apanese GDP beats forecasts in Q3 but has a muted impact on currency and equity markets
MAJOR HEADLINES – PREVIOUS SESSION
- CA Sep. Int’l Merchandise Trade Balance out at –C$0.9 bln vs. –C$1.8 bln expected and –C$2.0 bln prior
- CA Sep. New Vehicle sales out at 1.2% m/m vs. flat expected and revised -0.2% prior
- US Sep. Trade Balance out at -$36.5 bln vs. -$31.8 bln expected and revised -$30.8 bln prior
- US Oct. Import Price Index out at +0.7% m/m, -5.7% y/y vs. 1.0%/-5.5% expected and 0.2%/-12.0% prior resp.
- US Nov. Univ. of Michigan Confidence out at 66.0 vs. 71.0 expected and 70.6 prior
- NZ Q3 PPI Input Prices out at -1.1% q/q vs. flat expected and flat prior
- NZ Q3 PPI Output Prices out at -1.4% q/q vs. +0.2% expected and -0.7% prior
- JP Q3 GDP out at +1.2% q/q vs. +0.7% expected and +0.7% prior
- UK Nov. Rightmove House Prices out at -1.6% m/m, +1.6% y/y vs. +2.8%/+0.2% prior
THEMES TO WATCH – UPCOMING SESSION
(All times GMT)
- Denmark Wholesale Prices (0830)
- EU ECB’s Weber to speak (0850)
- Norway Trade Balance (0900)
- EU Euro-zone CPI (1000)
- EU ECB’s Tumpell-Gugerell to speak (1030)
- CA Manufacturing Sales (1330)
- US Advance Retail Sales (1330)
- US Empire State Manufacturing (1330)
- US Business Inventories (1500)
- EU ECB’s Liikanen to speak (1500)
- US Fed’s Bernanke to speak (1715)
- UK BOE’s sentence to speak (1800)
- US Fed’s Fisher to speak (1815)
Market Comments:
As we have seen recently, any rebound in the dollar proves to be short-lived and viewed as an opportunity to short the dollar at better levels. This latest case was no exception and Friday we saw a reversal in the dollar’s trend that had been in place for just two days. The US data releases on Friday were a general disappointment with firstly the US trade deficit ballooning to its worst level in a decade, followed by the lowest reading in three months for the University of Michigan confidence index. While one might have expected the weak data to confirm a risk-off environment, instead markets appeared to view the data as confirmation that low US rates would definitely be around for a further extended period, proving a boon to risk and hence pressuring the greenback.
The APEC meeting at the weekend held little for currency markets to latch on to. Apart from the pledge to keep current stimulus in place and acknowledgement that the global recovery is both fragileand sluggish (in line with the G-20 statement), there was apparently very little discussion on currencies (especially the Yuan) despite market rumours late Friday. Indeed, the only currency commentary came from IMF’s Strauss-Kahn who continued the fund’s apparent pressure on Chinese authorities by commenting that the Yuan needs to appreciate. The fund also added that China needs to cool loan growth (latest data suggests that is already being put into practice) but predicted that the Chinese economy would grow 8.5% in 2009 and 9% in 2010.
Further signs of the global economic recovery were evident in this morning’s release of Japanese GDP data for Q3. Growth surprised to the upside with a q/q performance of +1.2% versus +0.7% expected, marking the second consecutive quarter of growth after plumbing the depths of -3.2% q/q in Q1 2009. Compared to Q2’s turnaround being largely supported by external demand, this quarter’s growth was more balanced with domestic demand contributing a larger proportion (no doubt as a result of tax breaks on eco-friendly cars and consumer electronics) while capital expenditure no longer acted as a drag on growth (rising 1.6% in this quarter, its first positive contribution in six quarters, ). As ever, official comments urged caution about getting too carried away with the data, with Deputy PM Kan reiterating that downside risks to the economy still exist and must be monitored. Reaction to the data was noticeably muted (as is the case with most Japanese data) with the Nikkei barely registering gains and the JPY static.
The other data release this morning featured UK house prices from Rightmove. While November saw the biggest annual rise since May 2008 (+1.6%), compared to the previous month prices were some 1.6% lower. However, Rightmove noted that this was due to seasonal factors with the year-end/Christmas slowdown and the company expects further prices falls over the next three months before a customary spring pickup. An initial uptick in GBP but then a smart reversal to leave GBP back where it started.
On the data front later today we have Norway trade data, Euro-zone CPI and a number of speeches from central bankers at the ECB and BOE in Europe. Economic releases really heat up into the US session with Canada manufacturing sales, US retail sales, empire manufacturing and business inventories on tap. Fed chief Bernanke speaks late in the session on the economic outlook.
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