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Eurozone Q2 GDP finalized at -11.8%, worst contraction in Spain

    By
    ActionForex
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    Eurozone GDP contracted -11.8% qoq in Q2, slightly better than prior estimate of -12.1% qoq. EU GDP contracted -11.4% qoq. Both were the sharpest declines since record started back in 1995. Over the year, Eurozone GDP dropped -14.7% yoy while EU GDP dropped -13.9% yoy, also worst since 1995.

    Among the member states where data were available, (-18.5%) recorded the sharpest decline of GDP compared to the previous quarter, followed by Croatia (-14.9%), Hungary (-14.5%), Greece (-14.0%), Portugal (-13.9%) and France (-13.8%). The lowest declines of GDP were observed in Finland (-4.5%), Lithuania (-5.5%) and Estonia (-5.6%), followed by Ireland (-6.1%), Latvia (-6.5%) and Denmark (-6.9%).

    Employment growth was finalized at -2.9% yoy in Eurozone and -2.7% yoy in EU. Employment in persons decreased in all Member States compared with the previous quarter, except in Malta (+0.6%). The largest decreases were recorded in Spain (-7.5%), Ireland (-6.1%), Hungary (-5.3%) and Estonia (-5.1%).

    Full release here.

    Australia NAB business conditions dropped to -6, as employment deteriorated

      By
      ActionForex
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      Australia NAB Business Confidence improved to -8 in August, up from -14. However, Business Conditions dropped to -6, down from 0. All conditions components deteriorated, with trading down from 1 to -2, profitability down from 1 to -3, employment down form -2 to -13.

      Alan Oster, NAB Group Chief Economist said the weakness in conditions was “primarily driven by a deterioration in the employment index – suggesting that while the economy has generally begun to open up, the labour market is still weakening”. The deteriorations was also “broad-based across the states”, suggests that the “virus continues to pose a risk everywhere, not just states with significant containment measures in place”. Confidence also “remains fragile”, still negative. it will “continue to be impacted by news around the virus”

      “Given the sheer magnitude of the fall in activity in Q2 and the subsequent lockdowns in Victoria, it’s is likely we will see a protracted recovery and a rise in the unemployment rate before it gets better. Policy makers have provided unprecedented support – but we think there will need to be more. This would help businesses and the economy recover more quickly and the focus can again return to growth”, Oster added.

      Full release here.

      Japan Q2 GDP contraction finalized at -7.9% qoq, -28.1% annualized

        By
        ActionForex
        -

        Japan Q2 GDP contraction was revised down to -7.9% qoq, from -7.8% qoq. In annualized term, GDP contracted -28.1% versus preliminary reading of -27.8%. GDP deflator was finalized at 1.3% yoy. In July, labor cash earnings dropped -1.3% yoy, versus expectation of -1.6% yoy. Household spending dropped -7.6% yoy, versus expectation of -3.7% yoy. Current account surplus narrowed to JPY 0.96T. Bank lending rose 6.7% yoy in August, versus expectation of 6.3% yoy.

        Economy Minister Yasutoshi Nishimura said “the economy was in a severe state in April-June because we intentionally halted activity to contain the coronavirus “. Nevertheless “it has recently shown signs of picking up”.

        “Some positive corporate spending to adapt to a new lifestyle is seen, such as capex to boost production capacity, spending on telecom equipment,” he added. On the other hand, “household income is rising so the economy likely to continue recovering but must watch impact on the renewed rise in infection numbers, hot temperatures on consumption.”

        BoE Haldane a touch more optimistic than his MPC colleagues

          By
          ActionForex
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          BoE Chief Economist Andy Haldane said he was “probably a touch more optimistic” on the economy than his MPC colleagues. “Right now the prevailing narrative is a bit gloomier than I think is justified by the data,” he said. “I am, I hope, more open minded about what lies ahead both economically and policy wise.”

          Haldane added that the “recovery isn’t being given enough credit”. The economy “has bounced back” because “the consumer has shown themselves to be incredibly resilient and adaptive and so too have businesses.” He also warned that pessimism surrounding the economy and job losses could “risk becoming self-fulfilling, and you’re then sucked down into some expectational vortex”.

          EU warns WTO term is the way in event of no-deal Brexit

            By
            ActionForex
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            As Brexit negotiation is a main theme today, a European Commission spokesman said at a regular new briefing, “we are fully concentrated on making the most out of this week’s negotiating round… we share prime minister Johnson’s desire to reach a deal quickly. We will do everything in our power to reach an agreement.”

