Australian GDP, ADP figures and ECB doubts

Yesterday started with the recognition that 28 years of economic growth in Australia has officially come to an end. In the second quarter, Australia's GDP fell by 7%, which was the largest decline in history. Considering that in the first quarter, the country's GDP fell by 0.3%, one can congratulate the Australian economy on the transition to a recession.

Meanwhile, the ECB seems to be seriously concerned about the strengthening of the euro (after all, after such inflationary data - recall that at the end of August deflation was recorded in the Eurozone - this is no wonder). At least the ECB chief economist Philip Lane noted that the exchange rate matters for monetary policy. In theory, the ECB could try to devalue the euro locally in order to accelerate inflation without cutting rates or expanding its quantitative easing program.

Another important event yesterday, which is especially important in anticipation of Friday's statistics on the US labor market, was the employment data from the ADP. Analysts predicted an increase in the indicator by 1000K, in fact, the growth was 428K. And although the figure itself is several times higher than the average pre-pandemic values, it was below forecast more than twice which is likely a reason for disappointment.

Nevertheless, it is not worth making any conclusions and projections on the NFP figures, because statistically, the relationship between the indicators (NFP and ADP): it is direct, but not strong enough (about 20-25%).

From other news, we note the lack of progress in negotiations between Democrats and Republicans on a new stimulus package (although Treasury Minister Mnuchin emphasized the urgency of this issue and its extreme importance), as well as Biden's leadership in the presidential race. Both of these factors are rather negative for the US stock market, so we continue to consider its current growth unreasonable and out of touch with reality.