China’s retail sales slipped in July, dashing expectations for a modest rise, while the factory sector’s recovery struggled to pick up pace. Retail sales unexpectedly extended their fall into a seventh month in July and industrial output missed expectations suggesting bumps in even the world’s most promising rebound. A key exception was auto sales, which surged 12.3%, turning around from a 8.2% fall in June. China’s recovery had been gaining momentum as pent-up demand, government stimulus and surprisingly resilient exports revived activity. Industrial output grew 4.8% in July from a year earlier, but less than a forecast 5.1% rise. China’s July nationwide survey-based jobless rate remained elevated at 5.7%.
France's unemployment rate yesterday fell to 7.1% in the second quarter, dropping to its lowest since 1983 when it stood at 7.0%. Analysts warned that the data could be misleading as the lockdown reduced the number of those classified as unemployed by making it impossible for them to look for jobs. In the last quarter of 2019, unemployment in eurozone’s second biggest economy had fallen to 8.1%, continuing a downtrend from 9.5% in the second quarter of 2017. Meanwhile the UK imposed a 14-day quarantine on all travellers from France due to rising infections there, which France said they will reciprocate. EURGBP remained stable at 90.28 pence.
Japan’s pandemic-hit economy is expected to have suffered a record shrinking last quarter since the records began in 1955, with a resurgence of the virus threatening to slow a fragile recovery now underway. Forecasts see gross domestic product contracting at an annualized pace of 27% in the three months through June. That means the world’s third-largest economy will have declined in size for three straight quarters, hit first by trade wars and a sales tax hike, then by the virus. Weak demand in a long-dated US government bond auction has extended a surge in US Treasury yields that has drawn many investors from Japan back to dollars. The yen is on course for its weakest week against the dollar in two months and is down about 0.9% at 106.75 from last Friday's close. Japan’s GDP figures follow grim readings from other major countries reeling from the impact of Covid-19. The UK contracted 20.4% last quarter while the US shrank by nearly a third.
The dollar was within reach of a seven-week losing streak against the risk-sensitive Aussie, which has settled around $0.7150 and is flat for the week. The kiwi was pressured at $0.6537, as the country faces a fresh coronavirus outbreak and after the central bank this week flagged increased bond buying and again mentioned the prospect of negative rates. 29 new cases in previously virus-free New Zealand prompted an extension of Auckland’s lockdown. Central banks in Australia and New Zealand are striking quite a different tone. The Reserve Bank of New Zealand (RBNZ) sparked a bond rally this week by promising to extend its own purchases and next week, speed them up as well. While the RBNZ talked about sub-zero rates, Reserve Bank of Australia Governor Philip Lowe re-iterated the need for fiscal support. The Aussie last sat at a 22-month high of NZ$1.10941 against the NZD having forged nearly 1% this week and the spread between Australian and New Zealand 10-year debt is at its widest since May.
