For the third day in a row, Australia was in the spotlight during the Asia session. This time it was the turn of trade data for April.
The trade balance came in at a deficit of A$203 mln, well below consensus estimates of a A$900 mln deficit and a sharp improvement on the revised A$1.282 bln the previous month. Exports were impressive, rising 3.3 percent and matching March’s strong performance with iron ore exports at a 6-month high, copper and coal exports at a 4-month high. China was still the major export destination with A$9.77 bln worth of business – itself a 4-month high too. Imports declined 1.0 percent following March’s 5.2 percent spike higher. However, a pervading mood of risk-off trading dominated activity and the AUD failed to benefit from the better trade data.
In other data, Australia’s home loans nudged higher by 0.2 percent m/m in April. The RBA’s back-to-back rate cuts at the end of last year appear to be stabilizing the housing market and subsequent cuts should imply improving data going forward.
From Japan, final Q1 GDP numbers were revised higher – up 1.2 percent q/q versus 1.0 percent at the preliminary estimate – resulting in annualized growth of 4.7 percent. A firmer-than-expected rise in capital spending on the back of reconstruction activity accounted for the bulk of the upwards revision. Bank lending held steady in May with growth unchanged at 0.4 percent m/m and in line with forecasts. Japan also posted a smaller current account surplus of ¥333.8 bln with the balance mostly affected by a widening in the trade deficit to ¥463.9 bln while the income surplus narrowed at the same time.
Markets were generally disappointed by developments in the West overnight but a surprise from China generally kept currencies volatile but in relatively tight ranges. There was disappointment that Fed Chairman Bernanke did not give any clear signal of further QE measures at this month’s pending FOMC meeting, instead suggesting that current weakness in the US economy is down to seasonal factors. He did however reiterate that the Fed stands ready to take action if the situation deteriorates.
The surprise came from China which cut lending rates by 25bp, the first cut since 2008, and also relaxed controls on bank lending rules. Some have suggested that the timing of the cut, ahead of the release of a slew of economic data for May, could suggest some weakness in the numbers. The cut in the lending rate, rather than a reduction in reserve ratio requirements, is seen as more directly affecting many highly leveraged sectors and improving demand for loans (Note latest Yuan loans data for May is scheduled for release between June 11-15). In contrast, the Bank of England left both interest rates and the asset purchase programme unchanged, which gave the pound a lift.
European stocks welcomed the news and risk put on a brief rally with EURUSD rising to 1.2625 and the AUDUSD touching parity. However, momentum was soon lost and the day’s close was towards the lower end of the range. On the data front, weekly jobless claims were in line with forecasts and slightly better than last week (377k versus revised 389k) and the Bloomberg consumer comfort index improved to -37.6. The CAD benefitted from a firm Ivey PMI reading – 60.5 from 52.7.
Data Highlights
US Initial Jobless Claims out at 377k vs. 378k expected and revised 389k prior
US Continuing Claims out at 3293k vs. 3250k expected and revised 3259k prior
US Bloomberg Consumer Comfort Index out at -37.6 vs. -39.3 prior
US RBC Consumer Outlook Index out at 46.1 vs. 47.6 prior
CA May Ivey PMI out at 60.5 vs. 54.5 expected and 52.7 prior
US Apr. Consumer Credit out at $6.515 bln vs. $11.0 bln expected and revised $12.368 bln prior
JP Q1 Final GDP out at 1.2% q/q vs. 1.1% expected and 1.0% prior
JP Apr. C/A out at ¥333.8 bln vs. ¥440.8 bln expected and ¥1589.4 bln prior
JP Apr. Trade Balance (BOP) out at -¥463.9 bln vs. -¥450.7 bln expected and +¥4.2 bln prior
JP May Bank Lending out at +0.4% y/y, as expected and unchanged from prior
AU Apr. Trade Balance out at –A$203 mln vs. –A$900 mln expected and revised –A$1282 mln prior
AU Apr. Home Loans out at +0.2% m/m vs. flat expected and revised 9+0.8% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
JP Economy Watchers’ Surveys (0500)
GE Trade Data (0600)
GE C/A Balance (0600)
Sweden Budget Balance (0730)
Sweden Industrial Production/Orders (0730)
Sweden Avg. House Prices (0730)
UK PPI Input/Output (0830)
GE Bundesbank Economic Forecasts (0900)
CA Housing Starts (1215)
CA Int’l Merchandise Trade (1230)
US Trade Balance (1230)
CA Unemployment Rate (1230)
US Wholesale Inventories (1400)
Andrew Robinson,
SAXO BANK