Aussie Drifting Lower

 | Aug 15, 2016 11:05

h2 Quick Recap

Weaker than expected US and Chinese data made the Aussie dollar the worst performing of the major currencies Friday, and sapped the strength of stocks to end the week on a new all time high. Bonds and oil rallied but gold and copper weakened.

h2 What You Need To Know /h2

International

  • US retail sales missed with a print of 0.0% against +0.4% expected when they were released on Friday. When you take out food and energy sales fell -0.1%. In some ways though Producer Prices were more disturbing and disruptive for expectations about the Fed’s policy actions this year.
  • While the market guesstimate was for a rise in the PPI of 0.1% it actually fell by 0.4% and ex-food and energy the fall was 0.3% versus the 0.2% rise that the pundits guessed at. Consumer confidence was okay edging up to 90.4 from 90.0
  • The washup was that the Dow Jones Industrial Average and S&P 500 retreated ever so slightly from the previous days records with closes at 18576, and 2184. The Nasdaq 100 did inch a smidge higher to close at 5232.
  • This data also helped drive US bonds a little lower with the 10 year Treasury finishing at 1.515% down around 6 points. Craig James from Commsec reported this morning that the bets on the fed are reduced a little with “Traders now see a 43% chance of a rate hike in December, down from 52% on Thursday.”
  • Chinese data was a miss the Friday and I’d characterise it as somewhat disappointing. It wasn’t exactly the “horrible” our headline at BI suggested (nice article from Scutty though) but it was certainly disappointing that the big three numbers missed to the downside. Industrial production printed 6% versus the 6.1% expected and 6.2% in June. Retail sales came in at 10.2% rather than the 10.5% the pundits guessed at, while fixed asset investment was actually a big miss with a print of 8.1% from 9% last and 8.8% expectations.
  • We can all wring our hands about Chinese growth but these data points simply confirm the economy is slowing but is still doing better than many feared six-months ago. One thing though I wonder if the economy is actually slowing quite markedly. Why do I wonder that – China’s new belligerence in the South and East China seas along with arguments over South Korea’s new missile defence system.
  • Japanese GDP data today is the key highlight 0 market expecting the print in a 0.2%-0.7% range.

Australia

  • The banks were a bit of a drag Friday but the National Australia Bank Ltd's (AX:NAB) advance was interesting given we get an update on how its tracking today. In the end the market finished up 23 at 5530, off its highs at 5549 but still a solid 0.42% higher.
  • That wasn’t terrible given the Chinese data but the SPI 200 futures are suggesting an 11 point fall when the market opens at 10am this morning. The miners had a bit of a rough run overseas suggesting a little more pressure today and we’ll see how the banks go.
  • It’s a big week for reporting on the ASX with 100 names reporting. Today’s highlights are BHP Billiton Ltd (AX:BHP), IronAtlas Iron Ltd (AX:AGO), Newcrest Mining Ltd (AX:NCM), and JB Hi-Fi Ltd (AX:JBH) with the latter giving an interesting indication on how the economy is tracking.
  • All that said, as I noted Friday I like the SPI 200 lower.

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Forex

  • The US dollar was weaker (but not terribly) on Friday as a result of retail sales and PPI data. Euro is at 1.1166 this morning, the pound is still struggling though down at 1.2925, while USD/JPY is at 101.05. The DXY recovered and in the end was down just 0.18% to 95.68.