Morning wrap (05.09.2023)

• Asia-Pacific indices fared poorly, following further weaker-than-forecast macro data from China. The Nikkei/Topix and KOSPI indices closed the session flat, recording little volatility
• But a stronger correction took place on the Chinese Hang Seng Index where a 1.78% decline took place after yesterday euphoric gains. Chinese index futures are lower now losing 0,7%
• Caixin services PMI from China came in at 51.8 level vs. 53.5 forecast and 54.1 previously. Retail sales in Singapore  came in at 1.1% y/y vs. 2.5% forecast and 1.1% previously with 0.6% monthly growth (previously -0.8%)
• Services PMI reading from Japan came in at 54,3 level vs 54,3 previously but household spending was lower (monthly -2,7% vs 0,9% previously). In y/y measure hosehold spending in Japan was -5% vs -2,5% forecasts and -4,2% previously
• The RBA kept interest rates unchanged in Australia at 4.1%, in line with market estimates and 4.1% previously
• RBA thinks that holding rates will provide further time to assess the impact of the higher interest rates but probably some further tightening may be required
• Australian central bank signalized that services price pressures may be surprisingly persistent and the outlook for housholds consumptions remains very uncertain, as well for China economy future. Now RBA is expecting growth below trend, at least for a while
• AUDUSD is losing mightily to the dollar near 0.7% to the declines also added to weaker macro data from China. In addition, Australia's current account fell mightily and came in below forecasts at $77 million against $80 million forecasts and $12.3 billion previously
• Secondary data arrived from Asia's other major economy, India where the services PMI came in at 60.1 versus 62.3 previously
• Futures in Europe point to a slightly lower opening of the session. Wall Street and Canadian investors will also return to the markets today after yesterday's break
• Investors are preparing for a series of PMI readings from individual countries in Europe and the Eurozone, as well as the publication of the US trade balance in the afternoon
• ECB Lane signalized that European Central Bank awaits cooling services inflation in Autumn.'The easing in services inflation helps limit the narrative that tourism is to keep services inflation high. We do expect bumpiness in easing of energy and food price inflation'
• The dollar index gains again today and rises 0.16% signaling general risk aversion which puts pressure on emerging markets
• Cryptocurrencies are trading down today - Bitcoin has settled below $26,000 and is trading at $25,700
• Oil is trading flat, while natural gas is trading nearly 1% back
• Precious metals are also not recording high volatility - gold is trading almost flat, silver is losing 0.66%
• AUD is strongly reducing yesterday's gains. The USD is one of the strongest currencies today

AUDUSD erases almost entirely the increases, which were indirectly supported by higher optimism about the future and health of the Chinese economy. China is one of Australia's major trading parnters and a powerful consumer of raw materials. Is that a warning signal for China? Source: xStation5