AUD took a hit in the Asian session, falling across the board and losing some 30 points versus the US dollar, after the China trade report for June showed that port growth had slowed. The report overall was a mixed bag with exports and the trade balance beating forecasts.
Exports rose 11.3 percent from a year earlier in June, beating median forecasts of a 10.6 percent increase and improving despite the recent PMI data suggesting a potential slowdown. But perhaps more worrying for the Asian region, and Australia in particular, import growth slowed to a mere 6.3 percent y/y, well below estimates of +11.0 percent and a slowdown from May’s 12.7 percent rebound. Imports of iron ore slowed to 58.31 mln tonnes from 63.84 mln in May, a reduction of 8.7 percent while imports of steel products fell 16.7% to 1.1 mln tonnes. The slower imports contributed to a wider trade surplus which jumped to $31.7 bln from $18.7 bln.
Today’s data confirms one of the AUD negative factors outlined in John’s piece from yesterday and likely increases the vulnerability to the downside.
While on Australia, data today showed both business conditions and confidence remain in negative territory, despite a total of 75bp in rate cuts over the past 2 month from the RBA. The ongoing European crisis along with the looming introduction of carbon taxes is taking its toll on Ozzie corporates with the conditions index coming in at -1 (albeit from -4 the previous month) and the confidence index deteriorating to -3 from -2.
In Europe overnight, we also began to see the first headlines/comments from the Eurogroup meeting. Spain was given an extended deadline of one year (to 2014) to correct its budget deficit while the draft MOU on recapitalizing Spanish banks from EFSF and subsequently ESM was agreed with final approval expected by July 20, after national procedures have been completed. Technical discussions on future ESM direct recapitalization of banks is not expected to start until September, as will proposals on banking supervision. There were no discussions on intervention in primary bond markets. Market reaction suggested a mild negative on the developments, even though expectations from the meeting were already quite low.
Otherwise, there was not much to report from Monday’s session with little on the data front to excite activity. EURUSD remained glued to the 1.23 level for most of the session, mildly pressured by slightly firmer Spanish yields and more downbeat comments on the economy from ECB’s Draghi.
Fed’s Williams gave those hoping for more QE measures from the Fed a lift as he commented that more is likely if his forecast of weaker growth and a stubborn unemployment rate above 8% become reality. The general mood of waning risk appetite took its toll on Wall St with the DJIA slipping 0.28 percent, S&P 0.16 percent and the Nasdaq 0.19 percent.
Data Highlights
CA Q2 Business Outlook Future sales out at 15.0, as expected vs. 35.0 prior
NZ Jun. REINZ House Price Index out at +0.3% m/m vs. 1.7% prior
NZ Jun. REINZ House Sales out at +17.3% y/y vs. 24.4% prior
US May Consumer Credit out at $17.117 bln vs. $8.5 bln expected and revised $9.95 bln prior
NZ Q2 Business Opinion Survey out at -4 vs. +13 prior
UK Jun. BRC Like-For-Like Sales out at +1.4% y/y vs. 2.0% expected and 1.3% prior
JP Jun. M3 Money Stock out at +2.0% y/y vs. 1.9% expected and 1.9% prior
AU Jun. NAB Business Conditions out at -1 vs. -4 prior
AU Jun. NAB Business Confidence out at -3 vs. -2 prior
China Jun. Trade Balance out at +$31.73 bln vs. +$24.0 bln expected and +$18.7 bln prior
China Jun. Exports out at +11.3% y/y vs. 10.6% expected and 15.3% prior
China Jun. Imports out at +6.3% y/y vs. 11.0% expected and 12.7% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
JP Consumer Confidence (0500)
Sweden Industrial Production/Orders (0730)
EU ECB’s Weidmann to speak at German Constitutional Court (0800)
Norway CPI/PPI (0800)
UK Industrial/Manufacturing Production (0830)
UK Trade Balance (0830)
UK Barclays’ Agius to testify (0900)
US Fed’s Bullard to speak (1005)
US NFIB Small Business Optimism (1130)
CA Housing Starts (1215)
US IBD/TIPP Economic Optimism (1400)
US JOLTs Job Openings (1400)
UK NIESR GDP Estimate (1400)
Andrew Robinson,
SAXO BANK