14 October 2011 at 4:22 GMT
One of the first countries to publish Q3 growth data, Singapore recorded better than expected 1.3% q/q growth in Q3, a commendable rebound from a sharp 6.3% q/q decline in Q2. From a year earlier, growth was up 5.9% with a strong performance from the manufacturing sector overcoming weaker input from construction and services.
At the same time the MAS announced a slight easing in monetary policy at its semi-annual review. The MAS reduced the slope of appreciation of the SGD basket while leaving the width of the trading band unchanged. The MAS highlighted that the “global economy has deteriorated sharply” and expects the Singapore economy to expand more slowly in 2012, possibly below potential rate of 3-5%. Inflation is expected to cool with slower domestic activity reducing tightness in the labour market and alleviating price pressures. Core inflation is expected to ease next year. The easing move was perhaps less-dovish than the market had been expecting (most looking for a fully-neutral stance) and the SGD firmed immediately post-announcement but support was found sub-1.27 versus the dollar and we’ve traded steady to higher since.
The much-awaited China CPI numbers for September were in line with forecasts and lower than the previous month though food prices remained elevated with an unchanged 13.4% y/y increase. More encouragingly there is evidence that pipeline pressures may be easing with producer prices rising a less-than-expected 6.5% y/y, with lower base metal prices helping the cause. The data helped put a base under risk currencies however, with the G20 meeting looming this weekend, we certainly did not see an explosion higher as equity markets struggled to get back into the black.
Early this morning S&P announced a one notch downgrade to Spain’s credit rating to AA- from AA with a negative outlook citing weak growth prospects and concerns over the health of the banking sector. This pulled EURUSD down 40 pips and set the early tone of risk-off for Asia.
Yesterday’s activity was more of position adjustment ahead of the weekend and saw differing reactions across asset classes, with the USD marginally higher, US bonds firmer and equities mixed. EUR’s rally ran out of steam mid-1.38 and saw retracement through 1.37. Early strength was seen as Slovakia ratified the July 21 EFSF changes but soon reversed after the ECB warned that any bondholder losses following any government write-down would damage the currency and banking system. The Portuguese PM also warned that the country is dependent on external aid and faces a deeper economic downturn next year.
US data releases were broadly in line with expectations with the trade balance unchanged at -$45.6 bln while jobless claims came in at 404k, marginally below the 405k seen last and 405k expected. The weekly Bloomberg consumer comfort index slid back to -50.8 from -50.2 but is still above the 2-year low seen a couple of weeks ago. Generally, the data had little impact on markets while Wall St was mixed – DJIA and S&P dragged down by JP Morgan while Nasdaq rallied on a rebound in the semi-conductor sector.
We have the G20 meeting in Paris this weekend with the associated headline risk so now, more than ever, is a time to remain vigilant.
Have a great weekend.
Economic Data Highlights
- CA Aug. Int’l Merchandise Trade out at –C$0.62 bln vs. –C$1.0 bln expected and revised –C$0.54 bln prior
- US Aug. Trade Balance out at -$45.6 bln vs. -$45.8 bln expected and revised -$45.6 bln prior
- US Initial Jobless Claims out at 404k vs. 405k expected and revised 405k prior
- US Continuing Claims out at 3670k vs. 3710k expected and revised 3725k prior
- US Bloomberg Consumer Comfort Index out at -50.8 vs. -50.2 prior
- JP Sep. M3 Money Stock out at +2.3% y/y vs. 2.2% expected and 2.2% prior
- JP Sep. Domestic Corp. Goods prices out at -0.1% m/m, +2.5% y/y vs. -0.2%/+2.5% expected and -0.2%/+2.6% prior resp.
- NZ Oct. ANZ Consumer Confidence out at -0.4% m/m vs. -0.6% prior
- SI Q3 Advance GDP Estimate out at +1.3% q/q, +5.9% y/y vs. 0.8%/5.6% expected and revised -6.3%/+1.0% prior resp.
- China Sep. CPI out at +6.1% y/y, as expected, vs. 6.2% prior
- China Sep. PPI out at +6.5% y/y vs. 6.9% expected and 7.3% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
- SI Retail Sales (0500)
- Norway Existing Home Prices (0800)
- EU Euro-zone CPI (0900)
- EU Euro-zone Trade Balance (0900)
- CA Manufacturing Sales (1230)
- US Import Price Index (1230)
- US Advance Retail Sales (1230)
- US Michigan Confidence (1355)
- US Business Inventories (1400)