by Kim | Aug 27, 2018
Macro review w/c 20 Aug 2018 – From Jackson Hole, the US Fed Chairman reiterated his key principal that rate hikes that are too fast or too slow are undesirable. The path for interest rate increases will continue to be gradual and based on the incoming data. The data so far – good jobs and growth numbers and low inflation.
The FOMC minutes provided further insight, especially around yield curve inversion – and highlights the range of opinions that exist regarding how members view yield curve inversion. It’s possible the yield curve could invert in the short-term (already flat) – it’s not clear how the FOMC members will balance “good data” with possibly hiking into an inversion. The next FOMC meeting is 26 Sept and rates are expected to increase.
The RBA minutes continued to highlight that while the next move in rates is likely to be up, there was no strong case for an increase in the near-term.
US-Mexico trade talks appear to be making headway, especially on key issues regarding the easing of the sunset clause requirement. The Canadian Foreign Minister has stated that Canada will re-join NAFTA negotiations once the US-Mexico deal agreed.
US-China negotiations did not appear to produce any further progress on stalled talks.
Brexit talks last week also appeared to have made little headway. The EU and UK negotiators have now made negotiations ongoing to meet key deadlines. The UK parliament returns next week, and key trade and tax bills will be in focus.
Data across the board remains mostly good with a few pockets of weakness;
US flash PMI’s highlighted that services and manufacturing continued to grow, but at a slightly slower pace in August, Durable Goods new orders and shipments declined in July.
Eurozone flash PMI’s highlighted a consistent rate of growth in August – but with a gap between the faster growth of core nations and the slowing growth in the periphery nations.
Japan flash PMI for Manufacturing highlighted a slightly faster pace of expansion led by domestic demand. Export orders have declined for 3 months in a row. CPI increased in July and the core annual rate accelerated slightly.
More detail is provided in the full review of last week – download it here (hit the back button on your browser to return to the site);
Weekly Macro Review 20Aug2018
The outlook for w/c 27 August 2018 – On liquidity, there is heavy treasury issuance this week. Key dates are 30 and 31 Aug. The US Treasury will auction and settle $267b in bills and coupons, raising approx. $46b in new money. The 4wk bill is yet to be announced. It’s month end and $20.9b of securities in the Fed SOMA will mature on 31 Aug – of that, $9b will be reinvested.
Trade – given previous timelines and current progress, it’s possible that a deal between US and Mexico on NAFTA could be announced this week. The restarting of US-China negotiations last week appears to have made little headway so far – awaiting announcement of further rounds of negotiations and/or escalations.
Brexit negotiations will now become ongoing between the UK and the EU. The UK parliament returns from summer recess next week.
Key data this week is focused on growth and CPI;
US – the second estimate of Q2 GDP and PCE and Core PCE prices for July
Eurozone – Final CPI for July and German prelim CPI for Aug
Canada – Q2 GDP
Further detail is provided in the full brief – download it here (hit the back button on your browser to return to the site);
Weekly Macro Brief 27Aug2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Mars Capital Partners | Aug 27, 2018
The summer grind continues as bullish triangles led the risk markets higher with no signs of a tradable top. The US$ started its corrective decline as expected which supported Emerging Markets and commodities across the board. Markets are poorly positioned for a near term US$ decline so we should expect a continuation of these near […]
by Kim | Aug 20, 2018
Macro review for w/c 13 August 2018 – Positive developments on trade this week. NAFTA talks between the US and Mexico continued possibly with some breakthroughs on new rules on auto trade and agricultural trade. Canada is yet to re-join talks. Talks are set to resume between the US and China later this month. The USTR process for the next tranche of Chinese tariffs continues with public hearings taking place this week.
Growth and spending data remained positive but CPI data points were weaker in the Eurozone and UK.
US data was somewhat positive. Retail sales were stronger in July, but growth was revised lower for June. Much slower growth in industrial production for the start of Q3. Regional data was mixed – a stronger Empire State Manufacturing Survey, but slower growth from the Philly Fed Business Outlook Survey.
Eurozone –flash GDP quarterly growth was unchanged from the previous quarter and the annual rate slowed slightly to +2.2%. Industrial production declined in June after a stronger result in May – declines were recorded across the larger Euro economies. CPI declined in July (with some larger declines across key Euro economies also) but accelerated higher on an annual basis. The annual rate is still influenced mostly by higher energy prices – annual CPI ex energy is growing at a more moderate +1.4%.
