It was a steady and uneventful start as trading got underway in this holiday-affected week. Opening currency levels were not much removed from Friday’s NY close.
Over the weekend China released its trade data for October. Exports beat forecasts with an 11.6 percent annual increase (10.0 percent expected), the fastest pace of growth seen in 5 months, and may inspire hope that the global pickup in economic activity may be underway in Q4. However the majority of the improvement came from destinations in ASEAN (accounting for 1.8% of the month’s total) and the US with bilateral trade with Europe predominantly in negative territory (for example Germany has seen negative growth for the past 5 months). Trade with Japan declined for the fifth straight month on an annualized basis, still affected by the ongoing island dispute, though Japan still remains top of the trading partner league.
Growth in imports held steady at +2.4 percent y/y, though slightly disappointing compared to the 3.4 percent growth expected. Imports of iron ore continued to decline on a year-by-year basis, but were offset by increases in agricultural products (corn, edible oil etc.). As a result, the trade surplus increased to $31.99 bln from $27.67 bln ($27.3 bln expected), the highest since January 2009. AUD was marginally higher at the open but mostly in line with other risk currencies.
Despite the improvement in the trade data, Chinese officials continued to urge caution. PBOC chief Zhou warned that the “5-year crisis” – from global financial crisis to EU debt crisis – was not over while Chen Deming, commerce minister also cautioned that the trade outlook remained “grim”.
Japan’s economy contracted 0.9 percent q/q in the third quarter with Q2 number also revised lower to just +0.1 percent q/q. On a seasonally-adjusted, annualized basis the decline was more pronounced at -3.5 percent y/y (-3.4 percent expected) with another hefty downward revision to Q2 data. Domestic demand fell 0.5 percent q/q to subtract 0.2 percent from GDP while net external demand subtracted 0.7 percent.
Friday was not a good day for risk as more disappointing EU data (French industrial production down 2.7 percent m/m) put pressure on the EUR. Comments from the German economy minister that the German economy could worsen over the winter and Fitch saying that the Greek government is at risk of losing its majority (though by today’s open the 2013 budget was passed in Parliament) pressed the single currency lower with EURUSD trading below the 1.27 mark for the first time in 2 months. The USD was generally better bid on the risk aversion theme with the USD index rising above 81.0. SEK suffered following weak data and concerns from the FinMin about European growth.
Risk did receive a minor lift into the NY close as the Michigan confidence index perked up to 84.9 in November from 82.6 the previous month while wholesale prices rose a better than expected 1.1 percent. Wall Street finished election week in the black but was still under water for the full week. The DJIA rallied 0.03 percent, S&P +0.17 percent and the Nasdaq +0.32 percent. It’s a US holiday today (Veterans Day) but Wall Street will be open.
Data Highlights
US Oct. Import Price Index out at +0.5% m/m, +0.4% y/y vs. flat/-0.5% expected and +1.1%/-0.5% prior resp.
US Nov. Michigan Confidence out at 84.9 vs. 82.9 expected and 82.6 prior
US Sep. Wholesale Inventories out at +1.1% m/m vs. 0.4% expected and 82.6 prior
China Oct. Trade Balance out at +$31.99 bln vs. +$27.3 bln expected and +$27.67 bln prior
China Oct. Exports out at +11.6% y/y vs. 10.0% expected and 9.9% prior
China Oct. Imports out at +2.4% y/y vs. 3.4% expected and 2.4% prior
JP Sep. Tertiary Industry Index out at +0.3% m/m vs. -0.1% expected and revised +0.3% prior
JP Q3 GDP out at -0.9% q/q, as expected vs. revised +0.1% prior
JP Q3 GDP Annualized out at -3.4% vs. -3.4% expected and revised +0.3% prior
JP Oct. Domestic Corp. Goods Prices out at -0.3% m/m, -1.0% y/y vs. -0.2%/-0.8% expected and +0.2%/-1.5% prior resp.
AU Sep. Home Loans out at +0.9% m/m vs. 1.0% expected and revised 2.1% prior
China Oct. New Yuan Loans out at +$505.2 bln vs. +$590.0 bln expected and +$623.2 bln prior
Upcoming Economic Calendar Highlights (All Times GMT)
JP Machine Tool Orders (0600)
GE Wholesale Price Index (0700)
EU ECB’s Knot to speak (0800)
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