Aussie Inflation In Check And Japanese Exports Grow

Tuesday markets and Asian currencies reacted to data from China which showed that China’s economic growth slowed in the third quarter to its weakest since the 2008 global financial crisis as a slumping property market dragged on manufacturing and investment, adding to concerns about flagging global growth. Economy grew 7.3% between July and September from a year earlier, slightly above the 7.2% forecast by analysts but slowing from 7.5% in the second quarter. This morning this is all but forgotten as traders focus on Australia inflation data and Japanese trade numbers which were both on the positive side. The Aussie climbed to 0.8794 adding 17 points while the kiwi added 19 points to reach 0.7980. The AUD was knocked from its perch above 88 US cents in the US session on the back of greenback strength. The move was disappointing, given the Australian dollar should have been supported by encouraging Chinese data on Tuesday and an improvement in global equities. Inflation figures from the Australian Bureau of Statistics this morning, which were largely in line with market expectations, failed to have a lasting impact on the Aussie dollar. The latest release of inflation data leaves the Reserve Bank scope to leave official interest rates at record lows for much longer, as repeatedly foreshadowed.

The second largest fall over the three months to September was automotive fuel, down 2.5 per cent thanks in part to ongoing falls in the global price of oil. The Reserve Bank pays more attention to the “underlying” measures of inflation, which strip out volatile items. These were also benign — the trimmed mean and weighted median measures rose between 0.4 per cent and 0.6 per cent over the three month period to finish the year to September around 2.5 per cent higher.

Japan saw a better than expected trade balance report. Exports rose at the fastest pace in almost a year in September, easing fears that the country’s main growth engine is sputtering. Exports grew 6.9 percent on an annual basis, the Ministry of Finance said, a tad higher than the 6.8 percent forecast from Reuters, and following the 1.3 percent decline in August. The JPY climbed to 106.84 against the US dollar.

Imports, meanwhile, rose 6.2 percent from the year-ago period, beating expectations of a 3 percent climb and after falling 1.5 percent in August. This brought trade deficit to 958.3 billion yen, larger than expectations for 777 billion yen deficit. The longer term view for Japanese exports has been in focus after momentum faltered in recent months despite a weak yen, which traditionally makes it more attractive for overseas firms to buy goods from Japan.

Markets were still a little queasy and uncertain after the ECB surprised traders when reports surfaced that the ECB had started to buy corporate bonds in an effort to stimulate the economy.  Major currencies fell against the greenback over European and US sessions on Tuesday. The euro fell from highs near $1.2835 to lows near $1.2715, ending US trade near $1.2720.  Speculation mounted that the European Central Bank is considering buying corporate bonds to revive the region’s economy. A Reuters report said the ECB bond buying plan could be approved by December and start early next year. The plan could help to free bank balance sheets for lending, particularly for the peripheral economies.