Asian markets unnerved by US spillovers

- Asian markets unnerved by US spillovers "Signs of a weakening US growth outlook dragged Asian markets down over the past the week. The deterioration in sentiment was exacerbated by indicators of slowing growth and domestic demand in China, even though the data were in line with expectations. Rising risk aversion has led to a steep strengthening of the Japanese yen, which benefits given its safe haven characteristics, with officials beginning to express concern about the impact on Japan’s recovery. The tentative nature of Japan’s recovery was underscored by a weaker-than-expected Q2 GDP outturn (0.1% q/q, s.a., versus consensus of 0.6%) on weak private consumption."
- Indicators continued to show a gradual slowdown in the region… "China’s monthly economic indicators for July provide further evidence of a soft landing for the economy in the second half of the year (see Highlights). Industrial production, housing prices, and credit growth all moderated. Exports remained resilient, resulting in a surprisingly large trade surplus. Elsewhere in the region, indicators were soft. In addition to a weaker Q2 GDP outturn, Japan’s machinery orders for July (-2.2% y/y) were well below expectations. June industrial production in India was also weaker than expected (7.1% y/y) raising questions about India’s 8.5% GDP growth target for the year. Meanwhile, Q2 GDP growth in Hong Kong came out in line with expectations, at 6.5% y/y (BBVA: 6.7%)."
- The Bank of Korea pauses on interest rate hikes… "While some market participants were expecting a second straight interest rate hike in Korea, the Bank of Korea left rates unchanged, although it signaled the likelihood of further rate hikes in the coming months to contain rising inflationary expectations."

BBVA Asia Weekly Watch 20100816

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