The final piece of the Australian data jigsaw fell in to place today with the release of July’s trade report.
Australia recorded a wider deficit of A$556 mln in the month as shipments of ores and minerals to China slowed, commodity prices eased 2.7 percent and the firm AUD took its toll on overseas demand. Last month’s tiny surplus of A$9 mln was revised lower to a deficit of A$227 mln meaning Australia has now seen a trade deficit every month this year. Imports recorded another month of declines, down 1.5 percent this month following 1.7 percent last month as demand for capital goods imports declined.
In other data, Australia’s construction industry contracted at its fastest pace in 11 months, according to the latest PMI data. The index slid to 32.2 last month from 32.6 in July. Despite the flow of weaker data the AUD managed to hold on to overnight gains with most players sitting back ahead of tonight’s key US non-farm payroll report.
On a more positive for Asia, Fitch upgraded South Korea credit rating by one notch to AA- bringing it one step above those for Japan and China and matching a similar move by Moody’s two weeks ago. Fitch noted the upgrade reflected South Korea’s continued economic and financial stability in a volatile global environment.
Overnight it was the ECB meeting that grabbed the headlines, not because Draghi and Co. delivered any rate cuts but because they confirmed more details on the ECB’s plan to buy EU periphery bonds. One to three year maturities will be the focus of the bond buying (including longer dated maturities that have one to three years of run time remaining) and there will be no (declared) limits on the buying. There are pretty stringent conditions regarding meeting and maintaining targets agreed to in any bailout operation. The ECB also downgraded growth forecasts for 2013 to +0.5 percent from +1.0 percent previously. Despite the downgrade, risk appetite was bid on the back of the bond buying announcement with equities surging and risk currencies rising.
On the data front, the US private ADP employment report showed 201k jobs were added in August, the biggest gain in 5 months and beating market expectations of +140k with last month’s data also revised higher by 10k. The weekly jobless claims data also showed some improvement to 365k from a revised 377k last week. The better data will perhaps skew expectations for tonight’s US non-farm payroll report higher. The weakness we saw in the manufacturing sector’s PMI was not reflected in the non-manufacturing sector. The ISM index rose to 53.7 from 52.6 with the employment component breaching the 50 threshold, rising to 53.8 from 49.3.
Have a great weekend, once we get past the non-farm payroll fun and games.
Data Highlights
US Aug. ADP Employment Change out at +201k vs. +140k expected and revised 173k prior
US Initial Jobless Claims out at 365k vs. 370k expected and revised 377k prior
US Continuing Claims out at 3322k vs. 3315k expected and revised 3328k prior
US Bloomberg Consumer Comfort Index out at -46.5 vs. -47.3 prior
US Aug. ISM Non-manufacturing out at 53.7 vs. 52.5 expected and 52.6 prior
AU Aug. AiG Performance of Construction Index out at 32.2 vs. 32.6 prior
AU Jul. Trade Balance out at –A$556 mln vs. –A$300 mln expected and revised –A$227 mln prior
Upcoming Economic Calendar Highlights
(All Times GMT)
JP Leading/Coincident Indices (0500)
Swiss Unemployment Rate (0545)
GE Trade Balance (0600)
Sweden Budget Balance (0730)
Norway Industrial Production (0800)
UK Industrial/Manufacturing (0830)
UK PPI Input/Output (0830)
GE Industrial Production (1000)
CA Unemployment Rate (1230)
US Change in Non-farm Payrolls (1230)
US Unemployment Rate (1230)
CA Building Permits (1230)
CA Ivey PMI (1400)
UK NIESR GDP Estimate (1400)
Andrew Robinson,
SAXO BANK