Daily Market Digest: China trade balance, BoJ minutes

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Today’s Economic events

  • Japan current account 1.65 trillion vs. 1.60 trillion
  • BoJ Bank lending 2.10% vs. 2.0%
  • Australia ANZ job advertising m/m -0.80% vs. 0.40% previously
  • China trade balance 343bn vs. 313bn
  • China-US denominated trade balance 52.3bn vs. 47.6bn
  • Japan economy watchers sentiment 45.1 vs. 42.60
  • German industrial production m/m 0.80% vs. 0.90%
  • Switzerland CPI m/m -0.40% vs. -0.50%
  • Sentix investor confidence 4.2 vs. 3.6
  • Canada building permits m/m -5.50% vs. 2.70%

Coming Up

  • US Labor market conditions index

China exports and imports decline at a faster pace in July

Exports and imports from China fell at a faster than expected pace in July, data from the customs department showed on Monday. On a year over year basis, exports fell 4.40% in US dollar terms, more than the expected 3.50% decline forecast by economists. Imports were also lower, falling 12.50% in July compared to a year ago and more than the forecast 7.0% declines.

China’s trade surplus amounted to $52.31 billion in July, rising more than the forecast of $47.3 billion.

On Friday, the PBoC said that it would continue with its prudent monetary policy into the second half of the year, putting to rest speculation of PBoC easing that was widely speculated. The central bank said that it would continue to provide adequate liquidity and ensure that credit expands at a reasonable pace. On the yuan’s exchange rate, the central bank reiterated that it will maintain a stable exchange rate while continuing with currency market reforms. At last check, China’s GDP was seen growing at 6.70% in the second quarter this year, spurred by the central bank’s stimulus measures and increased lending. China is aiming for a GDP growth rate of 6.5 – 7% this year.

Zhang Fan, an RHB economist said, “as the outlook of global economy is not very promising, China’s exports hardly can make a turnaround anytime soon.”  He, however, dismissed the notion of a PBoC easing, “China’s central bank is unlikely to take any aggressive easing in the third quarter as it said in its second-quarter monetary policy report that frequent RRR cuts will add downward pressure on the yuan. But he says the government may speed up spending for the rest of the year and increase the fiscal deficit to 4% of its GDP in 2016, compared with a 3% target set earlier this year,” Zhang said.

Japan data dump: Current Account, Bank Lending, BoJ Minutes

Current account surplus in Japan for July amounted to 974.4 billion yen, data from the Ministry of Finance showed on Monday. It was slightly below forecasts of 1.1k billion yen and marked a decline from 1.8k billion in current account surplus recorded in May.

The trade balance showed a surplus of 763.3 billion, missing forecasts of 773 billion but higher than the 39.9 billion yen recorded in the previous month. Exports were seen 9.90% lower on a year over year basis to a seasonally adjusted 5.834 trillion yen while imports were down 20.2% to 5.07 trillion yen.

In the first half of this year, Japan’s current account surplus was at 10.625 trillion yen.

In a separate report, the Bank of Japan’s data showed that bank lending in Japan increased 2.10% on a year over year basis in July, beating estimates of a 2.0% increase. Excluding trusts, bank lending added an annual 2.10%, while lending from trusts grew 2.30% for the second month in July. Overall, the data showed that the trend in bank lending did not change as demand for loans remained flat.

The Bank of Japan also released its July monetary policy meeting minutes. The report showed that BoJ policymakers were divided on the effects and sustainability of the central bank’s aggressive easing programs but agreed that a comprehensive review on why the policies have failed to boost inflation was required. The BoJ’s meeting minutes showed, “Japan’s economic activity and prices have improved substantially over the last three years. However, the price stability target has not yet been achieved. It is necessary for the BOJ to conduct a comprehensive assessment from the perspective of what should be done to achieve the price stability target of 2% at the earliest possible time.”

In the July meeting, the Bank of Japan kept monetary policy unchanged including interest rates but extended its ETF purchases. Policy makers said that the central bank would conduct a detailed assessment of the economic developments and the bank’s policies.

Germany industrial output rises 0.80% in June

Industrial production in Germany recovered from the slump in May, rising 0.80% in June, data from German statistics agency Destatis showed on Monday. In May, Germany’s industrial output fell to a revised -0.90% from previous reports of -1.30%. June’s industrial production marked the fastest pace of growth in five months, the data showed. Still, it was lower than forecasts of 0.90%. On a year over year basis, German industrial production was up 0.50%, matching forecasts and reversing the 0.40% decline seen the month before.

Excluding energy and construction, industrial production increased 1.50%. Energy production fell 2.70% during the month while construction fell 0.50%. Production of capital goods increased 3.50% while consumer goods increased 1.20%. Intermediate goods were down 0.70%. The increase in industrial production came as factories shrugged off the risks from Brexit. However, various surveys showed that business confidence remained weak for July. On Friday, factory orders showed a 0.40% decline on a month over month basis, reversing the minimal gains made the month before on lower demand from other eurozone countries.

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