The Chinese economy grew at a slower pace in the first quarter of this year, growing 8.1 percent y/y, its slowest pace of expansion in almost 3 years. The growth rate was below the consensus of +8.4 percent and much lower than Q4’s 9.2 percent rate, and also was far off the 9 percent-plus rumour that circulated in markets yesterday. In a knock-on effect, the AUD dropped 40 points versus the US dollar and regional equity markets eased back from early gains.
In contrast, the Singapore economy revealed an impressive growth spurt in the first quarter of 2012 with better performance reported across all sectors. Manufacturing grew 14.7 percent q/q compared with an 11.1 percent decline in Q4; construction rebound to +24.6 percent q/q vs. -2.2 percent in Q4 while the services sector grew 6.9 percent q/q versus 1.7 percent in Q4.
In its semi-annual monetary policy review, Singapore’s MAS maintained the policy of a “modest and gradual appreciation of the SGD NEER” but added that the slope of appreciation will be increased slightly. There was no change to where the trading band is centred but it restored the narrower trading band. The slight tightening comes as the MAS sees “core inflationary pressures have persisted but will likely ease in the latter half of the year.” USD/SGD gapped through 1.25 after the announcement to reach its lowest level since February 9.
In geopolitical news, North Korea finally launched its planned missile test which brought out immediate condemnation from the US, South Korea and Germany. There were unconfirmed reports that the test had been a failure.
The USD was broadly on the defensive overnight with commodity/risk currencies reacting favourably to (since unfounded) rumours of a stronger-than-expected China GDP print today. Fed’s Yellen and Dudley kept the QE debate alive with their customary dovish outlook, adding to the dollar’s discomfort while a mixed set of US data could not lift the USD index. Talk that the ECB was checking Spanish and Italian bond rates coincided with the EUR/USD rise to the 1.32 mark.
The US trade deficit narrowed sharply to $46 bln from $52.5 bln while PPI data showed reduced pipeline inflationary pressures. PPI was flat m/m and up 2.8 percent y/y while initial jobless claims showed a surprise jump to 380k from 367k and much higher than a consensus 355k. The weekly Bloomberg consumer comfort index brought its recent improving trend to an end with a move to -32.8 from -31.4. Wall Street was encouraged by the talk of better China GDP with materials and energy counters leading the indices higher. The DJIA closed up 1.41 percent, S&P +1.38 percent and the Nasdaq +1.3 percent.
Data Highlights
- US Feb. Trade Balance out at -$46.0 bln vs. -$51.8 bln expected and revised -$52.5 bln prior.
- US Mar. PPI out at flat m/m, +2.8% y/y vs. 0.3%/3.1% expected and 0.4%/3.3% prior resp.
- US Initial Jobless Claims out at 380k vs. 355k expected and revised 367k prior.
- US Bloomberg Consumer Comfort Index out at -32.8 vs. -31.4 prior.
- SI Q1 Advance GDP out at +9.9% q/q, +1.6% y/y vs. 6.8%/1.0% expected and -2.5%/+3.6% prior resp.
- China Mar. Industrial Production out at +11.9% y/y vs. +11.6% expected.
- China Q1 GDP out at +8.1% y/y vs. 8.4% expected and 8.9% prior.
- China Mar. Retail Sales out at +15.2% y/y vs. 15.1% expected.