Australia retail sales dropped -1.1% mom in September, better than preliminary reading of -1.5% mom. It’s also an improvement over August’s -4.0% mom.
In seasonally adjusted terms, there were falls in New South Wales (-0.9%), Queensland (-1.2%), Western Australia (-1.7%), South Australia (-2.9%), Victoria (-0.4%), the Australian Capital Territory (-2.4%), and Tasmania (-2.0%). The Northern Territory (4.3%) rose.
Australia AiG Performance of Construction Index rose to 52.7 in October, up from 45.2. It’s the first expansionary result since August 2018.
Ai Group Head of Policy, Peter Burn, said: “The expansion of the Australian construction industry in October was driven by further strength in house building and smaller declines in the apartment and engineering construction sectors while commercial building fell further behind. Across the industry employment lifted modestly over the month. With activity restrictions in Victoria now easing and new orders rising strongly across the country, the near-term outlook is encouraging. There is a note of caution in that the improvement in the sector and elsewhere in the economy is still heavily reliant on wage and apprentice support measures and spurred along by exceptionally low interest rates.”
New Zealand unemployment rate jumped to 5.3% in Q3, up from Q2’s 4.0%, but was slightly better than expectation of 5.4%.The 1.3% jump was the biggest quarterly increase on record. Labor force participation rate rose 0.2% to 70.1%. Employment dropped -0.8% over the quarter, matched expectations. 37k more New Zealanders were unemployed, bringing the total to 151k, highest in eight years.
“We are continuing to see the economic effects of COVID-19, and its associated border and business closures,” labour market and household statistics senior manager Sean Broughton said. “Last quarter’s low unemployment rate of 4.0 percent was explained in part by people’s inability to be ‘actively seeking’ and available for work during the national lockdown that was in place for much of the quarter. This quarter’s increase in unemployment reflects a return to more normal job-hunting be ha vi ours.”
BoJ Governor Haruhiko Kuroda emphasized in an online meeting with business leaders, “it’s extremely important to keep exchange-rate moves stable.” “As a central bank, we won’t act directly to stabilise markets,” he added. “But we of course will work closely with financial authorities and overseas central banks to help keep currency moves stable.”
“Global market developments remain jittery reflecting uncertainty over the outlook.” BoJ will also “closely watch global and economic market developments, including those after the U.S. presidential election.”
Kuroda also noted that “the spread of COVID-19 has not subsided globally, including Europe and the United States, and public health measures have been tightened in European countries… Under these circumstances, the consequences of COVID-19 and the magnitude of their impact on domestic and overseas economies are highly unclear.”
Released from Japan, monetary base rose 16.3% yoy in October, versus expectation of 14.5% yoy.
EU confirmed today that it received not response from the UK regarding the breach of the Brexit Withdrawal Agreement due to the Internal Market Bill. EU is now considering legal actions.
“We sent a letter of formal notice on 1 October to the UK for breaching its obligations under the Withdrawal Agreement.,” European Commission Spokespersona Daniel Ferrie said. As you know it had until the end of the month to submit its observations to that letter. To date I can confirm that the EU has received no reply from the UK. Therefore we are considering next steps, including issuing a reasoned opinion.”
Ferrie added: “More generally I would recall the EU is fully committed to achieving the full, timely and effective implementation of the Withdrawal Agreement within the remaining time available. That’s why we started the infringement procedure on 1 October. “This dispute will have to be resolved.”
Swiss CPI came in at 0.0% mom in October, matched expectations. Annually, CPI improved to -0.6% yoy, up from -0.8% yoy, matched expectations.
FSO said: “The stability of the index compared with the previous month is the result of opposing trends that counterbalanced each other overall. Prices for clothing and footwear increased, as well as those for glasses and contact lenses. In contrast, prices for combined offers for fixed-line and mobile communication, as well as those for other fruits (melons and grapes) decreased.”
In the post meeting press conference, RBA Governor Philip Lowe said ” it would be incorrect to conclude that we are out of firepower” after today’s package of easing measures. He emphasized the central bank still has a “range of tools”, including ” further liquidity provision, asset purchases and transactions in the foreign exchange market.”
Still, negative rate policy is “extraordinarily unlikely”. “There is little to be gained from lowering the policy rate into negative territory,” he added. “While a negative rate might lead to a helpful depreciation of the Australian dollar, it could impair the supply of credit to the economy and lead some people to save more, rather than spend more. ”
Australian Dollar is trading generally lower after RBA easing announcement, including against other commodity currencies. AUD/CAD’s decline is one of the more apparent. Rebound from 0.9247 might be slightly stronger than expected. Yet, the cross is held comfortably below falling 55 day EMA, keeping near term outlook bearish. The corrective fall from 0.9696 should resume sooner or later as long as 0.9433 resistance holds. Break of 0.9247 will target 38.2% retracement of 0.8066 to 0.9696 at 0.9073.
