Australian GDP lowest for decade, Hong Kong stocks jump on bill hopes – as it happened
Australian data shows the economy growing at its slowest rate since 2009, but the treasurer says Australia is 'resilient'
7.40am BST
Markets are closing all over Asia Pacific so it's time for me to step down. My colleagues in London will soon be starting a business blog from the northern hemisphere so check in with them to find out how the markets react to the latest Brexit shenanigans and all the potentially very good news about Hong Kong pulling its extradition bill.
These were the highlights today:
7.26am BST
The Hong Kong market has jumped 3% after the South China Morning Post reported that the government is withdrawing the controversial China extradition bill that sparked weeks of protest.
Hang Seng futures up over 3.5% pic.twitter.com/kRISBUVsbm
7.24am BST
Big turnaround for the ASX200 which has closed up 24 points or 0.31% at 6553 points.
The Nikkei is done for the day and has finished up 24 points, or 0.12%, at 20,649 points.
European Opening Calls:#FTSE 7293 +0.34%#DAX 11982 +0.60%#CAC 5487 +0.38%#MIB 21623 +1.05%#IBEX 8860 +0.57%#STOXX 3438 +0.51%
6.47am BST
For an in-depth examination of the GDP numbers, look no further than this column by my colleague Greg Jericho. He argues that but for government consumption the economy would have turned negative. He also points out that we've had four straight quarters of economic growth below trend - the first time that's happened since the 1990s.
Related: No surprise, but shocking: there's no other way to spin Australia's GDP | Greg Jericho
6.44am BST
Time to check up on the scores around the grounds.
6.28am BST
My colleague in Hong Kong, Verna Yu, has been having a longer look at the shocking economic data from the crisis-torn territory released earlier today showing that business activity has collapsed in recent weeks.
She writes that the city is on "the verge of recession" after a survey of business activity showed a reading of 40.8 for August - the lowest number ever recorded in the history of the series. Growth was already slowing before the protests started - the economy shrank 0.4% in the three months to June - so a second successive month in the red seems certain.
Related: Hong Kong on brink of recession as protests and trade war take toll
6.17am BST
The global slowdown has another obvious effect - the price of gold is on the rise and heading towards a six-year high.
Although it dipped slightly in Asian trade by 0.2% to $1,543.02 per ounce, it is hovering near last week's $1,554.56, its highest since April 2013.
"Rising US rate cut expectations over lacklustre economic data will boost bullion appeal as traders ease up on US dollar strength.
6.03am BST
The trade war between the US and China is usually blamed for the slowing world economy and problems we've seen in economies such as South Korea, Hong Kong and even Australia.
But as this thread from Natixis economist Trinh Nguyen explains, the slowdown was already under way thanks to the rising US dollar and China's decision to rein in its gigantic credit bubble, setting off a credit crunch in emerging markets.
Nope, it is the slowdown of the Chinese economy dude to massive rise of credit & now credit is slowing & so the world is living with limited sources of growth. Trade-war just tips that China slowdown which was inevitable. Have people forgottten about the massive leveraging? "aTMi https://t.co/j5WNhSWhLB
5.40am BST
The treasurer, Josh Frydenberg, has described the GDP figures as a sign of the "remarkable resilience" of the Australian economy.
Seeking to find an upbeat note on the weak numbers, Frydenberg repeated the standard government line of the past few days by saying the data did not take into account the full effect of the federal income tax cuts and the central bank's 50 basis points worth of interest rate cuts.
It's a reminder of the remarkable resilience of the Australian economy and a repudiation of all those who have sought to talk it down. The fundamentals of the Australian economy are strong.
We are having a discussion with key stakeholders about other ways we can boost investment, and those decisions will be decisions at budget time.
5.34am BST
The Australian Council of Social Service has called on the government to increase the Newstart allowance in order to stimulate the Australian economy.
"The government can effectively work to boost the flagging economy by acting on poverty and homelessness," Acoss director of policy Jacqueline Phillips said. "An increase to Newstart would immediately boost the economy by providing stimulus where it is needed most, including in struggling regional communities.
