by Chris Becker
The data calendar this week is on the services/composite PMI train, with Japan and China both reporting this morning, with Europe/UK reporting later tonight (AEDST time) and then the US with its non-ISM tomorrow morning.
Australia’s two largest trading blocs both reported surprising uplifts in their PMIs, according to Markit (Japan here, China here):
Japan:
- 51.7 for December, up from 50.6 in November
- Service activity growth accelerates, but new orders fall at weak pace
- Payroll numbers remain just inside growth territory at Japanese services providers
- Business sentiment strengthens
The headline seasonally adjusted Business Activity Index at 51.7 in December, up from 50.6 in November and signalling a moderate rise in
activity at Japanese services firms. Growth in business activity has now risen for the second consecutive month, with the latest index reading
posting well above the average since the sales tax increase was implemented in April.
China:
- Business activity rises solidly at service providers, while output declines fractionally at manufacturers
- Strongest expansion of service sector employment in 18 months, but job shedding persists at goods producers
- Input cost inflation hits 19-month low at service providers, while costs fall sharply at manufacturers
HSBC China Composite PMI™ data (which covers both manufacturing and services) signalled increased business
activity in China for the eighth successive month in December. Furthermore, the rate of expansion quickened slightly from November, with the HSBC Composite Output Index posting at 51.4 at the end of 2014 (up from 51.1).
The Aussie dollar has broken out once more on the relatively positive news, building on the upside surprise in the trade balance figures this morning, now at 81.20 cents against the USD and rallying strongly against Yen (up nearly half a cent to almost 97 Yen).
With the third round of Abenomics starting sometime soon (Abe just announced he wants the budget for 2015 sorted by next week), and talk of a decrease in the Chinese RRR (reserve requirement ratio) as a secondary form of stimulus coming out of unofficial channels, there is potential for these prints to accelerate and provide an uplift in the AUD in the first half of this year.
Or to add to long standing shorts as the realisation sets in that Australia has no hope of filling the post-mining boom chasm.