AUD/NZD is holding in very tight range so far today. Downside momentum is somewhat diminishing, yet there is no sign of bottoming yet. As long as 1.0717 support turned resistance holds, further decline remains in favor. 1.0565 structural support is the key trend defining level. Strong rebound from there will keep the rally form 0.9994 intact, and retain the prospect of another rise through 1.1043 at a later stage. But Sustained break of 1.0565 will argue that such rise has completed. Deeper fall would be seen to 61.8% retracement of 0.9994 to 1.1043 at 1.0395 and below.
RBA announced a package of policy action today, as widely expected. The package includes:
The central bank acknowledged that recent data have been “a bit better than expected” and “near-term outlook is better than it was three months ago”. But “recovery is still expected to be bumpy and drawn out and the outlook remains dependent on successful containment of the virus.”
Q3 GDP is expected to report positive growth. But it will “take some time to reach the pre-pandemic level of output”. GDP is projected to grow around 6% over the year to June 2021, and 4% in 2022. Unemployment rate is projected to peak at a little below 8 per cent, rather than the 10 per cent expected previously. Unemployment rate is expected to drop be to around 6% at the end of 2022.
Regarding the development of Gold, this question has been in our minds for some time. Is gold just correcting the rise from 1451.16 to 2075.18? Or it’s correcting the whole up trend from 1160.17? We’d probably find out very soon as the results of US election unfolds, which should set the direction of the financial markets for the next few months.
1848.39 support is a key level, as it largely overlaps with 23.6% retracement of 1160.17 to 2075.18 at 1859.23. Sustained break of this support zone will favor the case that it’s in a larger scale correction. Deeper decline should be seen to 38.2% retracement at 1509.70, which is close to 55 week EMA (now at 1735.45.
Nevertheless, even in case of a brief breach, failure to sustain below 1848.39, followed by break of 1933.17 resistance, will argue that the correction is a smaller scale one, and has probably completed. Retest of 2075.18 high should be seen rather soon, with prospect of a break out. We’ll see.
After initial dive to 33.50 yesterday, WTI oil price staged a strong rebound and it’s now back above 36 handle. The rebound was driven by news that Russia discussed a three-month extension of OPEC+ oil production cuts, until March 2021.
Technically, WTI drew support from 34.10/36 zone as we have expected. The zone covers 100% projection of 43.50 to 35.98 from 41.62 at 34.10 and 34.36 structural support. Break of 36.72 resistance indicates short term bottoming, on bullish convergence condition in 4 hour MACD. Immediate bearishness is now neutralized. There is little prospect of strong rally as long as 55 day EMA (now at 39.27) holds. Though, even in case of another fall, 33.50 should provide the floor.
US ISM Manufacturing Index rose to 59.3 in October, up from 55.4, way better than expectation of 55.6. The month-over-month gain of 3.9 pts is the second largest since May 2009. It’s also the highest reading since September 2018 while the overall economy has been in the sixth month in a row.
Looking at some details, new orders rose 7.7pts to 67.9. Production rose 2.0 pts to 63.0. Prices rose 2.7pts to 65.5. Employment rose 3.6 pts to 53.2, back in expansion.
“The past relationship between the Manufacturing PMI and the overall economy indicates that the Manufacturing PMI® for October (59.3 percent) corresponds to a 4.8-percent increase in real gross domestic product (GDP) on an annualized basis,” says Timothy R. Fiore, Chair of the ISM Manufacturing Business Survey Committee.
ECB Executive Board member Yves Mersch said in a speech that the pandemic emergency purchase programme (PEPP) is the “most appropriate instrument compared with a recalibration of standard policy tools, such as interest rate cuts”. PEPP purchases are “separate from and cannot be consolidated with APP purchases”, making it a “distinct monetary policy measure”.
He also emphasized that “crisis measures must be temporary and targeted. They are justified only in the light of the exceptional circumstances seen during the pandemic. Extraordinary times require extraordinary action. As the crisis evolves and subsides, the ECB will reconsider its tools and supervisory practices.
UK PMI Manufacturing was finalized at 53.7 in October, down from September’s 54.1. It’s nonetheless the fifth straight months of expansion reading. Markit said output and new order growth slowed while job losses mounted. But business optimism was at highest level since January 2018.
Rob Dobson, Director at IHS Markit: “October saw the UK manufacturing recovery continue, albeit with the upturn losing momentum amid ongoing lockdown measures and signs that growth could weaken further in coming months after Brexit-related stockpiling. The main drag was a fall back into contraction for the consumer goods industry… There was positive news on the export front… However, a significant contribution to the improvement in exports came from a temporary boost of Brexit stock building by EU clients.
