ASX200 range holds after stronger AU jobs offset by softer China GDP
Tony Sycamore July 15, 2021 5:52 AM
A double header of sorts today for the ASX200 in the shape of Australian jobs data for June and China Q2 GDP, alongside June partials.
Consensus expectations heading into the labour market data were for employment to rise +25k and for the unemployment rate to fall to 5.0%. On both metrics the labour market exceeded expectations as the unemployment rate fell to a 10 year low of 4.9%, on a +29.1k rise in new jobs.
Offsetting some of the good news, hours worked fell by 8.4% in Victoria following its lockdown in June, an effect likely to be replicated next month in NSW, due to the current lockdown in Sydney. A rise in underemployment to from 7.4% in May to 7.9% in June, pushed the underutilisation rate higher from 12.5% to 12.8%.
All in all, a good set of numbers that at any other time would prompt the RBA to think about upgrading its unemployment forecasts. However, this is likely to depend on for how long Sydney remains in lockdown.
Turning now to China Q2 GDP which declined from a base effect distorted 18.3% rise in Q1, to a below consensus 7.9% in Q2. The softer Q2 number partially due to the resurgence in Covid in China that impacted catering, travel and entertainment.
The market is expected to look through the slowdown in Chinese growth, comforted by the PBOC’s recent dovish shift that included an increase in aggregate finance and a 50bp cut to the Reserve Requirement Ratio (RRR).
Since our last update in early July, the ASX200 has continued to consolidate the strong gains from the first half 2021, between 7400 on the topside and 7200 on the downside. This type of sideways price action is not uncommon at this time of the year as viewed in July 2017 and again in 2020.
As such, the view remains unchanged and we retain a preference to buy weakness in the ASX200 towards uptrend support coming 7100/7000 area.
Source Tradingview. The figures stated areas of the 15th of July 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.