- Japanese economy loses steam at the beginning of this year snapping its 8-quarter long winning streak
- Australian wage growth remains subdued during the first three months in 2018
- Asian stocks quite calm despite widespread falls on Wall Street, US yields keep rallying
In the morning we do not see larger moves across the FX space and Asian stocks either. Over the past hours investors’ attention was paid to Japan from where the first quarter GDP calculations were released.
The data disappointed to say the least, and as a result the Asian economy shrank in a quarterly basis by 0.2% while the median estimate had looked for no change. This decline snaps the two year period of growth, the longest run seen for decades. In an annualized rate we got a 0.6% drop which fell short of the consensus pointing at a 0.1% contraction. The sole brighter spot, at least in the eyes of the Bank of Japan, was GDP deflator rebounding more than expected to 0.5%, this is the broadest inflation gauge. Nevertheless, that kind of scheme does not suit the goldilocks economy, and could even portend more woes going forward as consumer spending might be reduced in the wake of lacklustre wage growth. The details paint also quite the gloomy prospect as consumer outlays stayed flat whereas business expenditure decreased 0.1% coming in well below forecasts suggesting a 0.4% increase. The last but not least, the numbers for the last quarter of 2017 were noticeably revised down: quarterly GDP from 0.4% to 0.1%, annualized GDP from 1.6% to 0.6%, private consumption from 0.5% to 0.2% and business spending from 1% to 0.6%. A small uptick in GDP deflator (0.1%) was also revised downwards to flat.
Looking elsewhere one needs to pay attention to the Australian dollar which is among the best performing currencies in the morning despite a slight disappointment in the wage data. Wage growth in the first three months of the year increased 0.5% qoq missing the consensus at 0.6% qoq, though a yoy basis matched expectations showing 2.1%. Overall the release does not change too much in terms of the current RBA stance underlining the same issue across the globe – slow wage growth despite the tight jobs market.
Finally let’s sum up Asian trading where we do not see any heavier slumps even as Wall Street ended Tuesday in bleak moods while the US 10Y yield closed above 3.07%. The latest hours brought also some comments from North Korea which said that it will never engage in economic trade with the US in exchange for giving up its nuclear programme. It also added that it needs to reconsider the summit with the US if Washington insists on North Korea giving up the nuclear programme. Well, the past weeks seemed to be reassuring in terms of relations between the two feuding countries, but these remarks highlight there is a long way to go so as to end the feud once and for all.