Asia Summary and Highlights 16 May
Japan's annualized Q1 GDP -2.0% vs -1.5% expected
Australian April unemployment rate 4.1% vs. 3.9% expected
Asia Session
The annualized preliminary Q1 GDP has come deep in contraction for Japan at -2%, 0.5% q/q. The details are also disappointing with CAPEX, export, domestic and external demand all showing contraction. But it is a preliminary report and when we had the previous preliminary GDP report the initial contraction was revised to expansion. Thus, market seems to have overlooked this weak GDP data and let USD take the driving seat. USD/JPY is trading 0.65% lower at 153.87 with JGB and U.S. Treasury Yields both lower.
The April Australian Jobs report is mixed with a good headline employment change and higher participation but also higher unemployment rate. As per our forecast, the Australian labor market will gradually correct but remain solid. The headline shine is undermined by the fact that the gains were in part time employment where we see a drop in full time. Chinese President Xi met with Putin and says China will always be a good friend and partner of mutual trust with Russia is not a sign that China-U.S. relationship heading better soon. Regional sentiment outpace U.S. major equities in gains but AUD/USD stay depressed after jobs report to trade 0.1% lower at 0.6686, NZD/USD rose 0.02% while USD/CAD rose 0.05%. Else, EUR/USD and GBP/USD are unchanged.
North American session
The USD slipped on the US data. CPI rose by a lower than expected 0.3% overall with the core rate while on consensus at 0.3% up by 0.29% before rounding. Retail sales were also weaker than expected, unchanged overall with negative back revisions, with a 0.2% rise ex autos but a 0.1% decline ex autos and gasoline.
There was some volatility with the initial knee-jerk USD fall being fully reversed, but USD slippage subsequently resumed to reach fresh lows. USD/JPY fell by 60 pips to 155 and EUR/USD rose by 50 pips to 1.0880. In a risk on environment EUR/GBP fell 20 pips to .8580 and EUR/CHF rose by 20 pips to .9820. AUD was bid, AUD/USD getting close to .67 and AUD/CAD reaching .91.
Other US data was also on the weak side of consensus, the Empire State manufacturing survey falling to -15.6 from -14.3 and later the NAHB homebuilders’ index falling significantly to 45 from 51.