China's economic fortunes remained a market moving theme overnight after yesterday's release of third-quarter GDP. China grew at a yearly pace of 7.4 percent in the third-quarter, edging down from second-quarter growth of 7.6 percent. Although in line with economist's estimates, markets remain divided over China's growth trajectory. China's ability to navigate a soft landing through a once-in-a-decade change of leadership remains a key point of contention for markets. With the western world mired in debt and uncertainty, recent years have seen China looked upon as an economic savior, with a thirst for foreign product considered a critical element in the global recovery. Nevertheless, recent macroeconomic data shows tentative signs the region may enjoy a stronger fourth-quarter, before reemerging above 8-percent in 2013, as stimulus measures further infiltrate the economy.
A mixed round of corporate earnings failed to inspire further upside momentum in the United States, with the focus also on the weekly jobless claims which jumped to 388,000 for the week ending October 13. Economists were expecting a more moderate rise to 360,000 from 342,000 the previous week. Nonetheless, in keeping with the recent stronger data pulse, manufacturing activity in the Philadelphia region outpaced expectations with the Philly-Fed index returning to growth in October. The manufacturing gauge rose to 5.7 from a previous negative 1.9. Likewise, the US leading index, which is a composite of a range of economic indicators, pointed to stronger growth in September. The Index rose 0.6 percent from a fall of 0.4 percent in August. Analysts expected the index to edge up by 0.2 percent.
The Euro's ascent began to waiver overnight with optimism over Spain's likely request for a bailout and solid demand for their debt at auction overshadowed by falling US markets. The Euro collapsed against the US dollar with a break to the downside of $US1.31 and currently remains slightly higher than session lows of $US1.3055. After peaking at 3-week highs of 104.12 US cents, the Australian dollar consolidated gains in the latter part of US trade to current levels around 103.7 US cents. Support for the greenback prompted weakness across the commodity bloc, but the Aussie dollar held up reasonably well in comparison to commodity counterparts the CAD and Kiwi.
With little in the way of scheduled event risk, we anticipate a quiet close to the local week. Market will then take cues from the European summit which kicks off this evening. A$ price action has displayed supportive behavior at 103.55 with further losses likely to be contained at 103.2 US cents during the domestic session. Resistance is eyed at overnight highs just above 104 US cents.
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