ECONOMETER

When good is bad and bad is bad.

The BAD: Data today in Australia revealed a much worse than expected outcome for the Jobs market last month. Australia cut 22.6k jobs compared to consensus expectations of a 10k increase. The impact was swift. The AUD was hit losing a significant amount of ground settling around 0.88 versus USD. Clearly there has been a worsening in job market conditions over recent months and while I am still constructive on AUD the trend in jobs is sending a worrying signal.

The GOOD: Japan machinery orders rose strongly up 9.3% in November compared to the previous month. This was cited as evidence that Abenomics is working although I’ll only believe this when we see evidence of structural reforms. Nonetheless, it was sufficient to be bad for the JPY with USD/JPY pushing eventually back towards 105. I remain negative on the yen and ultimately see higher US bond yields pushing USD/JPY even higher.

Today I’m posting from Seoul after traveling to Singapore, Cambodia, and Beijing as part of our Asia roadshow presentations. Tomorrow I’m in Taipei and next week Mumbai.

Unfortunately as is usual with such trips all I’m seeing are airports and hotels as I move from meeting to meeting. On the other hand it’s great to get a perspective about what investors are thinking at the start of the year.

Investors seem to be still making their minds about whether the economic news is good or bad. The bad news from the disappointing US jobs report last week has quickly been overtaken by better news from core US retail sales, Empire Manufacturing confidence and earnings. The net result is that bulls are back in charge.

Consequently the dollar also looks to be in good shape. Given that the remaining US data releases this week in the US are likely to remain upbeat I see no reason to alter my positive stance on the US dollar.

Clearly it’s still early days for US Q4 earnings releases suggesting that sentiment will remain fickle over coming days but any slippage in the USD should be seen as buying opportunities.