The aftermath of yesterday’s US Thanksgiving holiday meant that Asia was left searching for crumbs of news, information or data to justify trading during this morning’s session. With no particular drivers, equity futures extended yesterday’s losses to a second day as US indices slid between 0.12% and 0.23%, with the NAS100 index under-performing. The mild risk-off theme was also evident in currency markets, with the AUD/USD sliding 0.04% to 0.6767 and USD/JPY dropping 0.05% to 109.46.
The Asia slowdown continues
The effects of the US-China trade war is having a noticeable impact on the economies of Asia’s largest exporting powerhouses, data released today showed. Japan’s industrial output fell at the fastest pace since early 2018 in October amid a slowdown in demand both domestically and externally. Output fell 4.2% y/y, double market expectations of a 2.1% drop, and followed a 1.7% gain in September.
The weak data had a negative impact on the Japan225 index, which fell as much as 0.5% to the lowest level in three days. The 55-day moving average is at 22,665.
Japan225 Daily Chart
In South Korea, industrial output also slumped in October, falling 2.5% y/y which was worse than economists’ expectations of a -1.8% print. Output has contracted in seven out of the last nine months and the two months of positive growth were only +0.4% and +0.6% y/y.
Bank of Korea leaves benchmark rate unchanged
The Bank of Korea kept its key interest rate unchanged at 1.25% at today’s monetary policy meeting. Surveys had held the unanimous view that this would be the case though, given the weak series of data recently, they could have rightly justified a third rate cut of the year. Indeed that was the case at the meeting, with one member calling for a rate cut while the rest voted for status quo.
At the post-meeting press conference, BOK Governor Lee said the Bank was cutting its 2019 GDP growth forecast to 2.0% from 2.2% while reducing next year’s forecast to 2.3% from 2.5%. He expects the economy to start a rebound from mid-2020 amid a pickup in chip demand.
US calendar still on holiday
There are no data releases scheduled for the US today as Americans recover from their Thanksgiving dinners. The European session features German October retail sales, which are expected to rise 1.1% y/y, a slower pace than September’s +3.4% (even with the Oktoberfest effect), and the provisional reading for the Euro-zone’s consumer prices for November (a slight uptick to +1.2% y/y from 1.1% is anticipated). Another speech from ECB’s De Guindos completes the session for today.
On Saturday, China releases its official PMI data for November, with the manufacturing PMI expected to improve to 49.5 from 49.3 and the non-manufacturing version rising to 53.6 from 52.8. Any misses either way will be reflected in trading early in the session on Monday.