            He warned, a no-deal Brexit would “inevitably create barriers to trade and cross border exchanges that do not exist today”. “I finally point out that while we are determined to reach an agreement with the UK, the EU will be ready – in the event of a no deal scenario – to trade with UK on WTO terms as of the first of January, 2021,” the spokesman said.

            Separately, Commission President Ursula von der Leyen tweeted: “I trust the British government to implement the Withdrawal Agreement, an obligation under international law & prerequisite for any future partnership. Protocol on Ireland/Northern Ireland is essential to protect peace and stability on the island & integrity of the single market.”

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            Eurozone Sentix investor confidence rose to -8, inflation risks on the rise

              By
              ActionForex
              -

              Eurozone Sentix Investor Confidence rose to -8 in September, up from -13.4, better than expectation of -10.8. That’s the fifth increase in a row, and the highest level since February. Current Situation Index rose to -33.0, up from -41.3, highest since March and fourth increase in a row. Expectations Index recovery to 20.8, up from 19.3.

              Sentix said that overall, “the current recovery phase is similar to that of 2009, when we also saw a continuous improvement, which, as today, had little impact on stock market expectations.” Though, there are “clear signs of change on the bond markets”. “For our theme barometers show that the risks of inflation are on the rise again from the investors’ perspective. The corresponding sub-index for institutional investors fell to -15.5 points in September. This is the worst value since November 2018.

              Full release here.

              UK Johnson to set Oct 15 deadline for deal with EU, or accept and move on

                By
                ActionForex
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                It’s reported that UK Prime Minister Boris Johnson is prepared to set an October 15 deadline for a deal with EU after the Brexit transition. Or, the UK and EU should both accept that there won’t be a free trade agreement and “move on”. A no-deal would means “having a trading agreement with the EU like Australia’s” using WTO protocols, and “that would be a good outcome” for the country.

                Foreign Minister Dominic Raab warned that this week is “a wake-up call for the EU”, adding “the EU’s best moment to strike a deal is now.” Fisheries and state aid rules are “the only two points holding us back”. “All the UK is asking for it to be treated like any other country in free trade negotiations,” he said. “No other country would accept being bound by or controlled by the EU’s rules.”

                UK’s chief negotiator David Frost told The Mail on Sunday: “We are not going to accept level playing field provisions that lock us in to the way the EU do things; we are not going to accept provisions that give them control over our money or the way we can organise things here in the UK and that should not be controversial – that’s what being an independent country is about, that’s what the British people voted for and that’s what will happen at the end of the year, come what may”.

                Separately, the Financial Times also reported that the UK government is planning legislation that would override key parts of the Withdrawal Agreement. The sections of internal market bill to be published on Wednesday would “eliminate the legal force of parts of the withdrawal agreement” in areas including state aid and Northern Ireland customs.

                China exports rose 9.5% in Aug, but imports contracted -2.1%

                  By
                  ActionForex
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                  In USD terms, in August, China’s total international trade rose 4.2% yoy to USD 411.6B. Exports rose 9.5% yoy to USD 235.3B, above expectation of 7.1% yoy. Imports, however, dropped -2.1% yoy to USD 176.3B, well below expectation of 0.1% yoy. Trade surplus narrowed to USD 58.9B, but still above expectation of USD 49.8B.

                  Year-to-August, total trade dropped -3.6% yoy to USD 2854B. Exports dropped -2.3% yoy to USD 1572B. Imports dropped -5.2% to USD 1283B. Trade balance recorded USD 289B surplus.

                  With EU, year-to-August, total trade dropped -1.5% yoy to USD 401B. Exports rose 2.1% yoy to USD 245B. Imports dropped -6.8% yoy to USD 156B.

                  With US, year-to-August, total trade dropped -3.5% yoy to USD 344B. Exports dropped -3.6% to USD 266B. Imports dropped -2.9% yoy to USD 78B.China t

                  Australia AiG services dropped to 42.5, all sectors in contraction, employment decreased significantly

                    By
                    ActionForex
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                    Australia AiG Performance of Services Index dropped to 42.5 in August, down from 44.0. Looking at some details, employment plunged -7.9 pts to 39.4. But sales were steady, down -0.1 to 43.3. New orders also dropped -1.7 to 45.2. Average wages dropped -2.4 to 43.4.

