Japan’s economy sank deeper into contraction complicating further the job of the new prime minister that will succeed PM Abe. Household spending and wages fell in July as the impact of the pandemic kept consumption weak even after lockdown was lifted in May. The world’s third-largest economy shrank an annualised 28.1% in April-June, more than a preliminary reading of a 27.8%, revised data showed. Chief Cabinet Secretary Yoshihide Suga, the frontrunner to become next premier, has signalled his readiness to boost spending if he were to lead the country following Abe’s path. The government has so far unveiled a $2 trillion package of stimulus measures, adding to an enhanced easing programme from the Bank of Japan. Japan’s economy has shown some recovery with factory output rising in July, but household spending fell a bigger-than-expected 7.6% in July year-on-year while real wages declined for the fifth straight month. The central bank eased policy twice this year complementing two big government spending packages but is now expected to hold off on further stimulus.
The US dollar held steady as investors weighed whether an accommodative turn from the European Central Bank later this week could hit the euro, while the pound nursed losses due to Brexit uncertainty. The New Zealand dollar was little changed at $0.6690, after the fall it suffered following a Sunday statement from the central bank which revived the prospect of negative rates. The British pound fell after the UK threatened to tear up the Withdrawal Agreement signed with the EU in January. The pound is changing hands at $1.3124, after shedding 0.8% overnight, also losing ground against the yen at 139.46.
Employment fell in Australia while last month’s business confidence gained but remained fragile. Australian jobs fell by 0.4% over the month to Aug. 22, with the rate of job losses in the Victoria state slowing from a month ago. Employment fell by 2% in Victoria – which suffered the most coronavirus infections - over the month to Aug. 22, and rose 0.1% for the rest of Australia. The Australian dollar stood firm at $0.7276 while the AUS200 index fell further continuing the downtrend it suffered last week since retreating from the 6200 3-month peak it tested before the fall.
British shares rose as a raft of strong corporate earnings updates brewed optimism around a post-pandemic economic rebound, while fresh Brexit negotiations sparked concerns about a no-deal exit for the UK from the European Union. Britain began a fresh round of Brexit trade talks by warning the EU that it was preparing to leave the bloc without an agreement as the two sides negotiate the rules that govern nearly $1 trillion in trade. The FTSE 100 rose 0.6%, gaining for a second straight session, with financials and service-based companies gaining the most.
