Asia lacked momentum to push direction - awaiting Europe for impulses


MAJOR HEADLINES – PREVIOUS SESSION

  • GE Jul. Factory Orders out at +3.5% m/m, -19.8% y/y vs. +2.0%/-20.6% exp. and 3.8%/-25.2% prior resp.

  • JP Jul. Current A/C Balance out at ¥1,265.6 bln vs. ¥1,4520.6 bln expected and ¥1,152.5 bln prior

  • JP Jul. Trade Balance out at ¥437.3 bln vs. ¥490.2 bln expected and ¥602.2 bln prior

  • JP Aug M3 Money Supply out at +2.0% y/y vs. +1.9% expected and +2.1% prior

  • JP Aug. Bank Lending out at +2.5% y/y vs. +2.8% prior

  • AU Aug. Business Conditions Index out at 4 vs. 1 prior

  • AU Aug. Business Confidence Index out at 18 vs. 10 prior

  • JP Aug. Bankruptcies out at -1.0% y/y vs. +1.0% prior

  • JP Aug. Economy Watchers Survey Current Conditions out at 41.7 vs. 43.0 expected and 42.4 prior

  • JP Aug. Economy Watchers Survey Expectations out at 44.0, as expected, vs. 44.9 prior

  • Swiss Aug. Unemployment Rate out at 3.8% vs. 3.9% expected and 3.7% prior


THEMES TO WATCH – UPCOMING SESSION

(All times GMT)

  • GE Trade Data (0600)

  • Sweden Current Account Balance (0730)

  • Denmark Current Account Balance (0730)

  • UK Industrial/Manufacturing Production (0830)

  • GE Industrial Production (1000)

  • CA Building Permits (1230)

  • EU ECB’s Weber to speak (1445)

  • US Consumer Credit (1900)

Market Comments:

Market holidays in the US and Canada ensured that activity in the European session wound down early with levels only marginally changed from the open.

The data releases that were scheduled for Europe were a mixed bag with the Euro-zone Sentix Investor Confidence coming in slightly below expectations whereas German factory orders were above consensus.
Investor confidence rose to a 14-month high reading of -14.6 from last month’s -17.0 but disappointed relative to the -13.9 expectation. In the breakdown of the numbers, the current situation index among private investors jumped to -29.0 from -32.5 while institutional investors saw a larger jump to -36.5 from -45.5. The expectations index was a touch more gloomy, sliding back to 2 from 5 for private investors and to 9 from 11 for institutional.
German factory orders for July on the other hand were above forecast, rising 3.5% m/m versus 2.0% expected, which resulted in a dramatic improvement in the annual measure to -19.8% versus June’s -25.2%. In the breakdown, capital orders rose 3.2% while consumer goods orders fell 1.5% m/m. Needless to say neither piece of data had a market-moving impact.

The NZD’s surge through the 0.69 level yesterday did not draw much teeth-gnashing from the RBNZ though NZ finance minister English was quoted on the wires as saying the Kiwi’s strength appears to the out of line with fundamentals and it meant that exporters’ competitiveness would need to be monitored. Reflecting on the outlook, he pondered what the situation might be in six months time or so after the RBA enters its rate-hiking phase and NZ rate remain flat. Note the RBNZ meeting is on Thursday with no change in the OCR expected and a continued pledge to keep rates low.

The AUD also continues to reach for new 2009 highs, given further assistance from this morning’s business conditions indices. Business conditions in August edged up to +4 from +1, close to its +6 long-term average, while business confidence rose by a solid 8 points to 18 from 10, its best level in nearly six years. The improvement was based on a surge in profitability and trading conditions but a fall in forward orders and a decline in employment intentions took some of the shine off the report. However, in general a positive report and should help keep the current desire for the AUD intact.

The only other point of note during the Asian session was that gold futures briefly touched the 1,000 mark for the first time since February. Cash on the other hand fell just short of the mark, trading up to the 998 handle.

The UK’s Telegraph features an article which refers to the UN Conference on Trade and Development (UNCTAD) stating that the system of currencies and capital rules which binds the world economy is not working properly and needs wholesale reconsideration. The report calls for a new Bretton Woods-style system of managed international exchange rates. It adds that replacing the dollar with an artificial currency would solve some of the problems related to the potential of countries running large deficits and would help stability. More pressure for the dollar?

Data releases for today are centred around Europe, which has kicked off with Swiss unemployment. German trade and industrial production data follow while UK industrial and manufacturing production will also be released. The return of North American markets will have only Canadian building permits to contend with.