Chinese Home Price Appreciation Extends Decline

Daily Analysis - 18/09/2017

Residential Real Estate Price Growth Ebbs as Government Efforts Help Dampen Speculation


In a sign of ongoing progress towards reducing overall speculative activity in the housing market, the rate of gains for Chinese housing prices slowed to the lowest point since 2016, helping improve sentiment and diminish fears of a steep correction.  The Yuan is slightly weaker on the session, with the US dollar firming as the upcoming Fed decision approaches.

Chinese New Home Price Gains Continue to Taper

Figures reported monthly by the National Bureau of Statistics displayed another steep slide in housing price appreciation in a reading of price activity across 70 major China cities.  According to the aggregate figure, new residential real estate price growth slowed to 8.30% in August on an annualized basis, down from the 9.70% recorded a month earlier.

Curbs implemented by the government earlier in the year to cool the housing market are continuing to have a noticeable impact on the pace of gains, with prices surprisingly contracting in two cities as the major hubs of Beijing and Shanghai saw increases decelerate to 5.20% and 2.80% respectively.  Overall, the figure marked the slowest pace of advance since July of 2016, with more declines likely in store over the coming months as the more restrictive measures remain in place. The USDCNH pair is slightly higher on the session, hovering back above 6.5550.



S&P 500 Pushes to Fresh Heights After Disappointing US Data

The US dollar fell into the end of last week, spurred by weaker retail and industrial production results after Hurricane Harvey’s landfall.  Retail sales fell -0.20% month over month, predominantly on the back of auto sales which were down by -1.60% for the period.  Core retail sales, which excludes cars in the measure, rose by 0.20% compared to expectations of 0.50% growth for the month.

Apart from the disappointing retail results, industrial production dropped by the most in 8-years.  Oil and gas-related activities like drilling and refining were among the most impacted by the Hurricane, accounting for the substantial decline in industrial output. The S&P 500 closed at a record high on Friday, with futures trading near a new intraday high of 2504.25 as dollar weakness in the aftermath of Friday’s fundamental data helped boost demand for equities.


Crude Prices Fail to Top $50 Despite Dropping US Rig Count


After attempting to rally higher last week, a combination of a large build in onshore crude stockpiles coupled with a further rebound in production helped offset the potential price gains from the latest decrease in operation oil rigs.  Data released by US oil services giant Baker Hughes on Friday indicated that the amount of active US drill rigs fell by 7 to a total of 749 last week.

Even though the industry has recovered as refining operations are gradually restored, production generally lags the rig count, indicating that overall US oil output might be set to fall in the coming weeks.  However, the production rebound appears to have overshadowed this development, with West Texas Intermediate futures still unable to close above the $50.00 per barrel threshold.  Should exports continue to rise back to pre-storm levels, futures may finally mount a rally back above the key psychological level.


Euro Area Wage Gains Touch Two-Year High

With the discussion of tapering asset purchases tabled until the next ECB Governing Council Meeting in October, the latest data pertaining to wage growth may help push the Central Bank’s to reduce monetary stimulus.  Figures unveiled by Eurostat on Friday showed that wages within the Euro Area grew by 2.00% year over year through the end of July, outpacing the 1.30% headline inflation rate over the same period.  With wage growth outstripping inflation, consumers are more likely to continue supporting the ongoing economic advance.

Furthermore, this positive development may be the trigger that helps the Central Bank gradually reduce asset purchases and tighten interest rates from record lows.  Data due on inflation later in the session will likely also play an important role, with further gains solidifying the likelihood of a tapering announcement.  In the meantime, the Euro is extending Friday’s rally against the Yen, with the EURJPY pair edging above 133.000.



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