Asia was in pause mode ahead of tonight’s non-farm payroll report with only the BOJ meeting to monitor.
The BOJ left rates unchanged in a unanimous decision, did not announce any new monetary easing steps, but cut its assessment of the Japanese economy. The economy is “leveling off” and is expected to show flat growth for the time-being but resume a moderate recovery later. Externally, economies have moved somewhat deeper into a deceleration phase but domestic demand has been resilient, mostly supported by reconstruction-related demand. Shirakawa’s post-meeting press briefing is scheduled for 0630GMT. USDJPY edged marginally lower (a whole 8 points!) as built-in easing expectations were thwarted.
Otherwise, Australia’s construction sector shrank by the most in 12 months in September as demand in both residential and commercial categories waned. The construction PMI slid to 30.9 from 32.2, marking the 28th month below the key 50 threshold with the index in steady decline since the end of last year, despite RBA’s rate cutting efforts. Who said the Australian economy was doing well?
The real economic impact of the ongoing island spat between Japan and China was felt by Japanese car manufacturers in September with Mazda sales down 35 percent and Toyota sales down 50 percent. Scale-downs in production (and even plant closures) following local protests are making their mark on auto sales and, with the week-long Golden week holidays just finishing, a rebound in October looks unlikely.
Elsewhere, India announced further relaxations in regulations governing foreign investments in insurance and pension funds as it attempts to kick-start a slumping economy. In another step aimed at pushing the biggest opening of the economy since 2004, overseas companies may hold as much as 49% in insurance firms and overseas investments in pension funds are allowed for the first time.
An unchanged ECB and non-dovish press conference from Snr. Draghi was enough to pull the EUR to the 1.30 mark versus the US dollar overnight. He emphasized that, with regard to the OMT, a country needs to request the bailout before the ECB will start buying bonds and any country isolated from primary markets will not be able to request further aid from the OMT programme. With regard to rates, there was no mention of any discussion regarding another rate cut. The BOE was also unchanged and GBP also pushed a touch higher, though with less conviction.
US data flows were generally positive and supportive of risk with weekly jobless claims slightly below forecasts at 367k, September Challenger job cuts at -70.8 percent y/y from -36.9 percent while the weekly Bloomberg consumer comfort index improved to -36.9 from -39.6. Factory orders were also better than forecast at -5.2 percent m/m versus +2.6 percent last time. Minutes of the September 13 FOMC meeting simply repeated what had been said in the post-meeting statement and Bernanke’s press conference. Wall Street was encouraged by the data and developments in Europe and rose for the fourth day in a row: S&P up 0.72 percent, DJIA +0.6 percent and Nasdaq +0.45 percent. Now we wait for the non-farm payrolls.
Have a great weekend!
Data Highlights
US Sep. Challenger Job Cuts out at -70.8% y/y vs. -36.9% prior
US Oct. RBC Consumer Outlook Index out at 48.4 vs. 50.4 prior
US Initial Jobless Claims out at 367k vs. 370k expected and revised 363k prior
US Continuing Claims out at 3281k vs. 3275k expected and revised 3281k prior
US Bloomberg Consumer Comfort Index out at -36.9 vs. -39.6 prior
CA Sep. Ivey PMI out at 60.4 vs. 59.4 expected and 62.5 prior
US Aug. Factory Orders out at -5.2% m/m vs. -5.9% expected and revised +2.6% prior
AU Sep. AiG Performance of Construction Index out at 30.9 vs. 32.2 prior
JP BOJ leaves rates unchanged; no new easing measures
Upcoming Economic Calendar Highlights
(All Times GMT)
JP Leading/Coincident Indices (0500)
Sweden Service Production (0730)
Sweden Budget Balance (0730)
Swiss KOF Economic Forecasts (0800)
NO Industrial/Manufacturing Production (0800)
GE Factory Orders (1000)
CA Unemployment Rate (1230)
US Change in Non-farm Payrolls (1230)
US Unemployment Rate (1230)
CA Building Permits (1230)
US Fed’s Dudley to speak (1400)
GE Chancellor Merkel to speak (1700)
US Fed’s Duke to speak (1700)
US Consumer Credit (1900)
Andrew Robinson,
SAXO BANK