Ahead Today
G3: US industrial production, retail sales, import prices, Germany ZEW survey expectations, Japan tertiary industry index
Asia: Hong Kong unemployment rate
Market Highlights
Both US and China are showing signs of economic weakness, suggesting that global demand may begin to moderate in the coming months. Asian currencies with larger trade exposures with US and China could be relatively more vulnerable.
In the US, weakening job growth raises concerns about growth risk. The US added only 22,000 jobs in August, far below market expectations of 75,000, Meanwhile, China’s activity data for August shows a further slowdown, with key indicators falling short of market expectations. Retail sales growth moderated to 3.4%yoy, the slowest pace of growth since December 2024. Industrial production grew 5.2%yoy, down from 5.7% in July and missing expectations for a 5.6% increase. Fixed asset investment expanded by 0.5%yoy, down from July’s 1.6%yoy. This was dragged down by a 12.9%yoy drop in property investment. Home prices continued their declines, with new and used flats falling by 0.3%mom and 0.6%mom, respectively. Surveyed unemployment rate edged up to 5.3%, from 5.2% in July. These weaker than expected economic activity indicators, coupled with persistent deflation, point to ongoing weakness in domestic demand and reinforce the case for more monetary and fiscal policy stimulus to achieve China’s 5% growth target for the year.
Asian currencies broadly gained or held steady against the US dollar in yesterday’s session. In particular, the Korean won led gains by rising 0.5%. The move came amid news that Korea has cancelled plans to lower the threshold for capital gains tax. In contrast, the IDR and THB weakened against the US dollar. In Indonesia, the government has recently injected IDR200 trillion in cash reserves into the banking system to help revive credit growth and support the broader economy. Newly appointed finance Minister Purbaya has also pledged to keep the fiscal deficit within the statutory 3% of GDP limit. However, markets are awaiting greater clarity on his fiscal roadmap for 2026. In Thailand, the baht came under pressure following plans by authorities to impose a tax on gold trading settled in local currency, a move aimed at reducing bullion shipments and curbing currency strength. However, details of the proposed tax will only be discussed after a new cabinet is sworn in, expected by this week.