Asia Today: Hurricane Sandy or BOJ - Which will have more impact?

Today’s Asian session kicked off with participants having one eye on tracking the path of Hurricane Sandy and the other on tomorrow’s Bank of Japan meeting.

Activity was relatively subdued in both respects with USDJPY holding below the 80.0 mark, having given up that handle on Friday. Risk was mixed with Asian equities equally divided between positive and negative (the influential Shanghai Composite marginally in the red) and risk currencies holding a mild bid tone throughout the session.

On the data front, Japan’s retail sales were soft in September, falling 3.6 percent from a month ago with large retailers suffering a 1.0 percent decline from a year ago. This could help to push the BOJ into additional stimulus measures at tomorrow’s meeting (¥10 tln worth of measures is all-but priced in to current levels). FinMin Jojima repeated that he wanted to see the BOJ take “bold policy steps” to defeat deflation. USDJPY was stuck in a 15 point range, sitting nicely on the 200-day moving average, with heavy exporter sales above the 80 mark last week now being mentioned.

From the UK, house prices as measured by Hometrack fell for the fourth consecutive month in October with Hometrack saying that the property market was unlikely to recover unless we see sustainable economic growth along with easier access to home financing for prospective buyers. On a slightly more positive note, a CBI survey suggested that UK companies were planning to increase hiring over the next 12 months with 36 percent of employers planning to increase wages and 16 percent looking at a wage freeze. In addition, the Lloyds UK business barometer improved to +17 in October from +10.

Despite these more positive outlooks, BOE’s Dale was quoted in the UK Times as saying that economic growth in the UK would be “materially lower” in the fourth quarter after Q3’s number were given  an unexpectedly strong boost from the one-off Olympics. The noted hawk added that despite reductions in the funding costs for banks, positive inflation figures and the bank’s new “Funding for Lending” programme being additional good news for the economy, rising energy costs would eat into households’ real incomes and could force inflation back higher.

A weak Friday session in Asia was reinforced by dismal Spanish jobs data and German FinMin expressing doubts about the Greek debt negotiations. EURUSD was travelling south of 1.29 as Spanish unemployment hit a record 25% before US growth numbers surprised to the upside and helped shore up losses. The US economy grew 2.0 percent q/q, better than the 1.8 percent expected and a strong rebound from Q2’s 1.3 percent. Final Michigan confidence numbers were slightly below forecasts but still at a 5-year high.

Data Highlights

• US Q3 GDP out at +2.0% q/q vs. 1.8% expected and 1.3% prior
• US Oct. Final Michigan Confidence out at 82.6 vs. 83.0 expected and 83.1 prior
• China Sep. Industrial Profits YTD out at -1.8% y/y vs. -3.1% prior
• JP Sep. Retail Trade out at -3.6% m/m, +0.4% y/y vs. -1.5%/+1.0% expected and 1.5%/1.7% prior resp.
• JP Sep. Lge. Retailers’ Sales out at -1.0% y/y vs. -1.2% expected and -0.9% prior
• UK Oct. Lloyds Business Barometer out at +17 vs. +10 prior
• UK Oct. Hometrack Housing Survey out at -0.1% m/m, -0.4% y/y vs. -0.1%-0.5% prior resp.

Upcoming Economic Calendar Highlights

(All Times GMT)

• EU EBC’s Weidmann to speak (0730)
• Sweden Retail Sales (0830)
• UK Net Consumer Credit (0930)
• UK Mortgage Approvals (0930)
• UK M4 Money Supply (0930)
• US Personal Income/Spending (1230)
• GE CPI (1300)
• US Dallas Fed Manufacturing Activity (1430)
• UK BOE’s Haldane to speak (1800)

For more information on today’s events, please visit the financial calendar