by Kim | Sep 30, 2018
Macro review for w/c 24 September 2018 – As expected the US Federal Reserve increased the FFR by 25bps last week. A key change to the statement was the removal of “stance remains accommodative” but this did not signal a change in the path of policy. Projections for real GDP growth were upgraded in line with fiscal stimulus.
US data this week confirmed that real GDP growth in Q2 was 4.2% annualised and that inflation is not accelerating. In fact, core PCE price index growth slowed and came in at 0% in Aug. The annual headline rate also slowed slightly and remains around the Fed target.
Fixed mortgage rates continued to increase to new post GFC highs this week. Growth in house prices slowed. New home sales posted a slightly better month of growth after slowing for several months. From last week, existing home sales have declined over the last few months.
European inflation data continues to be led higher by accelerating energy prices. Prelim German and Euro-area CPI growth increased in Sept, coming in at +2.3% and +2.1% respectively. Euro-area CPI ex energy in the prelim estimate was +1.3% (annual).
Bank of Japan Governor Kuroda discouraged the idea that the BoJ might start to normalise rates. Governor Kuroda confirmed that extremely low rates will remain for an “extended period of time” meaning “a fairly long period of time”.
Brexit remains in a state of flux. Awaiting revised details of the trade component of Brexit, likely after the Conservative Party conference next week (from 30 Sep). UK GDP growth for Q2 was confirmed at +0.4% but Q1 growth was revised lower to +0.1%.
Expecting the US and Canada to announce details of an agreement on NAFTA early this week (Sunday). The US and Japan have agreed to commenced talks for a bilateral trade deal. The start of talks protects Japanese automakers from the threat of tariffs for now.
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 24Sept2018
The outlook for w/c 1 October 2018 – Medium supply of treasuries this week with the US Treasury auctioning and settling $135b in ST bills and settling $106b in note auctions from last week (settlement 1 Oct). The US Treasury will raise approx. $22b in new money this week. The 4wk bill is yet to be announced.
It’s the start of a new quarter and the monthly cap for reinvestment of maturing securities on the Fed balance sheet increases to $30b for treasuries and $20b for MBS. These are now the maximum cap levels and are not scheduled to increase further.
A big data week;
PMI’s for Sept will be released for the US, Asian and European economies.
US jobs data.
A heavy schedule of US Fed speeches, including Chairman Powell.
Australia RBA rates decision and retail sales.
Expecting an announcement on a NAFTA agreement between the US and Canada early in the week.
Brexit – the new form of the trade component of the Brexit withdrawal agreement will likely be announced after the Conservative party conference this week. Less than 4 weeks remain to negotiate the Irish border backstop and the broader trade element of the withdrawal agreement.
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 01Oct2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Mars Capital Partners | Sep 30, 2018
The global risk market themes of short bonds and long equities held last week - these are the most overcrowded and leveraged one-sided trades we have seen in recent times. While we are not fighting these trends (having been on the right side of the short bond idea) I am alert to a sudden reversal. […]
by Kim | Sep 24, 2018
Macro review for w/c 17 Sept 2018 – Trade and Brexit negotiations took a negative turn this week. The US-China trade dispute escalated with further tariffs implemented by both sides. The next round of trade talks was cancelled by China. Negotiations between US and Canada have yet to resolve issues on NAFTA. The EU rejected the UK Chequers plan for the post Brexit trade relationship and this now leaves four weeks to create a new deal, while no further progress has been made on the issues of the Irish border.
The preliminary PMI’s didn’t hold much good news either. The US composite PMI slowed further, led by services – the overall pace of expansion has been slower in Q3. The Eurozone composite PMI also continued to slow – with further evidence of slowing manufacturing and export activity, especially in core markets of France and Germany. Japanese manufacturing PMI improved.
Annual CPI growth continues to be influenced by higher energy/transport costs –
Eurozone; annual headline CPI growth slowed to +2%, around the ECB’s target, but annual growth of CPI ex energy lower at +1.4%.
UK; annual growth of CPI-H incl owner occ housing costs came in at +2.4%, but ex volatile items CPI growth was lower at +1.9%.
Japan; the BoJ measures CPI less fresh food, which came in higher at +0.9%, but still well below the BoJ target, annual growth in CPI ex fresh food and energy was less than half that rate at +0.4%.
