Aussie And Kiwi Higher On Data, Manufacturing Data Featured Today

Aussie and Kiwi opened the week higher with support from economic data. Meanwhile, sterling also extended rally against the greenback and yen with support from cross buying against Europeans. Yen is stuck in range for the moment. Asian equities were mixed, swinging between gains and losses. Housing data from Australia saw building approves dropped -1.8% mom, rose 23.1% yoy in October. that was better than expectation of -5.0% mom, 17.0% yoy. TD securities inflation expectation rose 0.2% mom in November. New Zealand terms of trade index rose sharply by 7.5% qoq in Q3 comparing to expectation of 2.9% qoq.

Also supporting sentiments on Aussie and Kiwi, the final China PMI manufacturing reading (complied by HSBC/Markit) came in at 50.8 in November, down from 50.9 in October but up from a flash reading of 50.4. Looking into the detail, output and total new orders increased at fastest rates in eight months, new export orders expanded at fractional pace while outstanding business increased solidly, but staffing levels dropped. According to HSBC, the reading suggested that "China's manufacturing sector kept relatively steady growth momentum in November, as the final manufacturing PMI was revised up from the flash reading on the back of faster new business gains. However, the renewed contraction of employment and the slower pace of restocking activities call for a continuation of accommodative policy. The modest inflationary pressures leave room to do so".

In Japan, the Ministry of Finance reported that companies' spending rose 1.5% yoy in Q3, following a flat reading in the prior quarter. Yet, the increase was disappointing and is expected to contribute little to GDP growth. BOJ Governor Haruhiko Kuroda noted that capital expenditure would likely rise further but he warned that overseas risks might dampen the central bank's goal of achieving a 2% inflation target in 2 years percent in roughly two years. According to Kuroda, the BOJ is "ready to adjust monetary policy without hesitation if upside or downside risks materialize... If overseas economies perform worse than expected, this may affect Japan's economy". There were speculations that BoJ would be forced to launch new stimulus program next year, probably in March to boost inflation to the 2% target by end of 2014.

Looking ahead, PMI manufacturing data will be the major focus today. Swiss, Italy and UK will release PMI manufacturing data for November in European session. Eurozone PMI manufacturing revision will also be released. From US, ISM manufacturing index will be featured with construction spending. We have a busy calendar this week. Starting from Asia Pacific, the RBA meeting due Tuesday would make no change in the monetary decision. The Australian government would also release retail sales for October on Tuesday and the national accounts on Wednesday. In New Zealand, a number of partial GDP indicators for Q3 would be released. In Europe, the ECB and the BoE would also announce no change in monetary policy on Thursday. In the US, on Wednesday, the ADP employment survey and the non-manufacturing ISM will be released. The non-farm payrolls to be released on Friday probably increased 183K in November, down from 204K in the prior month. The unemployment rate might have slipped to 7.2% in November from 7.3% a month ago.