Aussie dollar weakens as good news from China fades

Share Markets: 

Stocks turned negative on Friday, with disappointing US and German economic data, and US earning results and rising geopolitical tensions weighing on investor sentiment.

The Dow fell 0.7% and the S&P 500 and the Nasdaq were both down 0.5% for the session.

Interest Rates: 

US bond yields fell at the long end as increased risk aversion drove investors into safe haven US government bonds.

The US Treasury 10-year yield fell from 2.51% to 2.47%, while two-year yields were little changed, extending the flattening of the yield curve.

Australian three-year government bond future yields fell from 2.68% to 2.62%. The 10-year yield fell from 3.46% to 3.40%.

Foreign Exchange: 

The Aussie dollar weakened versus the US dollar, retracing the gains from Thursday's strong Chinese manufacturing data.

The AUD/USD is currently trading just under 94 US cents. The US dollar was broadly stronger, rising to an eight-month high against the Euro after the release of soft German economic data.

Commodities: 

The copper price fell on expectations of increased supply from Indonesia, however, the decline was limited given upbeat manufacturing data from China on Thursday drove copper demand expectations.

Australia:

There was no economic data released locally on Friday.

New Zealand: 

Business confidence fell from 42.8 to 39.7 in July. It was the lowest in 15 months, reflecting the impact of higher interest rates, weaker dairy prices and a high exchange rate.

However, the index continues to suggest businesses remain positive, sitting comfortably in positive territory.

Japan:

Annual headline inflation edged down from an annual rate of 3.7% to 3.6% in June. Core inflation (excluding fresh food) also edged down from 3.4% to 3.3% in June.

The Bank of Japan has estimated that the sales tax hike from April added 2 percentage points to core annual inflation.

Excluding the sales tax impact, there is still a way to go before the BoJ meets its 2 per cent annual inflation target.

China:

In further encouraging economic data from China, industrial profits rose 17.96% in the year to June, from 8.9% in the year to May.

Europe:

The German IFO business climate index dropped from 109.7 to 108.0 in July, with declines in the current conditions and expectations components.

Recent German partial data has been patchy and the Bundesbank expects a flat Q2 GDP growth report after mild weather saw activity pulled forward into Q1.

Euro zone M3 growth rose to 1.5% in the year to June, from 1.0% in the year to May. Private sector loans growth decelerated at a less steep pace of -1.7% in the year to June, from -2.0% in the year to May.

United Kingdom: 

UK GDP grew by 0.8% in Q2, matching Q1's pace.

Following lacklustre growth in 2012, the UK economy has expanded continuously for the last six quarters, posting 0.7-0.8% in the most recent five.

For the year to the June quarter, UK GDP growth edged up to 3.1%, from 3.0% in the year to the March quarter. The UK economy is now larger than it was prior to the GFC.

United States: 

US durable goods orders rose 0.7% in June. An 8% rise in aircraft orders and a 1.4% rise in core capital goods orders (excluding aircraft and defence) offset a 2.1% fall in autos.

But substantial revisions to May leave the overall picture unimpressive at the margin and have raised investor concerns about the momentum of corporate investment in the US.



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