5.16am BST
The British pound has continued to climb back from a 33-year low overnight to the dizzying heights of $1.2107 thanks to the Commons defeat inflicted on Boris Johnson.
Traders are betting that the success of Tory rebels and opposition MPs in seizing control of parliamentary business might succeed in taking no deal off the table.
Related: 'Johnson loses control': how the papers covered the historic Commons defeat
4.58am BST
More reaction in Australia where there is a nationwide hunt for the gloomiest way to cast this morning's GDP figures.
The consensus is that the annualised rate of 1.4% is the worst since September 2009. But to find a figure worse than 1.4% you have to go back in time to 2000 when growth bottomed out just above 1%.
Looking ahead, government consumption is likely to remain supportive in the medium term given spending commitments outside defense, while real exports are somewhat supply constrained and facing a deteriorating global demand backdrop. Capital spending looks to be improving in some pockets (e.g. mining and health-related sectors), but the upside for plant and equipment spending overall is limited by weak business profitability, and we expect any such improvement will be largely offset by moderation in public spending projects, and sharp outright declines in home building.
This leaves household consumption as key for the growth outlook into 2020, and as articulated by RBA officials, this is also the area of greatest uncertainty for the forecasts, given the pull from balance sheet drags and push from still-decent labour income growth.
4.17am BST
New car sales have fallen again in Australia in another sign of weak consumer demand.
The number of vehicles sold in August month was down 10.1% compared with August 2018, according to the country's peak motor industry group. It follows a fall of 2.8% in July, the Federal Chamber of Automotive Industries (FCAI) said.
4.06am BST
Outside Australia, stock markets have bounced thanks to the strong service sector data from China.
The Shanghai Composite index was up 0.45% this morning and they're loving the numbers in Hong Kong where the Hang Seng is up 1.48%.
3.39am BST
Craig James, chief economist at CommSec, says Australia's record economic expansion has entered its 29th year.
If you are under the age of 45 you probably have never experienced a recession in your working life. Remarkable. The current US economic expansion is also a record. But it has extended for 10 years rather than 28 years. Australia's record economic expansion is now in its 29th year. In fact there has been 33 consecutive quarters of consecutive economic growth (over eight years without a negative result).
3.28am BST
Dr Sarah Hunter, chief economist for BIS Oxford Economics, has a similar copnclusion to the folks at Capital, pinpointing stagnant wage growth as a factor in curbing GDP.
While there will be some support for households from the cash rate and tax cuts, weak income growth will fundamentally constrain spending in the near term (the savings rate actually dipped down slightly compared to the March quarter). And the residential construction downturn has much further to run - activity levels are likely to continue declining until at least 2021. The positive contribution from net exports is also likely to fade (though remain positive), with the ramp up in LNG exports set to taper off.
Overall, growth is likely to remain relatively subdued until the early 2020s. But the June quarter is likely to be the trough for the y/y growth rate - the economy grew by just 1.4% y/y from June 2018 - as the very weak quarters from late 2018 and early 2019 drop out of the calculation.
3.15am BST
Capital Economics has given its initial verdict on the GDP numbers. They reckon growth won't pick up much in the next quarter, despite what the government is saying, because iron ore exports won't be able to contribute as much.
Marcel Thieliant , senior Australia & New Zealand economist, said:
GDP growth held steady in the second quarter but the hangover from high household debt suggests growth will stabilise rather than pick up much further over the coming quarters. The 0.5% q/q increase in GDP in the second quarter was in line with the Bloomberg median and resulted in annual GDP growth of just 1.4%, matching the low reached during the global financial crisis. And because GDP growth in the first quarter was revised up, it meant that quarterly growth held steady in Q2. The 0.6 percentage point boost from net trade in part reflects the unwinding of supply disruptions to iron ore in the second quarter and a much smaller contribution in the third quarter is likely. However, inventories are unlikely to keep knocking off 0.5 ppt from quarterly growth as they did last quarter.
3.09am BST
Activity in China's services sector rose at its fastest pace in three months in August as new orders rose, according to the latest PMI survey today.
