Signs of weakening global growth were reflected in today’s flash estimate of China’s manufacturing PMI data for March, which slid to 48.1 from 49.6 last time. Note this is the first “real month” of data this year now that the Lunar New Year distortions are out of the way and is not suggesting a rosy future. Contraction was reported across all sub-categories with new orders falling to 46.2, the lowest since early 2011. The data naturally affected risk, with the AUD as usual bearing the brunt of risk selling.
Further evidence of slower Asian activity came from a New Zealand report of Q4 growth. Actual numbers failed to meet expectations, with 0.3 percent q/q growth reported versus 0.6 percent expected and a downwardly-revised 0.7 percent in Q3. Manufacturing appeared to be a drag on growth during the quarter, though this was countered somewhat by a better performance in agriculture, services and the one-off boost from the Rugby World Cup. Compared to a year ago, growth increased 1.8 percent versus 2.2 percent expected and 1.8 percent in Q3. NZD tumbled a rapid 50 points post-data followed by consolidation before the risk-off trade occurred post-China data, dragging it down further. The data probably implies the RBNZ on hold with rates at emergency low levels near-term, with another rate cut a possibility if conditions deteriorate further.
In other data, Japan’s merchandise trade balance posted a small trade balance in February in contrast to a record deficit of ¥1476.9 bln in January and expectations of another deficit of around ¥120 bln. This marked the first trade surplus in 5 months, albeit a small one, despite import costs rising 9.2 percent y/y on higher energy prices.
Overnight, currencies were relatively stable with murmurings about the eurozone taking the edge off the EUR. Commentaries that Spain could be the next Greece and is actually in a worse position than before brought the debt crisis back into focus with Spanish yields ticking higher. The cut in reserve ratio requirements for the rural sector by China failed to stop the rot in the AUD with AUDUSD sliding to 2-month lows, grappling with 200- and 100-day moving averages at the lows. On the data front, US existing home sales showed a pullback in February with a 0.9 percent m/m decline versus +0.9 percent expected, though January numbers were revised higher to +5.7 percent m/m from +4.3 percent.
Data Highlights
US Feb. Existing Home Sales out at -0.9% m/m vs. +0.9% expected and revised +5.7% prior
NZ Q4 GDP out at +0.3% q/q, +1.8% y/y vs. 0.6%/2.2% expected and revised 0.7%/1.8% prior resp.
JP Feb. Merchandise Trade Balance out at +¥32.9 bln vs. -¥120.0 bln expected and revised -¥1476.9 bln prior
China Mar. HSBC Flash PMI out at 48.1 vs. 49.6 prior
Upcoming Economic Calendar Highlights
(All Times GMT)
Swiss Trade Data (0700)
GE PMI Data (0830)
EU PMI Data (0900)
UK Retail Sales (0930)
EU Industrial New Orders (1000)
CA Retail Sales (1230)
US Initial Jobless Claims (1230)
US Bloomberg Consumer Comfort (1345)
US Bloomberg Economic Expectations (1345)
US House Price Index (1400)
US Leading Indicators (1400)
EU Euro-zone Consumer Confidence (1500)
US Fed’s Bernanke speaking (1645)
EU ECB’S Gonzalez-Paramo to speak (1930)
US Fed’s Evans to speak (2000)
Andrew Robinson,
SAXO BANK