The risk pendulum swung back to positive during the Asian session after latest leading indicators for China posted strong gains.
The US Conference Board’s leading index for China posted a strong 1.7 percent m/m increase in August, the best month-on-month increase in seven months and follows a 0.6 percent m/m increase in July. The increase was primarily due to a rebound in real estate activity, with strong credit growth and an improvement in consumer expectations adding to the uptick. Manufacturing and trade sectors continued to underperform, however. In the press release, the Conference Board pointed out that “recent LEI trends suggest the rebound in the real estate sector may be tenuous and uncertainty around credit-led growth remains a concern”. The headline improvement was enough to pull risk appetite higher with EURUSD edging up to overnight highs and AUDUSD rallying back to Monday opening levels.
In other events, the RBA released its semi-annual financial stability review which assured that Australia’s banks remain relatively strong and profitable and have the resources to withstand any external shocks from abroad. It saw no signs (yet?) of Australian banks taking on inappropriate risks and urged them not to relax lending standards. It also noted that Australian household savings have stabilized at high levels with private deleveraging happening at a faster pace.
As one might expect, USDJPY’s slide through the 78.0 level overnight prompted the usual utterings from Japanese finance minister Azumi. He commented that as long as he is in the post (he will soon move to become the ruling DPJ’s secretary general) he will stand ready to take firm measures on the JPY and expects the recent BOJ easing measures to impact the JPY in the medium- to long-term. He also assured that there would be no FX policy vacuum during the position changeover.
Currency markets were relatively stable overnight though the EUR traded with a soft feel following across-the-board weakness in Germany’s IFO readings. The risk-off mood extended from Asia with a heavy feel to most markets.
US data releases did little to lift the gloom with the Chicago Fed’s measure of activity falling to its lowest level in the post-2009 period. The Dallas Fed’s measure of manufacturing activity in Texas did show a mild improvement to -0.9 from -0.6 but remained in negative territory for the third straight month.
Data Highlights
- US Aug. Chicago Fed Activity Index out at -0.87 vs. revised -0.12 prior
- US Sep. Dallas Fed Manufacturing Activity out at -0.9 vs. -2.7 expected and -1.6 prior
- China Aug. Conference Board Leading Index out at +1.7% m/m vs. +0.6% prior
(All Times GMT)
- JP Small Business Confidence (0500)
- GE GfK Consumer Confidence (0600)
- Swiss UBS Consumption Indicator (0600)
- Sweden PPI (0730)
- GE Merkel, Draghi to speak (0800)
- AU RBA’s Dabelle to speak (0830)
- UK BBA Loans for House Purchase (0830)
- UK BOE’s Fisher to speak (0930)
- CA Retail Sales (1230)
- US S&P/CaseShiller House Prices (1300)
- US Consumer Confidence (1400)
- US Richmond Fed Manufacturing Index (1400)
- US House Price Index (1400)