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);
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