The expansion saw the biggest increase in hiring in over a year, the private Caixin/Markit services purchasing managers' index (PMI) showed.
3.06am BST
The Australian GDP figures will heap more pressure on the Reserve Bank to cut rates. Its forecasts for the second quarter said the economy would grow by 0.75%, with an annualised rate of 1.7%. So it's missed by a bit of a distance.
The Reserve Bank governor Philip Lowe yesterday opted to keep rates on hold and said in his statement after the bank's monthly meeting that that he thought that rising house prices might give a bit of a boost to household consumption, one of the areas of the economy that is weakest.
And to think, the RBA chose to keep monetary policy relatively tight yesterday?
Aus GDP for 2Q2019 grew 0.5%qoq/1.4%yoy, in-line with economist expectations. These data are lower than the #RBA growth forecasts of 0.75%qoq/1.7%yoy, putting more pressure on the RBA to ease further.#ausbiz pic.twitter.com/W8Lt5nrOhA
Not many countries can say they have been able deflate an asset price bubble without knocking their economy into recession. A flexible economy combined with good management and a bit of luck got this outcome (so far). https://t.co/yWewzuh7q9
2.51am BST
The ASX200 has stayed broadly falt throughout the GDp excitement, and sits 47 points off at 6.525.
The Aussie dollar is up again at US67.78 as traders see the results as encouraging for the economy.
2.47am BST
Labor's Jim Chalmers is quick out of the blocks to highlight that these are the worst annualised numbers for GDP since September 2009, when the world was still in the middle of the financial crisis.
New #nationalaccounts data shows slowest annual economic growth in a decade on the Liberals' watch and yet still no plan to turn things around #auspol #ausecon
2.42am BST
Household consumption and business investment and inventories were the biggest drags on growth, the release by the ABS shows.
This is a handy graph explaining what the breakdown was:
2.39am BST
The annualised growth rate of 1.4% is the lowest recorded since the September quarter in 2009.
Although the quarterly rate came in at a slightly better than expected 0.5%, that annual rate will be the one that gets all the attention.
The Australian economy expanded by 0.5% in the June quarter and has increased by 1.4% over the past year. Annual growth is at its lowest level since September 2009 #ausbiz #auspol pic.twitter.com/CDk5f1efbG
Aus GDP prints on par with consensus estimates 0.5% q/q... annual growth 1.4% y/y weakest since Q3 2009 post GFC #GDP #Aus
2.32am BST
The economy grew by 0.5% in the second quarter, making a yearly rate of 1.4%
2.29am BST
We've had a range of forecasts for GDP from minus 6 (Credit Suisse) to plus 7 (Stephen Koukoulas) on the quarterly rate.
So what will it be ...
2.20am BST
Less than 20 minutes before those GDP numbers. Most forecasts are expecting a number of around 0.4%, month on month, and 1.4% for the yearly rate.
We've already had Scott Morrison saying earlier that he expects the growth rate to improve as tax cuts and interest rate cuts take more effect later in the year, giving his government a bit of relief.
Iron ore futures one year forward indicate return to 50-70 $ price range. On that level, lowest cost producers still have > 50% EBIT margin. (In chart, more informative Dec futures.) Supply constraints are easing. #steel #Stahl #konjunktur #industrie #commodities pic.twitter.com/Z5zrGF0zea
The price of iron ore took a 30% hit in August with other commodity prices also dropping. Is stability in sight?#Economy #Commodities #Brexit #Insightshttps://t.co/zll1lISNcA pic.twitter.com/seY8a8R3OP
2.10am BST
We'll turn the focus on to Australian GDP in a minute, but another pretty shocking statistic from Asia this morning: sales of Japanese cars to South Korea fell 57% in August compared with a year before.
It follows a consumer boycott of Japanese goods in a growing diplomatic row about the legacy of the second world war.
2.06am BST
The forecasters at Capital Economics wrote last week that Hong Kong was, by their reckoning, already in recession. Evidence was provided in Friday's figures on tourist arrivals, which were down 12% in July compared with June.
With spending by residents and tourists in sharp decline, and the trade war not going away, we think Hong Kong's economy is in recession.