UK retail sales data was stronger with sales volume growth accelerating in July – June results revised higher also. CPI growth was zero for the month (goods components declined) and there was no change in the annual rate of 2.3%.
Brexit – no outcomes announced from the lower level talks of last week, little progress made on key points of the withdrawal agreement. An increasing focus on preparedness for Brexit with ‘no deal’ as the UK government will commence release of ‘no deal’ contingency plans starting this week.
The Zew Financial Market report (25 Jun – 9 Jul) highlights that economic expectation indices have fallen across most major economies, but the assessment of current conditions remains broadly positive.
More detail is provided in the full review of last week – download it here (hit the back button on your browser to return to the site);
Weekly Macro Review 13Aug2018
The outlook for w/c 20 August 2018 – The big event for this week will be the Jackson Hole central banking conference/symposium commencing on 23 August.
Liquidity – A light week with the US Treasury possibly paying down $7b (4wk bill auction amount TBA).
Trade – could expect some further breakthroughs on NAFTA (US-Mexico) – both sides claiming a deal possible by the end of August. Awaiting further detail on the US-China trade talks announced last week. The second tranche of tariffs on Chinese imports goes into effect 23 August.
High-level Brexit talks recommence this week between the UK and EU – 21 August. The UK government will commence release of ‘no deal’ contingency plans this week.
A relatively quiet data week – preliminary August PMI’s will be released, US Durable Goods Orders, Japanese CPI, detailed German Q2 GDP and Canadian Retail Sales.
Further detail is provided in the full brief – download it here (hit the back button on your browser to return to the site);
Weekly Macro Brief 13Aug2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Mars Capital Partners | Aug 20, 2018
Perspective - as global liquidity declines, capital flows to the best house on a bad street in a flight to perceived safety. The US capital markets have been the main beneficiary while Emerging markets and higher risk asset classes get liquidated. We are in a world of historically high and growing dollar denominated debt in […]
by Kim | Aug 13, 2018
Macro Review for w/c 6 August 2018 – Starting with central bank meetings – the RBA and RBNZ both kept rates on hold last week. The BoJ summary of opinions report highlighted little differences of opinion on recent MP implementation changes. One opinion stood out – “Under the current policy, the possibility of the inflation rate increasing gradually toward 2 percent is low”.
US data continues to support Fed rate trajectory – CPI continued to grow with CPI ex fuel and food accelerating from 2.3% to 2.4% in June. Services growth (ex-energy services) remained at 3.1%. Consumer credit pulled back in the latest month but was higher overall in Q2 versus Q1. JOLTS, especially job openings, remain at historical highs.
Japan prelim Q2 GDP growth was stronger, driven higher in the quarter by private consumption. What stood out was the acceleration in the growth of compensation of employees in the quarter. Net exports detracted from growth on the back of slower export growth.
UK prelim Q2 GDP was also stronger. From the expenditure perspective, a large adjustment was applied to changes in inventories, making investment look stronger. Services continued to grow and contributed most to overall GDP growth. Construction reversed last quarters decline but was offset by a decline in total production (incl manufacturing).
On the trade front, the USTR confirmed that tariffs on the remaining $16b of the original $50b of Chinese imports would go into effect from 23 August 2018.
More detail is provided in the full review of last week – download it here (hit the back button on your browser to return to the site);
Weekly Macro Review 06August2018
The outlook for w/c 13 August 2018 – A relatively heavy week of treasury issuance with the US Treasury raising approx. $51b in new money (4wk bill TBA). Its also mid-month and $23b in US Fed holdings of securities will mature – $10b of that will be reinvested.
Trade – NAFTA talks will continue between US and Mexico this week – both sides claiming a deal possible by the end of August.
Official Brexit negotiations recommence this week between the UK and EU.
Growth, retail sales and inflation data are in focus this week;
- US Retail Sales for July and a further read on industrial production and regional manufacturing.
- Eurozone Q2 prelim GDP, CPI for July, Industrial production and sentiment.
- Key UK data – Retail Sales and CPI for July.
- Australian Labour Force data for July and the Q2 Wage Price Index.
Further detail is provided in the full brief – download it here (hit the back button on your browser to return to the site);
Weekly Macro Brief 13Aug2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
