HSBC came in at 49.1, up from the 47.9 print in September and the highest in 3 months, helping the notion that China may be looking forward to a better Q4. The knock-on effect for risk currencies was marginal, but still evident.
We also had a surprise when some US data was released early. The FHFA house price index was released early on its website (it was scheduled for this evening) and was much better than expectations. Prices rose 0.7 percent in August from a month earlier, much better than the 0.3 percent forecast.
New Zealand announced that it had successfully sold NZD 2.5 bln worth of inflation-linked bonds in its first such tender since 1999. The amount sold was more than double the targeted amount and the offer was over 4 times over-subscribed. The timing of the offer has led some to confirm that there will be no change in rates at tomorrow’s RBNZ meeting.
The EUR was under pressure throughout most of the overnight session with weak French business confidence, higher Spanish yields, criticism of the OMT from ECB member Mersch and negative comments from Greece on Troika demands all combined to push the currency pair to one-week lows. General weak risk appetite also benefitted the US dollar which saw the USD index rally to the 80 mark for the first time since October 11. CAD outperformed after the Bank of Canada surprised with a less-dovish tone to its statement after leaving rates unchanged.
On the data front, Canada’s retail sales were bang in line with forecasts, rising 0.3% m/m in August while the Richmond Fed manufacturing index slid badly, dipping to -7 from +4 (+5 expected). Weak sentiment, lackluster earnings sent the DJIA crashing to its largest drop since June 21, falling 1.82 percent. The S&P followed with losses of 1.44 percent and the Nasdaq 0.88 percent.
Data Highlights
- CA August Retail Sales out at +0.3% m/m, as expected vs. 0.7% prior
- EU October eurozone Consumer Confidence out at -25.6 vs. -25.9 expected and -25.9 prior
- US October Richmond Fed Manufacturing Index out at -7 vs. +5 expected and +4 prior
- US August House Price Index out at +0.7% m/m vs. 0.3% expected and revised +0.1% prior
- AU Sep. DEWR Internet Skilled Vacancies out at -3.7% m/m vs. revised -3.4% prior
- AU Q3 CPI out at +1.4% q/q, +2.0% y/y vs. 1.0%/1.6% expected and 0.5%/1.2% prior resp.
- China October HSBC Flash Manufacturing PMI out at 49.1 vs. 47.9 prior
(All Times GMT)
- Sweden Consumer/Manufacturing Confidence (1715)
- Sweden Economic Tendency Survey (0715)
- GE Advance PMI Manufacturing/Services (0730)
- EU Advance PMI Manufacturing/Services/Composite (0800)
- GE IFO Surveys (0800)
- UK CBI Trends Total Orders/Selling Prices (1000)
- UK CBI Business Confidence (1000)
- US MBA Mortgage Applications (1100)
- CA Teranet/National Bank House Price Index (1300)
- US New Home Sales (1400)
- CA BOC Monetary Policy Report (1430)
- US FOMC Rate Announcement (1815)