Chinese indicators unconvincing at best

15.15 AEST, Monday 3 June 2013

Chinese indicators unconvincing at best
By Tim Waterer (Senior Trader, CMC Markets)

Trading decisions in financial markets continue to be made with one eye on the Fed which is why this week is shaping as particularly important given the jam packed economic calendar we have in store. With key readings on the US labour market due this week culminating in the crucial Non-Farm Payrolls figures on Friday there will be no shortage of economic indicators for traders to try and gauge what path QE will take for the remainder of the year.

Key data releases are not limited to the US. Chinese PMI numbers released both over the weekend and on Monday have given traders plenty to digest with the official government numbers and the HSBC data telling slightly different stories over the current health of the Chinese manufacturing sector. With the recent Chinese indicators being unconvincing at best, traders are having trouble deciphering what rate of slowdown may be taking place in the world’s second largest economy.

Given the indifferent readings on the Chinese economy, the Australian market initially did not appear to know whether it belonged in positive or negative territory today. However with the severity of the Wall Street loss as well as a sizable decline in the Nikkei today this weighed on the move lower by the ASX200 during the afternoon session. Declines in key commodity prices set the tone for a fall in the Materials sector today and this was able to counter a move higher from the big four banks. Overall there were just not enough positive drivers for the ASX200 which resulted in a negative start to the new month.

The Australian Dollar had a fairly constrained reaction to what was a busy day of economic data. The AUDUSD operated in a half cent range for the day and while it did dip below the US$0.96 level at one point much of the session was spent in the $US0.9610-0.9630 range. Commodity price pressures, a stronger USD and an upcoming RBA interest rate announcement were enough to keep the AUD relatively range bound to start the week. While the RBA are unlikely to cut on Tuesday (in part due to the recent depreciation of the AUD), traders will be closely combing through the statement looking for clues as to how much of an easing bias remains at play.

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