Morning Update – 07/12/2016 – by Arjun Lakhanpal

Morning all.. A quiet session on Wall St saw S&P close up 0.34% as all asset classes paused for breath it seems. Asian stocks also quiet but the Nikkei still managed a gain of 0.75% as USDJPY held firm and seems to be consolidating near the highs. The main news was the weak GDP data from Australia and was worse than most expectations. Australian Q3 GDP printed at -0.5% q/q (mkt -0.1% q/q), taking the y/y pace down to 1.8% y/y (mkt +2.2% y/y; This was very weak data. However, the market reaction has been muted, and some are dismissing it as ‘old news’ or ‘anticipated by the RBA’. GDP was 100bps below the RBA’s 3 Nov’16 forecast and 50bps below the consensus forecast on 6 Dec 2016 – so most of the so-called ‘special factors’ were known by the time these forecasts were made. AUD made a brief low of .7417 before bouncing and remaining around .7435 for most of the session. In Japan BoJ’s Iwata (01:30GMT): will not hesitate to take further easing steps if needed to sustain momentum toward hitting inflation target; monetary base will continue to expand under new framework, new policy not a shift away from quantity to interest rates; expects economy to continue expanding moderately; expects inflation to remain flat or slightly negative for the time being then accelerate toward target. This kept USDJPY bid in a quiet session. Oil was lower again in Asia with WTI down 0.65%. US yields remain firm with 10yr at 2.39%. This morning we get UK house price index and Industrial production along with Italian unemployment data. Good luck.