The Japan yen is mildly lower today as economic data showed that the economy contracted in Q2. GDP dropped -0.4% qoq, down from Q1's 1.0% qoq growth. Nonetheless, that was slightly better than expectation of -0.5% qoq fall. GDP deflator rose 1.6% yoy, much lower than prior quarter's 3.4% yoy and missed expectation of 2.1% yoy. There have been, to some degree, continuous speculation that BoJ would need to provide additional stimulus to boost the economy and inflation. On the other hand, some economists argue that if would be the government that's required to provide additional fiscal stimulus. In particular, Japan, like other Asian countries, could start to feel the impact of deeper slowdown in China's economy during the second half of the year. Markets would look into the next economic projections from BoJ to be released later in October, which would likely see some downward revisions in both GDP and inflation forecast. Nikkei in trading mildly higher by 70 pts at the time of writing.
Meanwhile Asian equities are soft elsewhere with HK HSI trading down -1% while China SSE (LONDON:SSE) composite is down -0.2%. Some analysts noted that while China halted devaluation of yuan after an unprecedented three day move last week, depreciation of the currency would likely continue through the rest of the year. And capital outflow from China could accelerate. It's reported that a total of USD 8.8b of fund flowed out of China/Hong Kong focused global funds in the past 2.5 months. The Chinese Yuan is little changed as the week starts and is trading at 6.3920 per dollar at the time of writing.
In Eurozone, while Greece sealed the EUR 86b new bailout deal, there is uncertainly over IMF's role in the agreement. German Chancellor Angela Merkel tried to reassure skeptics ahead of an important vote for the bailout in Bundestag on Monday. She emphasized that "Mrs. Lagarde, the chief of the IMF, made very clear that if these conditions are met, then she will recommend to the IMF board that the IMF takes part in the program from October." But on the hand hand, Lagarde is still pressing Eurozone to provide Greece with "significant" debt relief" and could wait still October to make a decision on participation.
Elsewhere, UK Rightmove house price dropped -0.8% mom in August. Swiss retail sales and Eurozone trade balance will be released in European session. Canada international securities transactions, US Empire State manufacturing index and NAHB housing market index will be featured in US session. Looking ahead, FOMC minutes would be a major focus this week on gauging the chance of September hike. Meanwhile, other focuses include RBA minutes, US CPI; UK retail sales, BoJ meeting and PMIs from China and Eurozone. Here are some highlights for the week.
- Tuesday: RBA minutes; UK CPI, PPI; US housing starts and building permits
- Wednesday: New Zealand PPI; Japan tarde balance; US CPI, FOMC minutes
- Thursday: BoJ; Swiss trade balance; UK retail sales; Canada wholesale sales; US jobless claims, Philly Fed survey, existing home sales
- Friday; China PMI manufacturing; German Gfk consumer sentiment; Eurozone PMIs; Canada retail sales and CPI