by Kim | Dec 31, 2018
We pick up the new year with a full schedule of data, heavy treasury issuance, Fed speeches and ongoing trade negotiations.
Heavy supply of
US treasuries to be settled this week with the US Treasury settling approx. $298bn
in bill and note auctions throughout the week, raising approx. $42b in new
money.
The partial US
govt shutdown continues amid escalating threats/posturing to shut down the
border with Mexico if funding for the border wall is not approved. Democrats
will take control of the House of Representatives this week on 3 Jan 2019.
US Fed Chairman
Powell will take part in a panel discussion on Friday – looking for any further
signalling on rates from the Fed Chairman.
Data releases
this week keep trade and growth in focus;
US ISM
Manufacturing PMI to provide further insight into US manufacturing momentum
after several weaker regional survey results recently.
US non-farm
payrolls will be released on Friday (despite the partial govt shutdown).
Final versions
of the Dec PMI’s will be released across key economies during the week to also provide
some insight into the extent of export new orders/trade and manufacturing slow-down
especially within the Eurozone, China and Japan.
Trade
negotiations between the US and China are set to continue next week. The 1
March deadline for negotiations remains in place.
The UK vote on Brexit remains on the radar with a vote now likely during the week of 14 Jan 2019.
More detail is provided in the full briefing document. You can download it here;
The Macro Review will be posted next Monday.
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Dec 22, 2018
The most anticipated event of the week was the FOMC meeting.
The FFR was increased for the fourth time this year. The statement of the
decision had an unexpected hawkish tone including retaining the reference to “further
hikes”. Chairman Powell’s news conference, though, emphasised more the downside
risks. At this stage, FOMC participants have revised growth somewhat lower for
2019 and “judge” that there may be a further two hikes in rates in 2019. There
were some important changes to the wording of the decision statement which were
clarified by NY Fed President Williams in his CNBC interview on Friday morning.
US data was mostly good this week. Core PCE growth ticked up
in the latest month, in line with Fed estimates. The third estimate for Q3 GDP
growth was revised slightly lower to +3.4% as personal consumption expenditure
and the contribution of net exports were revised lower. The contribution from
inventories remains high. The latest month of PCE data for Nov indicates that
real spending growth has been somewhat lower so far in Q4 than in Q3.
US housing data had some positive news. Although the
conditions index continued to deteriorate in Nov, existing home sales and new
residential construction increased in the latest month.
One area to watch for is slowing US manufacturing growth. Data this week and over the last few weeks is hinting at slower momentum, especially from Dec. The three regional surveys this week were much softer. Advance durable goods new orders and shipments ex-transports for Nov was softer. In the previous month final durable goods report, core orders & shipments growth had been trending somewhat slower throughout the year. Last weeks industrial production data for manufacturing had growth slowing and the prelim PMI for Dec also showed manufacturing activity growing at a slower pace. Something to watch.
Other interest rates decisions this week; the BoE (concerned
about Brexit), BoJ (inflation not remotely close to targets) and RBA (concerned
banks are tightening credit too much) all kept rates on hold.
The impact of slower global trade was mostly evident in the
monthly Japanese trade data. Japanese export growth slowed to a mere +0.1% as
exports to two (Asia and Western Europe) of the top three Japanese export
markets declined versus last year. The Eurozone trade deficit also increased as
exports and import growth accelerated (but imports grew at a faster pace).
Consumer price data out this week indicates that the impact
of recent growth in energy costs is starting to reverse.
US-China trade talks; a ‘notice of modification of action’ was posted onto the US Federal Register by the USTR on 19 Dec 2018 – confirming that “the rate of additional duty for the products covered by the September 2018 action will increase to 25 percent on March 2, 2019”. This confirms a hard deadline of 1 March 2019 for the US-China Section 301 trade negotiations to be completed by. As we come back from the holiday season, trade negotiation activity will likely ramp up – along with headline risk.
There are more topics/data releases covered in this weeks review. Use the links in the contents page to navigate to different country sections. Download the review here;
The next weekly briefing document will be published next weekend.
