The Asian week finished with a bang as China’s Q2 GDP numbers came in slightly below expectations, though not enough to cause too much of a stir.
The Chinese economy grew 1.8 percent from the previous quarter, slightly better than the 1.6 percent expected but a downward revision to Q1’s growth to 1.6 percent from 1.8 percent negated any benefit. Compared to a year ago, growth was below forecast, hitting a 3-year low 7.6 percent y/y from 8.1 percent in Q1 and an expected 7.7 percent. Q2 growth brought the year-to-date GDP (H1) to 7.8 percent, below the 7.9 percent forecast. The numbers were reported in the Chinese press a few minutes ahead of the scheduled release time (AUD pressured slightly) so the reaction to the confirmed data was muted.
Earlier, Singapore’s release of Q2 GDP painted a more depressing picture. Quarter-on-quarter growth slowed dramatically to -1.1 percent from +9.4 percent while annual growth came in at 1.9 percent y/y, slower than the 2.3 percent forecast but stronger than the downwardly-revised performance of +1.4 percent in the first quarter. Manufacturing was an underperforming sector as the global economic slowdown takes its toll. The SGD weakened 0.25 percent versus the US dollar following the data.
The other Chinese data releases were a mixed bag with June industrial production failing to match forecasts while retail sales were better. IP rose 9.5 percent from a year earlier, slower than the 9.6 percent growth seen in May while retail sales growth also slowed to +13.7 percent y/y from 13.8 percent, albeit better than the 13.4 percent median forecast.
In the midst of all the Chinese data, Japanese finance minister Azumi reiterated that decisive action would be taken on FX if needed. His comments fell on deaf ears with USDJPY in a slumber at 79.30-35.
Elsewhere, Moody’s downgraded Italy’s government bond rating two notches to Baa2 from A3, maintained its negative outlook and warned that further downgrades may come if there is material deterioration in the country’s economic prospects or it encounters difficulties in implementing reforms. This knocked EURUSD down to 1.2185 from above 1.22 at the start of trading.
The EUR continued its slow but steady slide in yesterday’s session with relative growth concerns and record Greek unemployment at 22.5 percent pulling the single currency through 1.22 versus the US dollar. The USD index climbed to its highest in two years as the greenback held its safe-haven status. AUD felt some pressure following yesterday’s weak jobs data and nervousness ahead of China’s Q2 GDP release today.
On the data front, weekly US jobless claims were staggeringly better but quickly explained away by the BLS as distorted by the July 4 holiday and less-than-usual annual auto plant retooling shutdowns. Initial claims fell to 350k versus 372k expected while continuing claims were in line with forecasts at 3304k. The weekly Bloomberg consumer comfort index was unchanged at -37.5. Cyclical counters felt the pressure on Wall St after with more profit warnings from the tech sector adding to the gloom. The DJIA closed down 0.25 percent, S&P -0.5 percent and Nasdaq -0.75 percent.
Data Highlights
CA May New Housing Price Index out at +0.3% m/m, +2.4% y/y vs. 0.2%/2.3% expected and 0.2%/2.5% prior resp.
US Jun. Import Price Index out at -2.7% m/m, -2.6% y/y vs. -1.8%/-1.5% expected and revised -1.2%/-0.5% prior resp.
US Initial Jobless Claims out at 350k vs. 372k expected and revised 376k prior
US Continuing Claims out at 3304k vs. 3300k expected and revised 3318k prior
US Bloomberg Consumer Comfort Index out at -37.5, unchanged from prior
US Jun. Budget Statement out at -$59.7 bln vs. -$60.0 bln expected and -$43.1 bln prior
SI Q2 GDP out at -1.1% q/q, +1.9% y/y vs. 0.6%/2.3% expected and revised 9.4%/1.4% prior resp.
China Jun. Industrial Production out at +9.5% y/y vs. 9.8% expected and 9.6% prior
China Jun. Retail Sales out at +13.7% y/y vs. 13.4% expected and 13.8% prior
China Q2 GDP out at +1.8% q/q, +7.8% y/y vs. 1.6%/7.7% expected and 1.6%/8.1% prior resp.
Upcoming Economic Calendar Highlights
(All Times GMT)
JP Industrial Production/Capacity Utilization (0430)
SI Retail Sales (0500)
Swiss PPI (0715)
Norway Existing Home Prices (0800)
US PPI (1230)
US Michigan Confidence (1355)
US Fed’s Lockhart to speak (1720)
Andrew Robinson,
SAXO BANK