China Fixes Weaker Midpoint, Aussie Firms on Blowout Job Gains, RBA Warns of ‘Self-fulfilling Downturn’

The Australian Dollar is trading a little higher early Thursday after Australia’s labor market continued to confound the experts, by adding nearly three times the estimated number of jobs, while unemployment remained stubbornly unchanged as the labor force expanded further.
James Hyerczyk
Global News

Volatility is relatively low in the financial markets early Thursday as Asian stock market investors play “catch-up” with Wall Street and as global investors continue to keep an eye on plummeting global bond yields.

In Australia, traders had a chance to react to comments from a central bank official and the latest data on the country’s employment picture. The China daily yuan fix was once again the center of attention. President Trump made a comment about the situation in Hong Kong, and a former U.S. ambassador to China issued a warning.

U.S. 30-year Treasury Yield Falls to New Historic Low

Expectations for lower GDP growth, lackluster inflation and more aggressive central bank action kept the pressure on long-term yields early Thursday with the yield on the 30-year U.S. Treasury bond dipping to a record low, breaching the 2% level for its first time, according to Reuters.

After briefly falling below 2%, the yield on the 30-year Treasury bond saw a recovery and was last at 2.0004%. Nonetheless, that was higher than the yields on 30-year bonds elsewhere globally. In Japan, the 30-year Japanese government bond was at 0.155%, while the rate of the 30-year German bund was at -0.201%.

U.S.-China Trade War Risks Self-fulfilling downturn: RBA Official

The prolonged trade dispute between the United States and China is causing businesses worldwide to postpone investment decisions, hampering economic activity and risking a self-fulfilling global downward spiral, a top Reserve Bank of Australia (RBA) policymaker cautioned on Thursday.

“Businesses are waiting to see how the uncertainty resolves rather than invest,” he added. “The longer businesses hold off, the weaker demand will be, which will further confirm the decision to wait. That runs the risk of a self-fulfilling downturn.”

Aussie Dollar Firms as Australian Employment Beats Expectations

The Australian Dollar is trading a little higher early Thursday after Australia’s labor market continued to confound the experts, by adding nearly three times the estimated number of jobs, while unemployment remained stubbornly unchanged as the labor force expanded further.

Today’s employment change report showed jobs rose 41,100 from June, compared to economists’ forecast of a 14,000 gain; the unemployment rate held at 5.2%, matching estimates.

Full-time positions jumped 34,500; part-time roles gained 6,700, while the participation rate climbed to 66.1% versus an estimate of 66.0%.

The Australian Unemployment Rate held steady at 5.2%.

China Fixes Daily Yuan Midpoint Weaker than Expected

China’s official midpoint reference for the yuan was set at 7.0268 per the U.S. Dollar on Thursday. Analysts were looking for the midpoint to be fixed at 7.0236 per dollar, according to Reuters estimates. Additionally, it was the sixth consecutive session where the People’s Bank of China (PBOC) fixed the midpoint at a level weaker than the psychologically important 7-yuan-per-dollar mark.

Trump Tweets about Hong Kong

President Donald Trump in a tweet Wednesday suggested a “personal meeting” with China’s President Xi over the ongoing Hong Kong crisis. He also warned in another tweet that if China wants to make a trade deal, they should respond “humanely” to Hong Kong.

“I know President Xi of China very well,” Trump tweeted. “He is a great leader who very much has the respect of his people. He is also a good man in a ‘tough business.’ I have ZERO doubt that if President Xi wants to quickly and humanely solve the Hong Kong problem, he can do it. Personal meeting?”

Trump further added in a tweet, “Good things were stated on the call with China the other day. They are eating the Tariffs with the devaluation of their currency and “pouring” money into their system. The American consumer is fine with or without the September date, but much good will come from the short deferral to December. It actually helps China more than us, but will be reciprocated. Millions of jobs are being lost in China to other non-Tariffed countries. Thousands of companies are leaving. Of course China wants to make a deal. Let them work humanely with Hong Kong first!”

Ex-US Ambassador to China:  People in China can Withstand More Pain than Americans

Max Baucus, former U.S.-ambassador to China, warned Tuesday that Beijing may be able to endure more hardship than Washington in their yearlong trade war, according to CNBC.

“The Chinese are so tough, they can withstand more pain, in my judgment, than can Americans,” said Baucus.

“The Chinese respect strength more than any other people. …I think they can smell weakness better than any other people,” Baucus said, but said currently China appears to be hurting more economically than the U.S.

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