Weak economic data out of China and Australia triggered mild retreat in risk markets in Asia today, but they're, after all, overshadowed by the stronger rally triggered by joint central bank actions, China's easing and solid US data. Asian equities are broadly higher following the sharp 490 pts rise in DOW overnight. In currency markets, Aussie and Kiwi are still the strongest currencies this week, up around 5% against dollar and yen as risk appetite dominates. Focus will turn to Spain and France bond auctions, as well as PMI data from US and UK today. Though, reactions to these events would be mild as markets prepare for tomorrow's NFP report.
China's official Manufacturing PMI dropped more than expected to 49 in November. This was the first contractionary reading in nearly three years. Sub-index for new orders and new export orders were both very weak, dipped to 47.8 and 45.6 respectively. The data suggested deterioration in business conditions, both internally and externally. And the outlook justified the surprised move by PBoC yesterday, reducing the reserve requirement ratio by 50bps for the first time in nearly three years, to ease credit strains and help cash-strapped small companies. Economic data from Australia were also weak. Retail sales rose less than expected by 0.2% mom in October. Building approvals plunged by -10.7% in October. New Zealand's terms of trade index unexpectedly dropped -0.7% qoq in Q3. Swiss GDP rose 0.2% qoq, 1.3% yoy in Q3.
Spanish Treasury will auction as EUR 2.75b to EUR 3.75b of bonds maturing in 2015, 2016 and 2017 today. Markets are expecting similar result as Italy's bond sales on Tuesday, i.e., solid demand but sharply higher yields. France will sell as much as EUR 4.5b of bonds maturing in 2017, 2021, 2026 and 2041. There are talks that ECB would be willing to step in forcefully to stabilize the bond markets if EU ministers could agree to the governance reforms at the December 9 summit. and European Commissioner for Economic and Monetary Affairs Rehn has already named it a critical 10 days before the summit for building a convincing firewall and tightening governance. While Euro would follow risk markets closely, the upside impact could be relatively limited ahead of the summit in December.
In addition to the bond auctions, Eurozone PMI manufacturing final, Swiss SVME PMI and UK manufacturing PMI will be released today. From US, initial jobless claims, construction spending will be featured. But main focus will be on ISM manufacturing, which is expected to rise to 51.5 in November.
China's official Manufacturing PMI dropped more than expected to 49 in November. This was the first contractionary reading in nearly three years. Sub-index for new orders and new export orders were both very weak, dipped to 47.8 and 45.6 respectively. The data suggested deterioration in business conditions, both internally and externally. And the outlook justified the surprised move by PBoC yesterday, reducing the reserve requirement ratio by 50bps for the first time in nearly three years, to ease credit strains and help cash-strapped small companies. Economic data from Australia were also weak. Retail sales rose less than expected by 0.2% mom in October. Building approvals plunged by -10.7% in October. New Zealand's terms of trade index unexpectedly dropped -0.7% qoq in Q3. Swiss GDP rose 0.2% qoq, 1.3% yoy in Q3.
Spanish Treasury will auction as EUR 2.75b to EUR 3.75b of bonds maturing in 2015, 2016 and 2017 today. Markets are expecting similar result as Italy's bond sales on Tuesday, i.e., solid demand but sharply higher yields. France will sell as much as EUR 4.5b of bonds maturing in 2017, 2021, 2026 and 2041. There are talks that ECB would be willing to step in forcefully to stabilize the bond markets if EU ministers could agree to the governance reforms at the December 9 summit. and European Commissioner for Economic and Monetary Affairs Rehn has already named it a critical 10 days before the summit for building a convincing firewall and tightening governance. While Euro would follow risk markets closely, the upside impact could be relatively limited ahead of the summit in December.
In addition to the bond auctions, Eurozone PMI manufacturing final, Swiss SVME PMI and UK manufacturing PMI will be released today. From US, initial jobless claims, construction spending will be featured. But main focus will be on ISM manufacturing, which is expected to rise to 51.5 in November.