                    All sectors remained in contraction in trend terms. AiG added, “the introduction of stage 4 restrictions in the greater Melbourne area following some optimism in July weighed heavily on business activity in Victoria and the impact was felt across other states. All indicators were firmly negative for August and employment decreased significantly from the previous month.”

                    Full release here.

                    Canada employment rose 246k, unemployment rate dropped to 10.2%

                      By
                      ActionForex
                      -

                      Canada employment rose 246k in August, below expectation of 400k. Most of the growth were found in full-time jobs, which increase 206k. However, full time employment still just stood at 93.9% of pre-pandemic levels, compared with 96.1% for part-time work. Unemployment rate dropped slightly to 10.2%, down from 10.9%, better than expectation of 11.0%.

                      Full release here.

                      US non-farm payrolls rose 1371k, unemployment rate dropped to 8.4%

                        By
                        ActionForex
                        -

                        US Non-Farm payrolls employment grew 1371k in August, slightly below expectation of 1550k. Unemployment rate dropped sharply to 8.4%, down from 10.2%, beat expectation of 9.9%. Labor force participation rate also rose 0.3% to 61.7%. Average hourly earnings rose 0.4% mom, above expectation of 0.0% mom.

                        BLS said: “These improvements in the labor market reflect the continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic and efforts to contain it. In August, an increase in government employment largely reflected temporary hiring for the 2020 Census. Notable job gains also occurred in retail trade, in professional and business services, in leisure and hospitality, and in education and health services.”

                        Full release here.

                        BoE Saunders: Quite likely additional easing will be appropriate

                          By
                          ActionForex
                          -

                          BoE MPC member Michael Saunders said it’s “quite likely that additional monetary easing will be appropriate in order to achieve a sustained return of inflation to the 2% target”. “My hunch is that risks lie on the side of weaker growth and a longer period of excess supply than forecast,” he added.

                          Regarding post-Brexit outlook, he said, “risks probably lie on the side of a thinner trade deal, a less-smooth transition, or more persistent Brexit-related uncertainty. More generally, global trade policy uncertainty remains high.”

                           

                          UK PMI construction dropped to 54.6, speed of recovery lost momentum

                            By
                            ActionForex
                            -

                            UK PMI Construction dropped to 54.6 in August, down from July’s 58.1. Markit said subdued order books held back output growth. House building remained the best performing category. Business expectations reached six-month high on hopes of a boost from infrastructure work.

                            Tim Moore, Economics Director at IHS Markit: “The latest PMI data signalled a setback for the UK construction sector as the speed of recovery lost momentum for the first time since the reopening phase began in May…. Another month of widespread job shedding highlighted the ongoing difficulties faced by UK construction companies, with order books often depleted due to a slump in demand from sectors of the economy that have experienced the greatest impact from the pandemic.”

                            Full release here.

                            NFP in focus as Dollar index capped below 93.47 resistance

                              By
                              ActionForex
                              -

                              US Non-Farm Payrolls employment data will be the main event for today. Markets are expecting 1550k job growth in August, slightly down from July’s 1763k. Unemployment rate is expected to drop to 9.9%, down from 10.2%. Looking at other employment related data, ADP private employment was a big disappointment with just 428k growth. ISM Manufacturing employment edged higher by 2.1 pts to 46.4, but stayed in contraction. ISM Non-Manufacturing employment rose notably by 5.8 pts to 47.9, but also stayed in contraction. Jobless claims was a positive development though, with four-week moving average down from 1.34m to 992k.

                              Dollar’s reaction to NFP data is relatively uncertain. Dollar index’s down trend since March’s spike looks overstretched, with clear bullish convergence condition in daily MACD and RSI. Yet there has been no follow-through buying in the multiple rebound attempts in recent weeks. Break of 93.47 resistance is needed to be first sign of short term bottoming. In that case, we’d likely see a test on 44 day EMA (now at 94.43) at least.

                              Hong Kong HSI breaks near term channel with sharp decline

                                By
                                ActionForex
                                -

                                Asia markets open sharply lower, following the selloff in US overnight. The -1.8% decline in Hong Kong HSI (at the time of writing) looks tiny comparing to the near -5% decline in NASDAQ. But the technical development is much more bearish.