1.56am BST
Hong Kong is surely heading into a recession, if it's not already there.
The city's manufacturing sector has recorded its lowest activity reading ever in Ausgust, according to the just-released PMI survey, as it struggles with its biggest political crisis since the handover in 1997.
Hong Kong Mfg PMI drops to lowest on record pic.twitter.com/MfPbKIyQTV
1.49am BST
Japan's service sector expanded in August, providing some better news for stock markets gripped with fears of a global downturn.
The final Jibun Bank Japan services purchasing managers' index (PMI) rose to 53.3 from 51.8 in July on a seasonally adjusted basis, marking the fastest growth since October 2017. The final gauge was slightly lower than the 53.4 reading released in the flash PMI on 22 August. A reading below 50 marks contraction.
1.39am BST
If you think the Australian economy is struggling, take a look at Britain.
Amid the prospect of a do-or-die general election to decide the fate of Brexit, the pound fell to its lowest point for three years overnight. Sterling slumped as low as $1.1959 at one point on Tuesday before recovering some ground. It's now at $1.209.
#GBPUSD - a bullish pinbar stopped just shy of the 2016 low, and closed back above 1.20. With #parliament back from recess, we expect lot of headline risk for #GBP pairs (which doesn't always play nicely with technicals...) ^MS #Cable #Brexit pic.twitter.com/E5MLlHYcTh
Related: Brexit: Boris Johnson to table motion for general election - live news
1.29am BST
Banks are leading the way down in Sydney with the ASX Financials index down more than 1.1%. Westpac is the worst performer of the big four banks, off almost 1.3%.
Also among the biggest fallers is the building products group, CSR, which is off 5%.
1.26am BST
The Aussie dollar is up around 0.13% at US67.65c.
1.25am BST
The ASX200 is down this morning by around 0.9% - a fall of almost 60 points to 6,514.
So too are stocks in Japan and Korea where trading is also under way.
1.18am BST
The word that you won't catch the PM saying is recession. We're not there yet in Australia, of course, because you need two successive quarters of negative growth to register an official recession*.
But awareness of the idea is increasing across the country, which hasn't seen this beast for 28 years. Data produced by the realtime media monitoring firm Streem reveals how use of the word recession has increased 610% over the past year in stories about the Australian economy.
Related: Election blow for Coalition as Australia falls into per-capita recession
1.00am BST
My Canberra colleague Paul Karp has this on Scott Morrison's comments this morning ahead of what are expected to be poor GDP figures:
The PM has told 3AW Radio it was "ridiculous" to argue tax cuts had failed to stimulate the Australian economy, noting that the GDP figures relate to the June quarter and tax cuts won't show up until the September quarter.
What I'll do is continue to monitor the implementation of our plans. I'm not surprised by the difficulties we're seeing at the moment. When we put the budget together in May I said we should cut taxes, we should spend more on infrastructure, we should invest more in skills transitioning. I said we need to keep the rate of jobs growth running, which is above what our budget estimated, and we've seen record employment growth.
We will carefully and soberly look at what's happening in the economy. We've got plans that we put in place in the budget to deal with exactly the situation we're talking about now, and we'll watch those programs ... I'm not seeing anything at the moment which would ... draw that question to our consideration. I don't believe it is [on the table]. We're putting the budget in a much stronger position - this is the first budget surplus year we've been in for 12 years. I know Labor and others are so quick to throw away those gains ... at the first breath of wind. Our government won't do that - we will stay the course, we will be consistent, we will be measured, we will be reasoned.
12.46am BST
My colleague Ben Butler has been looking at what's in store on the markets this morning:
Australia's market is set for a fall this morning no matter what GDP figures reveal after international markets fell overnight.
12.37am BST
Good morning and welcome to the business live blog.
The big event today is the release of Australian gross domestic product figures for the second quarter of the year. The number is widely expected by forecasters to come in at 0.4%, with an annualised rate of 1.4%. This would represent close to Australia's worst economic growth for a decade and would pile pressure on the government to explain away such weak growth after their six years in power. Scott Morrison has been speaking about this already today so we'll have some of his words very shortly.
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