by Kim | Sep 30, 2019
The outlook for w/c 30 September 2019 – A full week of data, US Fed speeches and it’s also quarter end.
Important
US data out this week; non-farm payrolls and employment, ISM manufacturing and
non-manufacturing PMI’s for Sep and the final Markit PMI’s for Sep.
There is
also a full week of Fed speeches. The highlight will be on Friday with a ‘Fed
Listens’ event – “Fed Listens: Perspectives on Maximum Employment
and Price Stability”. US
Fed Chairman Powell will give the opening remarks at this event. Also speaking
will be Board members Brainard and Quarles.
Other speeches of note will be; Board Vice Chairman Clarida (Thursday) – outlook for the economy and monetary policy at the Wall Street Journal’s Future of Global Markets event in New York.
Across Europe, the final PMI’s for Sep will be released as well as Euro Area and German CPI and retail sales data.
The final
PMI’s for the UK in Sep and Q2 GDP will also be in focus this week. Brexit is
now coming into the *final* four week stretch. Further alternative plans for
the Irish border issue are expected to be tabled with the EU later this week.
The focus on Australia will be on the RBA rates decision on Tuesday. The expectations are for a further cut in the overnight cash rate to 0.75% (at 27 Sep 2019 a 78% expectation https://www.asx.com.au/prices/targetratetracker.htm). The probability for a further rate cut increased after the labour market data in mid-Sep indicated unemployment had moved higher. Later in the week, Aus retail sales data will also be released.
On trade, the WTO is expected to announce this week the findings of its arbitration on the amount of US tariffs related to the Airbus case.
US Treasury issuance will be heavier this week and its quarter end. The US Treasury will settle $297bn in ST bills, notes and TIPS this week, raising approx. $51bn in new money.
More detail (including a calendar of key events) is provided in the briefing document – download the file here;
Several data releases from last week w/c 23 September will instead be included in the Weekly Macro Review for w/c 30 September 2019 (next week).
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Mars Capital Partners | Sep 30, 2019
Last week, equity markets drifted lower from major resistance but so far have held key breakout support. The US dollar continued to grind higher with no evidence of a tradable high. Precious metals reversed sharply lower as expected while Crude Oil gave up all of its post-Saudi shutdown spike higher. The SPX / ES faded […]
by Kim | Sep 23, 2019
The weekly macro review w/c 16 September 2019 – Policy easing by the US Federal Reserve followed the ECB easing measures announced last week. All three central banks this week indicated heightened concern for global growth and a weakening outlook.
The US
Federal Reserve cut the FFR range target to 1.75-2.0%. The cut was based on the
implication of global developments for the economic outlook and muted inflation
pressure. The future likely path will be
determined based on incoming information.
Despite the
cut in rates, US data has continued to improve, especially housing related data
this week. The regional manufacturing surveys for Sep were mixed. Industrial
production data in Aug improved, especially with manufacturing production
returning to growth in the month.
The Bank of England (BoE) kept rates on hold while forward guidance remains firmly focused on Brexit. UK CPI (H) slowed markedly in the latest Aug release and the BoE highlighted the potential shift to a lower demand environment the longer that Brexit uncertainties persist. Talks between the UK and the EU have sparked hopes for a revised Brexit deal – meetings this coming week at the UN General Assembly will be important. The crucial date remains 19 Oct 2019 – after which if there is no revised deal, the UK PM is now required to request another extension.
The Bank of Japan (BoJ) kept rates on hold and there were no changes to policy settings. That said, the BoJ continued to upgrade its level of concern on growth which was reflected in changes to the wording in its statement. The BoJ has shifted its view to that of downside risks increasing. Last month the BoJ amended its statement indicating its willingness to take additional easing measures. This month the BoJ appears to be more explicit in opening the door to the possibility of further easing;
“…slowdowns in overseas economies have continued to be observed and their downside risks seem to be increasing, the Bank judges that it is becoming necessary to pay closer attention to the possibility that the momentum toward achieving the price stability target will be lost.”
Next month will be important for the BoJ as Japan implements
the consumption tax hike.
Data out of
Japan confirmed the continued weaker external trade in Aug with both merchandise
exports and imports declining YoY. Of note was the weaker exports to its
largest export market, China. This also highlighted that demand out of China does
not appear to be improving. Japan National CPI ex fresh food growth slowed. There
is some evidence to suggest that, removing both fresh food and energy price changes,
there is some accelerating trend in underlying price growth – albeit at low
levels and with the 2% target remaining elusive.
The Reserve Bank of Australia (RBA) minutes indicated that rates remained on hold as there was no further deterioration in domestic conditions that warranted a further rate cut in Sep. Signs were emerging that the established housing market (sales and prices) in Syd & Melb had begun to stabilize and that employment growth had been maintained. The latest labour market report this week though, cited by the RBA as one of the more important datapoints (for its objective to reduce spare capacity of persistently high unemployment and underemployment), showed that unemployment increased as increased participation was not matched by gains in employment growth. The composition of employment growth also raised concerns as FT employment growth slowed markedly.
Chinese data was mostly weaker. Retail sales growth slowed slightly, and growth remains lower than at a year ago. The decline in Auto sales appears to be gathering pace as Auto retail sales declined by 8% in Aug (versus -0.1% for the YTD). Annual growth in industrial production also slowed to a new near-term low of only 4.4%. Growth across all three key industrial groups continued to slow in Aug.
There are more data releases covered in last weeks review. Use the links on the contents page to navigate to different country sections. Download the review here;
The outlook for w/c 23 September 2019 – Important datapoints this week will be the prelim PMI’s for
Sep across the US, Japan and the Eurozone. Manufacturing has remained weak and/or
in contraction across most regions with services activity helping to off-set
some of the weakness.
