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IronFX Daily Commentary | Japan avoids technical recession | 08/12/2015

08.12.2015, 10am

• Japan avoids technical recession Japan’s economy dodged a technical recession, defined as two consecutive quarters of negative growth, with the Q3 growth rate revised up to +0.3% qoq. The main contributor to positive growth was capital expenditure, a success widely attributed to Shinzo Abe’s government policies, pressuring companies to invest their record profits. However, concerns about the economy being in a standstill remain, with the government growth target being far from reached. Given weak household spending and exports thus far in Q4, this could put policymakers under pressure to introduce additional stimulus in order to accelerate growth.

• Chinese November exports weaker than expected, but imports decline eases China’s trade performance remained weak in November. The trade surplus expanded, but only because imports fell at a faster pace than exports. Imports fell for the 13th consecutive month, but by less than expected, while exports declined by more than expected. This was the 5th straight month exports fell. The weak performance is expected add to evidence that the Chinese economy will print its slowest expansion in Q4 for a quarter of a century. This could hurt AUD and NZD.

• Today’s highlights: During the European day, Eurozone’s final Q3 GDP is forecast to confirm the preliminary estimate and to show that Eurozone’s economy expanded by only 0.3% qoq. Therefore, the market reaction could be minimal at this release, unless we have a huge revision.

• From the UK, we get industrial production for October. Expectations are for the industrial output to have risen 0.1% mom, a rebound from September’s 0.2% decline. Given that the construction and manufacturing PMI’s for the same month were encouraging, although they disappointed the following month, we see the likelihood for a strong industrial production figure as well. This could support the pound, at least temporarily.

• In Canada, housing starts for November and building permits for October are due to be released. The forecast is for housing starts to have declined marginally in November, while building permits are expected to have increased in October after falling for two consecutive months, which could boost CAD a bit.

• In the US, the Job Opening and Labor Turnover Survey (JOLTS) report for October is due out and the forecast is for a marginal decline in the number of job openings. This survey will also report the “quit rate”, which measures workers who voluntarily resign, and is a closely watched indicator of how strong the job market is. Additionally, we receive the NFIB Business Optimism Index for October. Even though this indicator is not a major market mover, it is worth watching because of the Fed’s emphasis on employment. Small businesses employ the majority of people in the US. Following the better-than-expected NFP figure for November and the astonishing print in October, this indicator could attract more attention than usual going into next week’s FOMC meeting.

• We have only one speaker for the day: Bank of Canada Governor Stephen Poloz.

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