China data disappoints, Greek stock market to reopen

Market Brief

Asia stocks declined across the board as Chinese economic data showed more weakness. China Caixin manufacturing PMI final (different from the official read which fell to a five-month low at 50.0) contracted to a 2-year low at 47.8 in July compared with flash estimates of 48.2 and down from 49.4 in June. The Shanghai composite fell -2.33% and Shenzhen declined 2.30%. The Hang Seng fell -1.01% and the Nikkei -0.17%. In the FX markets volatility was subdued after Fridays wild swings. EURUSD was range bound between 1.0966 to 1.0991 while traded slightly higher from 123.90 to 124.10. AUDUSD edged lower despite solid economic data. AUDUSD fell from 0.7321 to 0.7290. US rates were slightly higher as the 10yr yields rose 2.5bp to 2.205% on the open but quickly slipped to 2.194%. The PBoC kept the USDCNY fix steady at 6.116. With a busy GBP week ahead, the sterling was range bound. Commodties remain under pressure with oil falling in early trading. According to a Bloomberg report, ahead of the China's top leadership’s annual gathering, policy makers are preparing new fiscal spending initiatives to safeguard against economic weakening wouldn’t put there 2015 target out of reach (as in 2014). In the European session, Greece is anticipated to open its stock markets for the first time in over one month. Heavy selling is excepted and headwinds in stock across Europe.

According to Bloomberg, BoJ Governor Haruhiko Kuroda stated that there was no current need for additional monetary easing. The inflation trend was improving, yet the BoJ stood ready to adjust policy if needed. He went on to say that in his view the private sector remained more pessimistic then the central bank on inflation outlook. Finally, it was the official BoJ view that its inflation target of 2% would be achieved around the first half of 2056. In economic data, Nikkei manufacturing PMI expanded to 51.2 in July revised lower from 51.4 of preliminary estimates.

Australia, July AIG performance of manufacturing index expanded to 50.4 recovering from a contraction of 44.2 in June. While, HIA new home sales rose 0.5% m/m in June against a prior fall of 2.3% in May. Australia, house prices continue to surge despite efforts of regulators to control growing real-estate prices (dampening RBA easing expectations). Elsewhere, South Korea’s BoP current account surplus quickened to a record high of $12186.5mn against revised lower figures of $8618.1mn in May.

In the European session, traders will expect EU, UK and Swedish manufacturing PMI. Switzerland will release sight deposit data which will be of interest due to the fact that EURCHF has traded well above intervention levels. This read will help us understand if the SNB is looking to push the EURCH higher or only intervene to in defensive of the CHF. In the US personal income and spending, PCE and ISM manufacturing are anticipated to be release.