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Money supply, financing and bank lending figures all missed estimates. Perhaps what rattled investors even more was the drop off in industrial production, which slowed to 6.9% in August when the market was expecting an 8.8% rise. This reading was the weakest since March 2009, with a big drop off in ferrous metal smelting. This resulted in power and heat production falling 1.7%.
Growth also slowed in retail sales and fixed asset investment. There will now be plenty of talk around China’s growth target and whether it can be achieved with such mediocre activity. Needless to say, the market will be expecting stimulus at some stage.
Don’t forget though, this also means China can buy raw materials at lower levels now. So if the country is to ramp up, it would be in a pretty good position. Having said that, AUD/USD gapped lower this morning and tested $0.9000. This level has managed to hold so far, but momentum remains firmly to the downside and I wouldn’t be surprised to see selling pressure remain. Once the gap from this morning’s open is filled, perhaps sellers will return with greater conviction. However, the potential for China stimulus could keep some traders on the sidelines given the pair has already dropped significantly over the past week.
On the calendar today we only have new motor vehicle sales due out. For the rest of the week, RBA minutes will be the key local release, but I feel this will be a non-event and greater focus will be placed on the USD side of the equation.