The macro review for w/c 8 October 2018 – Inflation reports in the US were somewhat mixed. Growth in producer prices in Aug was higher, due to transport and warehouse prices. The annual core PPI growth remains at its highest level of the last 12months at +2.9%. In September, consumer price growth was slower – with a lower impact from energy prices, but continued pressure from shelter. Annual growth in core CPI remained at 2.2%, while the headline CPI slowed to +2.3%.
An important speech by the NY Fed President/CEO and Vice Chairman of the FOMC – John Williams. The Fed will review its current framework for managing interest rates over the coming months. Will either continue using the current system or go back to the pre-crisis system – possible implications for the value of excess bank reserves held at the Fed. Also, re-iterated that the Fed is nearing the end of the normalization process – less role for forward guidance and a shift away from using the ‘neutral’ rate benchmark.
European industrial production rebounded in August. But within that, German industrial production continued to decline, albeit to a lesser degree than the prior month.
German CPI reached its highest level in seven years at +2.3% on the back of higher energy prices – core CPI growth remains lower at +1.5%.
Australian housing – new lending for housing continued to fall in Aug. This time, the decline included owner occupier housing credit, notably in the two key states of NSW and to a lesser degree Vic. This data is prior to the out-of-cycle mortgage rate hikes taken by several of the major banks back at the start of September. Auction clearance rates remain at their lows (NSW & Vic). The data suggests further falls in house/apartment prices.
Brexit – at this stage, no further progress has been made on resolving the key issues of the Brexit withdrawal agreement. Unless progress is made over the next few days, its not likely that an additional EC summit will be announced for November.
It now looks likely that US President Trump and Chinese President Xi will meet on the sidelines of the G20 in late November.
There is more detail covered in the full review for last week – use the links in the contents page to navigate to different country sections. Download here (hit the back button on your browser to return to the site);
The outlook for w/c 15 October 2018 – The new 8 week bill will go to auction for the first time this week, slightly ahead of schedule. It will be a heavy week of treasury settlements. This week with the US Treasury will auction and settle approx. $154b in ST bills (the 4wk and 8wk are yet to be announced), raising approx. $21b in new money. The longer-term notes and bonds auctioned last week will settle on Monday 15 Oct – raising approx. $50b in new money. In all, $228b in auctions will settle this week, raising approx. $71b in new money (net new issuance).
The key releases this week;
US Retail Sales and FOMC minutes
Chinese data will be in focus – especially Q3 GDP growth and New Loans
The UK will be in the thick of it this week – the EC summit, CPI, PPI, Retail Sales and the Labour Market Survey. The EC summit is on 17-18 Oct and it will likely be announced on the 18 Oct whether enough progress has been made on the agreement to call an emergency EU meeting in November to finalize the Brexit deal. The next EC meeting will be December and it should be clear whether negotiations will/can get pushed out in time for an agreement to be finalized at the December meeting.
Further detail and a calendar of key releases is provided in the full briefing document – 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