In the US there will be more housing data – new home sales
and Case-Shiller House Price Index for (Jul). More recent data indicates that activity
in the housing sector appears to be picking up. Other important US data will be;
durable goods and the monthly personal income, outlays and PCE price index for
Aug. The US goods trade balance and the third est for GDP in Q2 will also be
released this week.
It will be a full week of US Fed speeches. Of note will be
speeches by; NY Fed President Williams speaking at the US Treasury Market Conference
in New York, Vice Chairman Clarida speaking at the Fed Listens event in San
Francisco and Vice Chairman Quarles speaking on macro-prudential regulation in
Washington, DC.
The annual UN General Assembly will take place this week
23-27 Sep in New York. Sideline meetings on trade and Brexit will be important.
Of particular interest is the US-Japan trade deal – a completed deal is
expected to be signed at the meeting this week (possibly Wednesday). The UK PM
and EU President are also expected to make the most of the meeting to further
discussions on a Brexit backstop alternative.
Not all leaders will be present at the UN General Assembly;
notable absences will be Chinese President Xi, PM Netanyahu and Russian
President Putin.
US Treasury issuance will be somewhat lighter this week. The US Treasury will settle $190bn in ST bills and FRN’s this week, raising approx. $25bn in new money (relatively light given recent weeks).
More detail (including a calendar of key events) is provided in the briefing document – download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Mars Capital Partners | Sep 23, 2019
Last week the Fed confirmed its dovish bias in line with global central banks. As trade tensions subside near term, the market's focus has shifted to continued CB liquidity support in a low growth world. From a technical perspective, equity markets continue to challenge new ATH's. Importantly, the global market rally from the January lows […]
by Kim | Sep 16, 2019
The weekly macro review for w/c 9 September 2019 – The ECB eased this week due to the continued shortfall of inflation linked to the ‘more protracted weakness in the Euro area economy’. Easing measures included a further cut into negative territory for the deposit facility, the reintroduction of QE at €20bn a month, continued reinvestments and changes to TLRTO III operations. Guidance now is that low rates and QE will be applied indefinitely.
The other
important news in the announcement/decision was the introduction of the two-tier
system of remunerating bank excess liquidity holdings from 30 Oct. It’s been
suggested that this was a somewhat ‘historic’ shift in the implementation of monetary
policy – the following is worth a read; https://www.philosophyofmoney.net/draghis-historic-farewell/.
News leaked late last week that the WTO ruled in favour of
the US regarding illegal EU subsidies for Airbus. The ruling has not yet been
made public as both parties review the decision over the next few weeks. The
WTO panel will then adopt the decision and make the ruling public. The US has
been reviewing the possible list of tariffs in preparation of the ruling. Depending
on the details of the ruling, tariffs in EU imports will most likely be
implemented. The EU has a similar case outstanding regarding Boeing.
US
consumer credit growth accelerated in Jul in line with the much stronger retail
sales in that month. The Aug retail sales growth slowed, and, ex autos, growth
was 0% versus the month prior. Consumer sentiment rebounded only slightly in the
prelim Sep reading, after the larger drop in Aug (linked mostly to negative
tariff news).
JOLTs
data indicated that while hiring continued to grow, job openings growth slowed
further. Layoffs and discharges (involuntary separations) contributed to
the increase in total separations. The number of quits (voluntary separations) increased
at a faster pace, reaching a new all-time high number of quits, suggesting that
workers were more confident in conditions to change jobs.
The growth
in the headline all-items CPI slowed slightly on an annual basis to +1.7%. But the
core CPI ex food and energy prices accelerated to +2.4%. Both core goods and
services contributed to this acceleration. It will be important to see how the
FOMC will view this at the upcoming meeting where rates are expected to be cut
again.
There has
been some optimism emerging regarding progress on an alternative to the current
backstop agreement for Brexit. UK rolling GDP data for May-Jul was lackluster with
growth at zero % after the prior three-month decline. The labour market remains
resilient – somewhat slower annual employment growth was offset by a lower
increase in participation which helped reduce total unemployment further.
Australian lending for housing increased at a much faster pace in Aug as easing of lending restrictions and rate cuts continued to take effect. Business confidence eased back again, and business conditions continued to decline in August. There is some indication that conditions may be firming across selected industries.
There are more data releases covered in last weeks review. Use the links on the contents page to navigate to different country sections. Download the review here;
The outlook for w/c 16 September 2019 – Central bank decisions will be the key focus this week. The FOMC, BoJ and BoE decisions are all scheduled this week. The FOMC is expected to cut rates – despite economic data remaining resilient. The current probability for the FOMC to cut rates to 175-200bps is 84% (as of 16 Sep) – https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html?utm_source=cmegroup&utm_medium=friendly&utm_campaign=fedwatch&redirect=/fedwatch).
In the US,
we will get our first reading of Sep manufacturing conditions with two regional
surveys released this week. Industrial production and housing data will also be
published.
The Eurozone
CPI and Zew economic sentiment survey will be released. The focus for Europe
may start to shift more onto possible escalation of trade tensions with the US considering
the (currently confidential) WTO ruling, possible subsequent tariffs and
the transition to the new EU leadership taking over the negotiations.
In the UK, the
focus will remain on Brexit and the emerging optimism for a deal on Brexit.
Data of note this week will be retail sales and the CPI.
This will
also be an important week for Aus data with Q2 house prices and the important
labour market report for Aug. The RBA minutes for Sep will also be published.
US Treasury issuance will be somewhat heavier this week. The US Treasury will settle $255bn in ST bills, notes and bonds this week, raising approx. $66bn in new money. This may be somewhat offset by the paydown of the maturing 45-day CMB from back in Aug ($35bn).
More detail (including a calendar of key events) is provided in the briefing document – download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
