Markets Look For More Solid Footing, But Need To Get Passed US Jobs Data

Australian retail sales continue to fare well. They rose 3.2% in July after a 2.7% gain in June. Through the first seven months, they have averaged 2.0% gain a month. In the comparable period last year, the average was 0.2%. August will be more challenging. The 3.1% decline in Australian shares today is the largest since May. Like in the US, tech stocks lead the rout. Separately, Australia committed to re-opening the economy before the end of the year.  

Polls suggest Japanese Cabinet Secretary Suga is the leading candidate to replace Abe as Prime Minister. This underscores our sense of continuity of Abenomics. Suga has indicated he will press for more BOJ liquidity provisions, which given the risk of deflation as shown in the August CPI for Toyko, maybe the direction that Governor Kuroda was moving in too.  

The dollar is in less than a quarter of a yen range today above JPY106.00. Recall that last week it settled near JPY105.40 following Abe's resignation. There is a $1.8 bln option at JPY106 that will be cut today. On the top side, there are another $2 bln in expiring options struck between JPY106.50 and JPY106.65. Below, there is a $365 mln option at JPY105.75 and another for about $480 mln at JPY105.55. After pulling back to around $0.7230 in the local session, the Australian dollar has rebounded to almost $0.7300, where it appeared to be losing some momentum. That said, above there resistance is seen in the $0.7320-$0.7340 area. Reflecting the dollar's recovery yesterday, the PBOC set the dollar's reference rate at CNY6.8359, a little stronger than the bank models suggested. The yuan's advancing streak against the dollar is now six-weeks long, and it has declined in only one week here in Q3.  


German factory orders in July rose 2.8% after the June series was revised to show a 28.8% jump rather than 27.9%. Still, the July increase was a little more than half of what economists projected. The source of disappointment was from domestic parties, where orders fell 10.2% after the 35.3% jump in June. Despite the consternation this week about the euro's strength, in July, as the euro was appreciated by the most in a month for a decade, foreign orders jumped. Foreign orders rose 14.4%, following a 23.6% rise. Yet the real strength of the foreign demand was from outside the eurozone. Those orders rose an impressive 19.2% after increasing 23.8% in June.  

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Read more by Marc on his site Marc to Market.

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