“The outlook for the remainder of the year has therefore become increasingly uncertain, with risks tilted to the downside. While most companies maintain a positive outlook, with three-fifths of manufacturers expecting output to rise over the coming year, concerns about near-term risks posed by the pandemic, changes to COVID restrictions and related stimulus measures, plus Brexit anxieties, continue to fog the future.”
Eurozone PMI Manufacturing was finalized at 54.8 in October, up from September’s 53.7. That’s also the best reading in 27 months. Among the member states, Germany PMI Manufacturing surged to 58.2, a 31-month high. Austria hit 23-month high at 54.0. Italy also hit 31-month high of at 53.8. Spain (52.5) , France (51.3) stayed in expansion. The Netherlands (50.4) and Ireland (50.3) were close to stagnation. Greece was in contraction at 48.7, a 3-month low.
Chris Williamson, Chief Business Economist at IHS Markit said: “Eurozone manufacturing boomed in October, with output and order books growing at rates rarely exceeded over the past two decades. However, while the data bode well for production during the fourth quarter, the expansion is worryingly uneven…. The renewed weakness of consumer-facing businesses serves as a reminder that, while manufacturing as a whole may be booming for now, the sustainability of the recovery will depend on household behaviour returning to normal and labour markets strengthening. Given second waves of virus infections, this still looks some way off.”
Japan PMI Manufacturing was finalized at 48.7 in October, up from September’s 47.7. Output and new orders both fell at softer rates. Export orders also increased for the first time since November 2018. Business optimism reached highest since July 2017.
Usamah Bhatti, Economist at IHS Markit, said: “Japanese manufacturers will be particularly buoyed by the return to growth in export orders, as demand across key overseas markets such as China picked up… The sector reported a weakening employment trend in October, however, as staff numbers fell at a faster pace compared to September… An encouraging finding in October was the sustained improvement in business optimism. Approximately 38% of Japanese manufacturers surveyed foresee an increase in output over the coming 12 months, strengthening the index to its highest reading in over three years.”
China Caixin PMI Manufacturing rose to 53.6 in October, up from 53.0, beat expectation of 53.0. That’s also the highest level since August 2014. Markit noted that output rises sharply amid quickest increase in total new work for nearly a decade. However, pandemic dampens growth of new export orders.
Wang Zhe, Senior Economist at Caixin Insight Group said: “To sum up, recovery was the word in the current macro economy, with the domestic epidemic under control. Manufacturing supply and demand improved at the same time. Enterprises were very willing to increase inventories. Prices tended to be stable. Business operations improved, and entrepreneurs were confident.
“But the twists and turns of overseas infections remained a headwind for exports. The full recovery of employment depends on stronger and more-lasting business confidence. As the economic indicators for consumption, investment and industrial output for September were generally better than expected, it is highly likely that the economic recovery will continue for the next several months. But there are still many uncertainties outside of China, so policymakers need to be cautious about normalizing post coronavirus monetary and fiscal policies.”
Australia AiG Performance of Manufacturing Index jumped 9.6 pts to 56.3 in October, first expansion reading since July. Strong expansionary readings were recorded in New South Wales (56.1) and South Australia (68.4). Victoria (47.3) and Queensland (47.5) stayed in contraction despite notable improvement. Looking at some more details, production rose 5.0 pts to 55.1. Employment rose 7.6 pts to 55.3. New orders rose 13.3 pts to 58.4. Exports rose 6.2 pts to 52.7. Sales rose 14.9 pts to 56.1. Average wages rose 5.0 pts to 57.3.
Ai Group Chief Executive Innes Willox said: “With the quantity of fiscal support easing in October and with the tax cuts only just starting to flow through, the lift in sales and the strong growth of new orders are particularly encouraging signs of improving household and business confidence. The solid national performance was achieved despite another month of contraction in Victoria. With restrictions in Victoria being lifted there are very good prospects of further strength in the closing months of 2020”.
Canada GDP rose 1.2% mom in August, above expectation of 0.9% mom. That’s the fourth consecutive month of increase. Yet, overall economic activity was still about -5% below February’s pre-pandemic level.
Goods-producing industries grew 0.5% mom while services-producing industries rose 1.5% mom. 15 of 20 industrial sectors posed increases while two were essentially unchanged.
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China Caixin PMI services rose to 56.8, composite rose to 55.7
China Caixin PMI Services rose to 56.8 in October, up from 54.8, beat expectation of 55.2. That’s the second best reading since 2020, just after June’s high of 58.4. PMI Composite rose to 55.7, up from 54.5.
Wang Zhe, Senior Economist at Caixin Insight Group said: “Overall, as the domestic epidemic situation stabilizes, recovery remained the main economic theme…. The development of the epidemic in Europe and the U.S. is still an uncertain factor affecting economic trends. In the coming months, a continued recovery of the Chinese economy is highly likely, but it is necessary to be cautious about the normalization of monetary and fiscal policies in the post-epidemic period.”
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