Financial markets moved sideways in Asian session as Japan’s GDP data contracted in 3Q12, overshadowing resilient Chinese data. In the US, President Obama called for raising tax on top income earners while maintaining tax cuts for those earning under USD250K per year. This would be part of his efforts to avoid the so-called “fiscal cliff” which might occur as early as January 2013. While exchanges still open on US Veteran Day on Monday, the dataflow is light and the focus will be on the Eurozone. The Greek parliament passed a new set of austerity measures last week and the 2013 budget expected to pass after vote. However, when the next trance of rescue loan would be granted remains uncertain. For the time being, a 3.1B euro ‘bridge financing’ bill will be issued so that the debt-ridden country would be able to repay maturing debt worth of around 4B euro.
Japan’s economy contracted -0.9% q/q in 3Q12, compared with a downwardly revised +0.1% growth a quarter ago. While not technically fallen to recession, Japan’s economy has contract in 5 over the past 8 quarters. The country’s economic growth has mainly relied on public spending which is not sustainable due to the government’s huge fiscal burden. Other than the GDP data, Japan’s employment and economic confidence remained weak. The BOJ has to extend and expand its asset buying program to stimulate domestic demand while excessive strength in Japanese yen should be curbed so as to help exports.
In China, trade surplus widened to US$ 32.0B in October from 27.7 in the prior month as driven by acceleration in exports growth. Exports soared +11.6% y/y to US$175.4B, up from +9.9% in September, while Imports growth stayed at +2.4%. Geographically, exports to the US climbed +9% y/y, up from +5.5% y/y in September while that to ASEAN countries up to +44.8% from 25.5% in September. Shipments to the EU continued to decline. Exports to the EU slipped -8.1% y/y in October, though it’s improved from a -10.7% decline a month ago.