As always, comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
Happy holidays and best wishes to you and your family!
by Mars Capital Partners | Dec 22, 2018
Given the holiday shortened week and the fact that I'm travelling over Xmas to visit family and friends, I've posted this update early. The bears remain firmly in control of this market as the Fed clearly signalled no immediate bailout for the bulls. Our bearish equities outlook continues to be rewarded. All US equity indices […]
by Kim | Dec 17, 2018
Macro review for w/c 10 December 2018 – US data out this week was positive and likely supportive of another hike in Dec. JOLTS data highlighted that job openings and hires remain close to respective recent peaks, while layoffs and discharges were unchanged in the month and remain at low levels. Headline PPI and CPI growth eased on lower energy prices. Core PPI remained elevated (and is now above the headline rate) and core CPI grew at a slightly faster rate (and is now growing on par with the headline rate), suggesting underlying inflation pressure remains. Even though retail sales growth slowed in Nov, spending growth remained elevated. Retail sales were also revised higher for Oct.
US industrial production (IP) was stronger in Nov led by mining and utilities- annual IP growth now at +3.8% just shy of the high point for the year. Manufacturing industrial production has been flat to down over the last two months and annual growth has slowed to 1.8%. Prelim PMI for Dec indicate slower growth across services and manufacturing.
The UK is in a deadlock over Brexit. The key vote on the withdrawal agreement was postponed during the week and the way forward for the UK is unclear. Data out this week indicated resilience in the economy despite the Brexit disruption. The labour market survey showed improved employment growth, while participation increased. Unemployment has started to increase somewhat over the last two quarterly reports. The monthly GDP growth slowed slightly.
Growth concerns remain within Europe. The ECB rates decision this week was as expected – key rates remain on hold while confirming that net asset purchases will end this month. The ECB assessment of current conditions confirm concerns over weaker external demand and country/sector specific issues but are offset by stronger domestic demand. GDP growth targets were revised slightly lower. While industrial production growth stabilized in Oct, the prelim PMI’s for Dec indicate continued weaker growth.
Q3 GDP decline in Japan was revised lower, but there are signs of a stronger end to the year. Prelim Manufacturing PMI for Dec stabilized even though new export orders continued to decline. The final industrial production data for Oct confirmed a stronger rebound after the weaker lead up to Sep. Forecasts are for continued growth in industrial production in Nov & Dec.
In Australia, the house price index confirmed that National house prices declined at an accelerated pace in Q3 at -1.9%. This was the second consecutive annual decline house prices at a National level. Despite a small rebound in housing finance in Oct, bigger picture declines in housing credit remain in place. Syd and Melb so far leading the way with the bigger declines in credit.
There are more topics/data releases covered in this weeks review. Use the links in the contents page to navigate to different country sections. Download the review here;
The outlook for w/c 17 December 2018 – The main event for this week will be the US FOMC meeting. At this stage, the probability of a rate hike is high at 77%. The FOMC statement/press conference will be of interest as we look for indications of what to expect in this post-forward guidance world.
In the US this week, the focus will be on the PCE price index, Durable Goods and housing data.
There will be a moderate level of treasury issuance this week with the US Treasury settling approx. $223b in US Treasury securities and raising approx. $34b in new money.
The UK remains in focus this week with the heightened uncertainty surrounding Brexit. The BoE meets this week on interest rates and it will be important to see how the BoE responds to the latest developments/deadlock on Brexit. CPI data for the UK will be out before the BoE meeting. UK retail sales will provide some indication on changes in consumer sentiment.
The BoJ also meets this week. Japan National CPI will be released after the BoJ meeting.
The Eurozone and Japanese trade data will be in focus as we continue to track the impact of slower trade.
The Australian labour market survey will be out this week. This is an important indicator for the economy and how it might fare amid the house price correction. So far, employment growth has remained strong.
Further detail and a calendar of key releases is provided in the full briefing document – download it here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Mars Capital Partners | Dec 17, 2018
Keep a close eye on the Fed this week! Last week, global equity markets continued to decline in line with our bearish expectations. US equity markets are once again testing major support with the Fed on deck later this week. We are starting to see more market mavens such as Stanley Druckenmiller call for the […]