Canada; headline CPI growth slowed to +2.8%, but again CPI ex energy annual growth was lower at +2.2%. The BoC measures of core CPI accelerated somewhat in the latest month and are now sitting between +2 and 2.2%.
The BoJ left monetary policy settings unchanged at the latest meeting.
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 17Sept2018
The outlook for w/c 24 Sept 2018 – Relatively light supply of treasuries this week. The US Treasury will settle approx. $163b in treasuries this week, raising approx. $6b in new money – 4wk bill is yet to be announced.
New tariffs imposed by the US and China will go into effect this week. Considering previous threats, it is possible that the US could impose the further $267b in tariffs after China retaliated with tariffs and cancelled its high-level trade visit.
President Trump and JapanesePM Abe will meet this week on the sidelines of the UN General Assembly. Auto tariffs and the trade deficit are likely to be in focus.
The uncertainty surrounding Brexit is now heightened after the EU rejected the UK Chequers plan. Awaiting the next steps for UK-EU to reconnect on trade and work through the Irish border issues. A deadline of four weeks remains.
FOMC meets this week – expectations are for another 25bps increase to 2-2.25%
This is the last week before the ECB reduces it net asset purchases by half. As of Oct, the ECB net asset purchases will be at a rate of €15b/month.
Important data this week;
US Q2 GDP third estimate, PCE for Aug, regional surveys
Eurozone prelim CPI for Sep
UK 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 24Sept2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Mars Capital Partners | Sep 24, 2018
Last week saw the Dow finally confirm the SPX, Nasdaq and Russell 2000 push to new ATH's. Bonds continued lower for a hard test of our 116 key support for the TLT with yields testing major resistance. The DXY continued its corrective decline while commodities like Crude Oil and Copper rallied unexpectedly. Key themes to […]
by Kim | Sep 17, 2018
Macro review for w/c 10 September 2018 – The week ended with threats of escalation in the trade dispute between US and China. Reports of possible retaliation from China amounts to what would be a major disruption to US supply chains in China. Escalation from China will be contingent on whether the US moves ahead with the next round of tariffs.
US data continues in line with the Fed’s rate trajectory. Good results from JOLTs data highlights further growth in employment. Consumer credit growth was stronger again, likely to help underpin expenditure growth – although, the motor vehicle component of non-revolving loans has been slowing. This is was highlighted in the slower retail sales growth this month. Retail sales growth was slower across most areas, but notably in auto’s. US CPI data was stable this month and annual rates of growth have been moderating. Slowing PPI suggest lower price pressure coming through the supply chain. Industrial production continued to grow.
The Eurozone industrial production looks like it could be rolling over, consistent with slowing GDP growth, slower German industrial production and slower growth in manufacturing PMI’s. Eurozone international trade data further confirmed the recent anecdotes from the PMI’s of slowing export growth. This will be important to watch.
ECB kept rates on hold – note that after Sept, the ECB will reduce net asset purchases by half to €15b/month.
Despite the increasingly negative and destabilising Brexit process, UK growth remains surprisingly robust. The rolling quarterly GDP was led higher by stronger retail activity throughout May-Jul. Some caution around labour market trends with employment growth clearly slowing. The BoE kept rates on hold.
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 10Sept2018
The outlook for w/c 17 September 2018 – Moderate supply of treasuries this week. The US Treasury will auction approx. $135b in ST bills and settle a total of approx. $208b in bills and coupons (including auctions from last week). The 4wk bill is yet to be announced. The US Treasury will raise approx. $21b in new money this week.
Trade will be a key focus this week. Threats of escalation over the weekend after Vice Premier Lui He was invited to Washington to re-start trade talks. Reports are that China may not accept the invitation if the next round of tariffs are implemented. There is a threat that China could retaliate by creating disruptions to US supply chains in China (such actions would have obvious implications for any other country considering operating within China in the future).
Brexit will be a key focus of an unofficial summit of EU leaders in Salzburg this week 19-20 Sept. No final agreement is likely, but it is hoped that the meeting will create new momentum leading into the final stages of the negotiations.
BoJ rates decision this week.
Important data out this week; Prelim PMI’s across US, Europe and Japan, providing an important read on growth momentum going into the final month of Q3. CPI reports from the Eurozone, UK, Japan and Canada. Australian house price index for Q2 and UK retail sales for Aug.
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 17Sept2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
