Macro Review for w/c 16 July; It was another important week on trade. Japan and the EU signed a large free trade deal, including specific provisions linked to the Paris Climate Agreement – “We are sending a strong signal to the world that two of its biggest economies still believe in open trade, opposing both unilateralism and protectionism.”
Late last week President Trump signalled he is willing to “go to 500”, further escalating the trade dispute with China by imposing tariffs on all Chinese imports.
Fed Chairman Powell provided an optimistic view of the US economy in his Senate Banking Committee testimony. It was seen as further support for two more rate increases this year – Sept and Dec.
US data was good – with continued growth in retail sales and stronger growth in industrial production in June after May was revised even lower. Regional surveys for NY and Philadelphia were a little mixed – current activity still in expansion, but some forward-looking indicators moderating.
UK data; retail sales declined in June but still a stronger Q2 overall, UK employment growth remains stable, but the decline in unemployment is becoming smaller as more workers enter the labour market and CPI growth mostly unchanged, with underlying/core CPI lower. This is amid the deep divisions and debate on the governments’ plan for Brexit. Stripping away the noise, the UK representatives will return to Brussels this week to “negotiate an operative backstop – an “all-weather insurance policy” – to address the issues of Ireland and Northern Ireland”. This will be an important step towards completing a withdrawal agreement (due mid-Oct 2018) to avoid a no-deal Brexit.
Headline CPI data in the Eurozone was influenced by higher energy prices and underlying CPI growth remains little changed +1.3% (annual).
Japanese headline CPI growth was also influenced by higher energy prices; ex-food & energy CPI declined in June by -0.1% and the annual rate slowed to +0.2%. The BoJ is planning a special review of the causes of enduring weakness in price growth.
More detail is provided in the full review – download it here (hit the back button on your browser to return to the site);
Weekly Macro Review 16July2018
The outlook for w/c 23 July 2018; Brexit negotiations shift to Brussels this week (26 July) where an important element of the withdrawal agreement will be addressed/negotiated; the issues of Ireland and Northern Ireland.
Trade disputes and negotiations remain a focus. President Trump has threatened a further escalation of tariffs on China, NAFTA negotiations resume albeit in a fragmented approach, US-Japan trade talks were supposed to be scheduled for July, President Trump also meets with European Commissioner Jean-Claude Juncker in Washington this week to continue trade talks and awaiting outcomes of public hearings on section 232 auto tariffs held last week.
Liquidity – moderate supply of treasuries this week with the US Treasury auctioning and settling approx. $141b in ST bills and raising approx. $16b in new money this week (could <$10b – 4wk bill TBA). The key date to watch is 26 July. The US Treasury will also auction $119b in notes, to settle next week.
ECB rates decision this week.
US GDP Q2 – the consensus currently at +4.2% (real GDP, qtr annualized), a large acceleration from Q1 growth of 2%.
Australia CPI Q2.
Preliminary PMI’s July – first gauge of activity for July across US, Japan, Eurozone and Germany.
Earnings continue and several of the FAANG’s report this week – Alphabet/Google, Amazon and Facebook.
Further detail is provided in the full brief – download it here (hit the back button on your browser to return to the site);
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
