Main Themes: It was a subdued session due to the US holiday. However, the market turned risk averse in Asian trade yesterday after President Trump signed a bill in support of Hong Kong protestors. This in turn raised concerns it would hinder prospects for a US-China trade deal.
Share Markets: While US shares were closed, futures on the S&P500 were down, as were shares across Europe. The German DAX fell 0.3% and the the UK FTSE100 dropped 0.2%. It follows a negative turn in sentiment yesterday in Asian trade.
Interest Rates: US treasuries did not trade, but yields in Germany were slightly higher further highlighting the risk-off mood.
Foreign Exchange: The US dollar index trended sideways. The yen rose sharply upon the news of Trump signing the bill yesterday, but then weakened as the session wore on. The Australian dollar similarly moved with risk appetite, dipping on the new US legislation, and then pared gains later on.
Commodities: Oil prices fell as risk appetite eased on trade worries.
Australia: Private capital expenditure (or capex) slipped 0.2% in the September quarter, the third consecutive quarter of decline. The recent weakness has been driven by the services sector. This sector also weighed on spending plans. In contrast, investment in the mining and manufacturing sectors was relatively firm in the quarter. We also received the fourth estimate for spending in 2019-20 of $116.7 billion. This estimate implies a 13.7% increase on 2018-19, which is a smaller increase than estimated previously. The extended period of weak business confidence, global uncertainty and weakness in consumer spending domestically has finally caught up with business spending plans.
Europe: Economic confidence improved in November (from 100.8 to 101.3), likely reflecting easing global trade tensions and provide hope that the slump in the economy for the zone may be stabilising. Consumer confidence similarly improved in the month, rising from -7.6 to -7.2, although unchanged in the final estimate. Nonetheless, businesses remain pessimistic – the business climate indicator fell from -0.20 to -0.23.
Japan: Retail sales slumped upon a hike in consumption tax, dropping 14.4% in October. The sizeable drop exceeded the median estimate for a 10.4% decline. With the impact of the tax hike on the consumer sector, the economy is lacking in key growth drivers given weakening industrial activity and exports.
United Kingdom: House prices rose 0.5% in November, which was the largest gain since July last year. The reduced uncertainty over Brexit, and the lower prospects of a “no-deal” Brexit is likely bringing back some confidence into the market despite the upcoming election.
United States: No major data to report due to thanksgiving holiday. However, Trump yesterday signed a bill into legislation which was seen to back pro-democracy protestors in Hong Kong, which Beijing has condemned as “full of prejudice and arrogance”. The bill threatens sanctions on Chinese and Hong Kong officials deemed responsible for human rights abuses in Hong Kong and for the state department to annually review whether Hong Kong has enough autonomy to justify favourable US trading terms.
Today’s key data and events:
NZ ANZ Consumer Confidence Nov prev 118.4 (8.00am)
NZ Building Permits Oct prev 7.2% (8.45am)
JN Job-to-Applicant Ratio Oct exp 1.56 prev 1.57 (10.30am)
JN Industrial Production Oct exp -2.0% prev 1.7% (10.50am)
AU Private Sector Credit Oct exp 0.3% prev 0.2% (11.30am)
EZ Unemployment Rate Oct exp 7.5% prev 7.5% (9.00pm)
EZ CPI Estimate Nov y/y exp 0.9% prev 0.7% (9.00pm)
UK GfK Consumer Sentiment Nov (11.01am)
CH Mfg PMI Nov exp 49.5 prev 49.3 (12.00pm, Sat 30 Nov)
CH Non-mfg PMI Nov exp 53.1 prev 52.8 (12.00pm, Sat 30 Nov)
Times are AEST. All data forecasts are m/m or q/q and seasonally adjusted unless otherwise specified. Forecasts for Australian data are our forecasts and for other countries they are consensus forecasts.
Janu Chan, Senior Economist Ph: 02-8253-0898