•China’s trade figures show weak demand all around China’s trade balance soared in September as both exports fell and imports fell sharply. Imports in particular were down 20.4% yoy, worse than the forecast of -16.0% yoy. Exports were down 3.7% yoy. The figures demonstrate how demand is softening all over the world: both domestic demand in China as construction and investment slow, and demand for China’s exports elsewhere in the world. The figures are bad news for Australia and New Zealand, which count China as their major export market. Aussie and kiwi plunged on the news giving back some of the last days gains. The sharp slide in imports however, helped for a near-record trade surplus in China ($60.24bn vs the record $60.62bn). The focus now turns on next Monday’s release of retail sales, industrial production and fixed asset investment and to a key meeting of Chinese Communist Party leaders’ end of the month, focusing on the next five-year plan. A lowering of the 7% yoy growth projection is a possibility, which could hurt the AUD and NZD.
• Overnight, from Japan, we got the minutes of Bank of Japan September policy meeting. These are not the minutes from the most recent meeting but rather from the previous one. The minutes revealed that many members shared the view that the underlying trend in inflation continue to improve. This is in line with the BoJ Governor Kuroda reluctance to take further actions at their next meeting end of this month. The focus is now about restructuring and corporate tax reform and less about using monetary policy to boost inflation expectations. USD/JPY continued to gyrate around the psychological 120.00 level. ( see more technical below)
• Today’s highlights: During the European day, the main event will be the German ZEW survey for October. The survey for September showed a mixed picture for Eurozone’s strongest economy. The expectations index declined once again from the previous month, while the current situation index increased moderately. This time, both indices are forecast to decline a bit, which could prove negative for EUR. The final German CPI data for September confirmed the preliminary reading and showed a fall of 0.2% yoy. The market reaction at this event was modest.
• In Sweden, CPI and CPIF for September are due to be released. The CPI is expected to remain flat, while the CPIF is expected to have risen by a percentage point. At its latest meeting, the RIksbank maintained its benchmark interest rate unchanged and the monthly pace of bond purchases intact. I believe that unless we see a fall into deflation, the Bank is unlikely to alter its stance and SEK could strengthen. However, given that the Bank remains willing to act even in between ordinary meeting, I would treat any short-term strength as a correction of the longer-term USD/SEK downtrend.
• In the UK, the spotlight will be on the CPI data for September. The headline figure is expected to have remained flat, while the core rate is expected to have risen a bit. Given that last Thursday, BoE officials were concerned that inflation is likely to rise slower than previously expected, a disappointing figure is likely to push further back expectations of a rate hike by the BoE, and put GBP under renewed selling pressure.
• In the US, the NFIB small business optimism index for September is due out. Even though this indicator is not a major market mover, it is worth watching because of the Fed’s emphasis on employment, as small businesses employ the majority of people in the US. Following the disappointing NFP figure in September, this indicator could attract more attention than usual.
• As for the speakers, ECB Executive Board member Yves Mersch, St. Louis Fed President James Bullard, BoE official Andrew Haldane and BoE MPC Ian McCafferty speak.