Housing Finance

Housing Finance figures during the month of May showed total commitments rose 0.6% (ex-refinancing) in the month, with this following
the gain of 1.5% in April. This now makes two gains in a row after a
period of six consecutive falls in housing finance. We don’t want to read
too much into this data, but it does imply a leveling out in housing
finance after a period of reasonably sharp declines. Of course, even with
this we would argue that the ‘heat’ has clearly been coming out of the
Australian housing market for some time.

• Currently market is pricing the August RBA at a low 20% chance of a tightening, considering the employment strength maybe it should be closer to 40%.

China
Chinese exports were up 43.9%yoy in June, which while slower than the year-on-year change recorded in May of 48.5% was above analyst expectations. It will provide support for market sentiment in the very short term, as it helps ease some investors' concern on the impact of global deceleration on China’s export performance. On the other hand, China’s import growth decelerated sharply to 34.1% yoy in June from 58% in Jan-May, suggesting that domestic demand is slowing.