China Trade Data Sent Stocks And Aussie Lower

European majors were generally soft against dollar and yen today as consolidations continued. But it was Aussie's weakness that caught most attention. Data from China saw exports rose a mere 1%yoy in July, sharply lower than June's 11.3% yoy and missed market expectation of 5% yoy. Import growth also slowed to 4.7% yoy, down from June's 6.3% yoy.

On a monthly basis, and seasonally adjusted, both export and import were down by -4.2% mom and -5.8% mom respectively. Overall trade surplus narrowed to $25.1b, down from prior month's $31.7b, versus consensus of $35b. The data raised much concern that China's economy is still suffering from weak external demand and would find it hard to get enough momentum for a rebound in Q3. The data sent Asians equities and Aussie lower.

In its quarterly monetary policy statement, RBA raised 2012 growth forecast to 3.75%, up from May's projection of 3.0%, but expects slowdown in the second half. Meanwhile, CPI project for 2012 was also raised to 2.5%, up from prior projection of 2.25%. Also, the central bank expect inflation rate to be in top half of its target range throughout 2013, with help from carbon tax.

The new projections now raised the possibility that RBA is done with its current easing cycle but the development in Europe would remain key. Meanwhile, RBA also warned that the "persistently high level" of Australian dollar exchange rate may "be more contractionary for the economy than historical relationships suggest". And "important risks revolve around exchange rate developments".

Elsewhere, Japan domestic CGPI dropped -0.4% mom in July. German CPI, UK PPI will be featured in European session. US import price will be released too. But the more important piece of data would be Canadian employment which is expected to show 10k growth in July with unemployment rate rose to 7.3%.