Overnight China February data was much weaker than expected • Chinas industrial production rose 8.6%yoy in the two month to February, sharply lower than the 9.5% expected. Similarly, fixed asset investment and retail sales also surprised substantially to the downside, suggesting that growth momentum has continued to slow. Retail sales rose 11.8% in the two months to February, and fixed assets investment increased 17.9% versus consensus for 13.5% and 19.4% respectively. China local debt is under control – Premier Li Keqiang • Premier Li Keqiang told an international conference that local debt is under control and the government is monitoring dangers from shadow banking. He added that some individual cases may be unavoidable but we must enhance monitoring and ensure timely handling to make sure that there are no systemic or regional financial risks. RBNZ more hawkish than expected, rate hikes likely front loaded • The RBNZ delivered its first 25bp hike and signaled further interest rate increases are likely over the next few months. The statement overall was more hawkish than market expected but more in line with ours. The 90 day interest rate path was revised higher and now implies between 100bp to 125bps in further hikes this year. The forecast horizon was extended through to March 2017 with the terminal rate at 5.3%. The central bank projected inflation to pick up at a faster pace, rising to 2% by mid-2014 from 1.6% previously. • Importantly, the NZD TWI projection was also revised higher, suggesting that the RBNZ is seeing less constraint on economic activity from the high currency. The governor reiterated that NZD is a headwind to growth but acknowledged at the same time that currency strength was supported by a 40 year high terms of trade and NZ interest rate advantage. NZ rates sold off post meeting and the NZD trade weighted index reached a new float high of 79.98. We expect NZD to remain strong against its trading partners as rate hikes will likely be front loaded through to July. Bouts in AUDNZD towards 1.07 should offer good values to sell into, in our view. Australia’s employment surged well above expectation • Australia’s employment climbed 47.3K in February, well above the market expectation for 15K and given that January was also revised higher to 18K from a 3.7K drop previously. The breakdown shows an impressive 80.5K rise in full-time employment, the biggest increase since 1991. The unemployment rate was unchanged at 6% while the participation rate edged higher to 64.8% from 64.6%. • Australian Bureau of Statistics noted that the rotation group for February 2014 survey had a higher proportion of employed persons and persons in the labour force than the sample it replaced. This incoming rotation group contributed, in original terms, 37% of the increase in total employment and 29% of the decrease in persons not in the labour force in February 2014. The trend estimates provide a better measure of the underlying level and direction of the series especially when there are significant rotation group effects. Based on trend estimates, employment rose by a modest 8.5K in February with the unemployment rate edging higher to 6% from 5.9%.
Posted on: Thu, 13 Mar 2014 07:11:27 +0000
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