Asian stocks mixed after large drop in US; AUD rises on jobs beat

Summary:

  • Asian indices mixed after US sell-off

  • Chinese composite recovers from 2-year low

  • Australian jobs growth beats estimates

 

Wednesday saw risk-off return to the markets in a big way with equities handing back the previous day’s rally and then some. On Wall Street the Dow Jones tumbled by 800 points in its largest drop of the year as it seems that the boost from the decision to delay tariffs on China has proven short-lived. Overnight Asian indices were mixed with the Nikkei down more than 1% but China managed to eke out a small gain and the Shanghai Composite continues to hold above potentially key support.

Chinese stocks dropped to their lowest level in more than 2 years overnight, but buyers stepped in and managed to close the market in the green. Lows around 9720 could now be seen as a key level to watch. Source: xStation

 

On the data front the main release from the ASIA-PAC session came from Australia with the latest employment data topping estimates and sending the Aussie to the top of the G10 leaderboard. For July the employment change came in at +41.1k vs +14.2k expected, marking a decent beat and also a move back into growth after -2.3k last time out - this figure itself was revised marginally lower from +0.5k. This is the 4th time in the past 5 releases that this metric has beaten consensus forecasts and indicates a healthy labour market at present.  

 

The Aussie is gaining against all its major peers this morning, boosted by a better than expected jobs report. Source: xStation 

 

The breakdown of the jobs report was also pleasing with 34.5k of the roles added falling into the full time category. The unemployment rate held steady at 5.2% as expected. There was a small positive reaction in the fixed income markets with the 3-year yield rising by 1 basis point and possible bets on further easing from the RBA were scaled back. Interest rate markets are now pricing in a 22% probability of a rate cut at the meeting next month - down from 44% yesterday.

The AUDUSD remains in a narrow range with 0.6675 a level to watch below. There’s been a positive cross in the MACD but longs would like to see a move, and daily close, above the 0.6820 level before they can get too excited about a larger recovery. Source: xStation 

  • Elsewhere Japanese industrial production for June showed a drop of 3.3% M/M, beating an expected -3.6% that was inline with the prior reading. The Nikkei 225 ended lower by a little more than 1%
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