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Economic Insights

Australian Q2 growth slows

Australian Q2 growth lost the momentum from previous quarter although global central banks fueled the commodities prices. I have been briefed the tough operating environment in Australia at this time when external weakness trimmed the domestic consumption, which is kind of a perfect chain-effect.

Australian Q2 Gross Domestic Product (GDP) expanded 0.7% on a q/q basis from previous 1.3%, and 3.7% y/y from previous 4.3%, well in line with my estimation that growth rate in Q2 below 4% carries a very high possibility and could deteriorate further should China failed to lift the demand and business confidence towards the end of the year.Source: Bloomberg, FXPRIMUS Global ResearchClick the image to enlarge

The message from Australia is clear from the chart above as the prolonged period of China’s slowing down has threatened the domestic consumption and jobs market; the excess of China stocks holding decreased the imports for those raw materials and directly trimmed the export from Australia.Source: Bloomberg, FXPRIMUS Global ResearchClick the image to enlarge

As I mentioned in my Daily Market Report article yesterday, even the People’s Bank of China (PBOC) has been implementing the monetary policy easing since early this year with 2 rounds of rate cuts; I can see that the steel sector has no improvement at all due to poor demand causing the overcapacity.Source: Bloomberg, FXPRIMUS Global ResearchClick the image to enlarge

Spain and Germany 2-year notes spread tighten further on European Central Bank (ECB) President Mario Draghi’s comments

Spain 2-year note advanced after Draghi commented that the ECB may consider purchasing short tenor bonds which the maturity is not more than 3 years. The current 2-year spread is 297.20, reduced substantially from 657.43 at the end of July.Source: Bloomberg, FXPRIMUS Global ResearchClick the image to enlarge

Spain’s 10-year yield also slipped to 6.57% from 6.9% earlier yesterday. From here, you can see the expectation on the ECB this Thursday is pretty high.

Global stocks dropped sharply because:
Moody’s turned negative outlook on the European Union (EU) region’s debts while triple A rating countries such as the UK, Germany, France and Holland carry a high percentage of exposure over the indebted countries’ portfolio
Also, the US Institute for Supply Management (ISM) Purchasing Managers’ Index (PMI) survey showed that the manufacturing activity in US has reached the lowest level over the past 3 years.Source: Bloomberg, FXPRIMUS Global ResearchClick the image to enlarge

However, the US equities pared some losses at the second half of the trading session because traders are betting on the central banks around the world to ready to act, which echoes the theory of “bad news is good news”.