CHINA STOCKS: Correction Continues Amid Multiple Headwinds, HSI Under 50-day EMA

August labour market data are released on Thursday and remain a point of focus. Employment is forecast to rise 21k after July’s +24.5k with the unemployment rate expected to remain at 4.2%. It will also be important to monitor underemployment, the split between full-time & part-time and hours worked. The RBA is currently expected to leave rates unchanged on September 30 as it waits for Q3 CPI on October 29.

• Bloomberg consensus is expecting job gains to print above both the 3-month and 6-month averages at +7.5k and +13.3k respectively. The data is notoriously volatile.
• Analysts estimates are ranged between +9.5k and +32.5k with most around 15k-30k.
• ANZ is at the upper end forecasting 32.5k new jobs due to vacancies, surveys and orders signalling solid demand for labour. NAB and CBA are around consensus at +25k and +20k respectively. Westpac is below consensus at +15k due to signs of a slowing in job growth as care-related hiring softens.
• Economists are split between the unemployment rate being unchanged at 4.2% (14 analysts on Bloomberg) or rising 0.1pp to 4.3% (11 analysts). This is reflected amongst the big 4 local banks with ANZ and CBA projecting 4.2% and NAB and Westpac 4.3%. It is currently 0.8pp above the October 2022 trough.
• The participation rate is expected to be steady at 67.0%.

Natural gas took direction from oil on Tuesday with prices trending higher driven by concerns that geopolitical issues could impact global fossil fuel supplies. European prices rose 0.8% to EUR 32.42, close to the intraday high, after a low of EUR 31.62 early in the session. They are now 2.5% higher this month.

• European gas fell on Monday driven by forecasts for a significant increase in wind-generated power but that is now expected to moderate towards average. Bloomberg reported that 60% of British power yesterday morning was from wind.
• After numerous Ukrainian attacks on Russian oil infrastructure over the weekend, it struck another refinery early in the week. US-EU talks continue on options to reduce the revenue Russia earns from energy exports. Restrictions on companies in India and China involved in oil trade with Russia were delayed by the EU.
• US gas rose 2.4% to $3.117 to be up 4% in September and 6% this week. It has found support from expectations that there will be increased cooling demand in the second half of September as higher temperatures are projected. There are also thoughts now that this warmer weather may mean a delay to the start of heating demand.
• There is also work on a Permian basin pipeline reducing flows, according to EBW AnalyticsGroup.
• Asian LNG demand looks to be picking up as countries take advantage of favourable prices.

In Tokyo morning trade, JGB futures are slightly weaker, -2 compared to settlement levels.

• Japan headline Aug trade figures were mixed. Exports were -0.1%y/y, against a -2.0% forecast (-2.6% was the July outcome). On the import side, we fell -5.2%y/y, against a -4.1% forecast and -7.4% prior outcome. The trade deficit was -242.5bn, against a -512.6bn forecast, while July's print was -118.4bn. In seasonally adjusted terms the trade deficit was -150.1bn, which was also better than forecast, but sub recent cycle highs for the balance (+166.5bn in Feb).
• Tariff impact was seen, with exports to the US down -13.8%y/y. To the EU exports rose 5.5%y/y, while to China exports were down a modest -0.5%y/y. The trade surplus Japan has with the US narrowed to 324bn. In Feb this year the surplus was at 918.5bn.
• Automobile exports fell 7.9% in August, the fifth consecutive decline following an 11.4% fall in July. Iron and steel exports dropped 14.9%, easing from July's 21.0% fall. Auto exports to the US fell by 28.4%.
• Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s modest rally.
• Cash JGBs are flat to 2bps cheaper across benchmarks. The benchmark 20-year yield is 1.0bp higher at 1.611% ahead of today’s supply.
• Swap rates are ~1bp higher. Swap spreads are mixed.