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Eurozone Economies Recovering at Modest Rate

According to data published yesterday, the number of initial applications for unemployment benefit in the US 12-18th July was down by 26,000 and, taking seasonal fluctuations into account, stood at 255,000. This is the lowest value since November 1973. Although the number of initial applications has been down for a large part of the year, the latest fall probably reflects seasonal volatility. In the two weeks that preceded, the number of applicants reached its highest level since April. Data on applicants can be particularly volatile in June when car manufacturers temporarily close their factories for refurbishment.

New Zealand’s trade deficit in June stood at 60 million NZD and the deficit for the year (ending on 30th June) stood at 2.8 billion NZD. It was expected that we’d see a balance of trade surplus in June of around 200 million NZD and a deficit for the year of 2.6 billion. This June deficit value is as a result of a fall in the price of dairy products.

June exports stood at 4.23 billion NZD; up 1.3% YOY, but down 3% MOM. Imports totaled 4.29 billion NZD; up 9% YOY and down 7.6% MOM.

The Chinese preliminary PMI for the manufacturing sector from Caixin (in cooperation with Markit), which is an indicator for manufacturing production in the country, showed a July fall to 48.2. This is the lowest for the past 15 months after falling from June’s 49.4. The manufacturing index for new orders, new export orders and employment creation fell in July.

Weak data on external trade, together with Chinese PMI data down, has led to pressure on the New Zealand dollar: NZD fell to 0.6570 against USD.

The Chinese state council put forward new measures to support the trade sector today due to weak foreign and domestic demand. In an announcement, the intention to support the yuan at a stable level and allow the widening of the value range for the yuan was also made clear. The People’s Bank of China sets daily markers for the yuan and it is currently allowing the currency to trade 2% above or below this marker against the dollar. The state council also announced that it intends to cease trade levies and reduce the amount of bureaucratic hindrances in order to increase the effectiveness of foreign trade. Furthermore, the insurance of export credit and the provision of financial services at more beneficial conditions for small time exporters are planned.

Some Eurozone business activity data for the manufacturing sector was published today. Preliminary data for economic activity in July indicated a slight slowdown. However, the volume of manufactured goods remains up near a four-year maximum; this is all despite the crisis in Greece. The July Markit preliminary PMI for the Eurozone was 53.7 points against June’s 54.2. The market was expecting better from this indicator.

The euro/dollar reacted to the weak Eurozone business activity data with a fall to 1.0940.

Today, the data on the number of drilling rigs in the US from Baker Hughes is worth a look. Oil prices are under pressure because of a lack of signs showing that the supply of oil will fall.

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