                                The index survived all the political turmoils in the past few months, including the forceful implementation of national security law by the Chinese government. But the channel that started back in March is finally broken with today’s decline. Daily MACD is also trending down.

                                It now looks like corrective rebound from 2139.26 has completed with three waves up to 26782.61. Immediate focus is now on 24167.78 support, which might be tested next week if the decline continues. Firm break there will confirm this bearish case and target 21139.26 low again. That could be accompanied by selloff in Asia markets elsewhere, which in turn might drag down Australian and New Zealand Dollars.

                                NASDAQ’s up trend not in threat despite -5% pull back

                                  By
                                  ActionForex
                                  -

                                  NASDAQ tumbled sharply by -598.34 pts or -4.96% overnight. While such decline was sharp and deep, there is no immediate threat the the up trend yet. NASDAQ is holding well inside the channel that started back in May. We’d continue to expect further rise as long as 11121.19 resistance turned support holds. Next target would be 161.8% projection of 6190.17 to 9838.37 from 6631.42 at 12534.20. Nevertheless, firm break of 11121.19 would indicate that a correction has likely started to correct the whole rise from 6631.42.

                                  Australia retail sales rose 3.2% in Jul, Victoria reported the only fall

                                    By
                                    ActionForex
                                    -

                                    Australia retail sales rose 3.2% mom in July, slightly below expectation of 3.3% mom. All state and territories reported growth in sales, except Victoria which was down -2.1% mom due to stage four lockdown.

                                    “Turnover in clothing, footwear and personal accessory retailing (7.1 per cent) and cafes, restaurants, and takeaway food services (4.9 per cent) rose across the country, with the exception of Victoria, where the reintroduction of Stage 3 stay-at-home restrictions in July partially offset these rises. As was the case in April, restrictions led to significant falls in these industries in Victoria” said Director of Quarterly Economy Wide Surveys Ben James.

                                    Full release here.

                                    Suga leads the race to LDP leader as popularity surges

                                      By
                                      ActionForex
                                      -

                                      Popularity Japanese Chief Cabinet Secretary Yoshihide Suga surged sharply, making him the favorite to win the leadership of the ruling Liberal Democratic Party. As a close aide of outgoing Prime Minister Shinzo Abe, he pledged to continue the Abenomics reform if he takes the position.

                                      According to a survey by Asahi Shimbun, Suga has 38% of public support, well ahead of 25% for former Defence Minister Shigeru Ishiba and LDP policy chief Fumio Kishida. Public debates will be held on September 9, 12. The leadership election will take place on September 14. The Winner is virtually assured of becoming prime minister because of the LDP’s parliamentary majority.

                                      Fed Evans comfortable with inflation at 2.5% for averaging

                                        By
                                        ActionForex
                                        -

                                        Chicago Fed President Charles Evans said the new average inflation targeting was “consistent with the type of outcome-based forward guidance that I advocated and that the Committee used to speed the recovery after the Great Financial Crisis.”

                                        “I expect that articulating outcome-based forward guidance for the rate path and asset purchases could be beneficial in the not-too-distant future” he added. He’d be “comfortable” with inflation going up to 2.5% “as long as we were trying to average off very low inflation rates”.

                                        Evans also said, “even with steady progress in controlling the virus and additional fiscal support, I expect it will be some time before the economy recovers from the hit it took”. He expects the unemployment rate would still be somewhere in the range of 5% to 5.5% at the end of 2022.

                                        Separately, Atlanta Fed President Raphael Bostic said, “as long as we see the trajectory moving in ways that suggest that we are not spiraling too far away from our target, I’m comfortable just letting the economy run and letting it play out”.

                                        US ISM non-manufacturing dropped to 56.9, respondents mostly optimistic

                                          By
                                          ActionForex
                                          -

                                          US ISM Non-Manufacturing index dropped to 56.9 in August, down from July’s 58.1, slightly below expectation of 57.1. Looking at some details, production dropped -4.8 to 62.4. New orders dropped -10.9 to 56.8. Prices rose 6.6 to 64.2. Employment rose 5.8 to 47.9, but stayed in contraction.

                                          “Respondents’ comments are mostly optimistic and industry specific about business conditions and the economy as businesses are starting to reopen. Industries that have not reopened remain concerned about the ongoing uncertainty. There is a challenge with capacity and logistics due to the pandemic and the impact on deliveries and order fulfillment,” says Anthony Nieves, Chair of ISM Services Business Survey Committee.

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