Originally published by Rivkin Securities
Monday’s Chinese GDP figures beat estimates, with year-on-year growth printing a solid 6.9%, allowing the AUD/USD to maintain levels just shy of US$0.7840 through until late in the European session, when it eased back to the US$0.7789 level. The elevated level of the Aussie dollar should be calming equity markets, because it will keep driving the Aussie regulators to create ways of curbing unsustainable house price growth by pressuring banks, rather than using the blunt tool of higher interest rates to deter residential borrowers. If the RBA were to raise rates, it would only serve to increase the level of the Aussie dollar, a side effect that the Reserve Bank would rather not tease out.
We won’t whisper this too loudly, but China’s growth is starting to make me a little nostalgic. Recovering commodity prices, rising foreign reserves, easing borrowing costs and a booming property market – it sounds like a China we haven’t known since the heady days of 2010. Investments into fixed assets in China have been falling in a straight line for four years, but have now seemed to plateau – this could be a medium-term break from the hangover created by the never-ending creation of floor space 5-10 years ago (ghost cities etc.). But we can get too excited at times like this and start cherry-picking the good-looking bits of data, and China still has some big debt problems – so as I said, let’s keep it to a whisper until we see another quarter that supports this view.
Iron ore prices celebrated the strong Chinese GDP figures along with other precious and base metals, which recovered from Friday’s weakness and boosted the likes of South32 (AX:S32), Western Areas (AX:WSA), OZ Minerals (AX:OZL) and Fortescue Metals Group (AX:FMG).
Despite a bit of local equity selling yesterday, US markets held steady and will see S&P/ASX 200 futures give our market a 4 point headwind on the open today, and with only European markets offering big data releases during our session, it will be up to the Aussie dollar, commodity prices and local investor sentiment to dictate movements on our markets today.
Today’s high-impact data are as follows, all AEST:
- Tuesday 08:45 NZ CPI
- Tuesday 18:30 UK CPI
- Tuesday 19:00 Eurozone ZEW Survey