- UK GDP contracts in Q2
- Japan, China show some resilience
- Canadian labour market softens
Europe – more reasons for concerns
At the last ECB meeting president Draghi said that the recession scenario was remote but he may soon need to rethink his statement. If anything, the latest data from Europe confirms a slowdown in manufacturing as the German industrial output contracted by 5.2% y/y – the most since February 2010. Things are not brighter in the UK where the Q2 GDP surprised with a 0.2% q/q contraction fueled mostly by lower capital formation (-1% q/q). It seems like Brexit concern was the main drag here even before Boris Johnson took over as a prime minister – not a good sign for the second half of the year.
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GBPUSD revisits the post Brexit-vote lows on Hard Brexit concerns and weak UK data. GBP looks to be oversold on the positioning basis but the positive news (that could trigger a rebound) is scarce. Source: Macrobond, xStation5
Asia – solid data from Japan and China
Decent news from Asia has been extremely rare as of late so little wonder investors took the latest trade data from China and GDP from Japan with enthusiasm. We will see for how long the Chinese exports shows relative resilience but for now it’s at least not falling off the cliff. Japanese growth is a bit of mystery. Consumption is already boosted by purchases ahead of the sales tax increase but investments were solid as well. However, unless exports improves, this might not last so in case of both China and Japan one needs to keep a close eye on manufacturing PMIs going forward.
Purchases ahead of planned sales tax increase helped boost Q2 GDP in Jappan. Source: Macrobond, XTB Research
Canada – disappointing NFP report
This week was relatively light in the US data so it was an opportunity to take a closer look at Canada where we had the NFP report. It didn’t go very well – total employment shrank for the second straight month and the unemployment rate rose to 5.7% from 5.4% just 2 months ago. Canadian labour market looked very strong in H1 so this softening is certainly a cause for concern and a warning sign that North America is not isolated from global slowdown.
Canadian labour market looked very strong but that has changed. Source: Macrobond, XTB Research
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