by Kim | Dec 30, 2019
The weekly macro brief for w/c 30 December 2019 – Its year end this week and there will be some focus on the repo market and any potential stress in markets/rates. The Fed has ramped up liquidity support leading up to the year-end turn in order to avoid the funding pressures experienced in Sep. Over the next few weeks, the term repo operations will unwind.
Although a shortened week, there are still several important
data releases;
FOMC Minutes from the 10-11 Dec Fed meeting
US ISM Manufacturing PMI for Dec
Global PMI’s (final version) for Dec will start to be
released this week, starting with manufacturing activity in the US, UK, Europe
and Australia
The Chinese NBS will release the manufacturing and
non-manufacturing PMI’s for Dec
On the trade front, the US-Japan phase one deal comes into
effect on 1 Jan. Negotiations on phase two will start shortly.
The US and China continue to work through the detail and
draft of the phase one deal.
The USMCA has passed through the House of Reps and will now
go to the Senate for approval some time over the next few weeks.
The US Treasury will settle approx. $302bn in ST bills, Notes and TIPS this week, raising approx. $32bn in new money.
More detail (including a calendar of key data releases) is provided in the briefing document – download the file here;
The weekly macro review will be posted next week covering the weeks of 23 and 30 Dec 2019.
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
We wish all of our valued clients a very safe, happy and prosperous New Year!
by Kim | Dec 24, 2019
Trade news continued to create a positive context this week.
While few details are yet to emerge on the US-China deal, a deal is expected to
be drafted and signed by early 2020. The USMCA was approved in Congress by a large
majority and that deal now goes to the Senate for approval.
Data on US manufacturing conditions were mostly stable, with
growth remaining low. The improvement in manufacturing industrial production
for Nov was led mostly by the end of the GM strike. The prelim manufacturing
PMI for Dec was little changed from Nov. The regional data for Dec was mixed,
with the only deterioration reported in the Kansas City Fed survey. Philly Fed
survey headline conditions worsened, but all the underlying indicators remained
positive.
US consumer readings indicate that any weakness has yet to broadly
spill-over into consumer metrics. Sentiment
continues to increase, albeit led by the higher income groups. Income and
outlays for the first two months of Q4 indicate stronger growth than in Q3. Services
activity continues to grow. From last week, the labour market remained stable.
JOLT’s data was mixed with weaker growth in hires, but a rebound in involuntary
separations from the month prior. The growth in voluntary separations, quits,
continue to slow – indicating a reduced willingness to voluntarily change jobs.
More broadly, the prelim PMI’s for Dec indicated a worsening
in manufacturing activity in Europe/Germany, but offset by services activity.
In Japan, there appears to be little rebound so far after
the Oct increase in the sales tax and weather disruptions. The prelim composite
PMI for Dec indicated stagnant conditions – with a slight worsening in manufacturing
activity. The Nov merchandise trade data remained weaker with exports and
imports declining again. The decline in
exports was broad-based. Similar to Oct, almost half of the decline in imports
was attributed to a decline in petroleum imports, but declines in imports were
still recorded across most commodity groups. Annual core inflation increased
only slightly. The BoJ kept policy and rates unchanged, noting risks from
external factors affecting the domestic economy.
The BoE kept rates
on hold – although there were two votes to loosen policy further at this time. The
PMI data reflected much weaker conditions in Dec as firms continued to work
through Brexit uncertainty. Retail sales data is unclear because Black Friday
promotion data in 2019 will fall into the Dec report. The labour market for Aug-Oct
remains resilient. Progress on the approval of the EU Withdrawal agreement is
underway with the bill passing its second reading. Some uncertainty is likely
to remain regarding Brexit as PM Johnson amended the Brexit Bill such that
there can be no extension granted to the UK-EU trade deal negotiations – with
the deadline at the end of 2020.
Aus prelim PMI’s for Dec continued to show weaker conditions across both manufacturing and services. The labour market also remains resilient and there are some signs of stabilising employment growth.
More releases are covered in the weekly review for last week – download the full document here;
Comments and feedback are welcome – email me at kim.mofardin@marscapitalpartners.net.
Wishing everyone safe and happy holidays!
by Kim | Dec 16, 2019
The weekly macro review for w/c 9 December 2019 – Several of the larger uncertainties for the global economy are now poised to be resolved positively. There were several major developments during the week.
Firstly, the US and China have agreed on a phase one trade deal.
While details are still emerging, there is at least no further deterioration in
the trade relationship.
The UK election resulted in an increased majority for the UK
Conservative Party. Brexit now looks likely to go ahead by the end of Jan 2020.
We expect that there will be some rebound in activity as firms commence
preparations for 31 Jan 2020.
Finally, the US Democrats also appear to have made an
agreement with the White House on changes to the USMCA/NAFTA. This legislation
is now expected to go to Congress before the end of the year as part of the
process to ratify the deal.
The US FOMC kept rates on hold. Given the cuts already
implemented over the last three (3) meetings, the Fed guidance has shifted to
monitoring the implications of incoming information for the outlook, global
developments and muted inflation pressure. Most FOMC members don’t see, given
the current data and projections, a case for hikes in 2020.
US retail sales were softer in Nov, despite post-holiday
promotions in Thanksgiving – although some of those holiday sales will be
reported in Dec. Producer prices continue to highlight weakness across growth
in service segments of trade margins and transport and warehousing prices in
Nov.
Annual growth in consumer prices accelerated, as energy
prices made a less negative contribution to price growth. Core CPI remains
elevated at +2.3% – led predominantly by services prices.
The business inventories report for Oct highlighted weaker
sales through the distributive trade channels while inventory continued to
grow.
The ECB also kept rates on hold and made no change policy.
This was the first meeting for the new ECB President Christine Lagarde.
In Japan, the second
estimate for Q3 real GDP growth was revised higher – due mostly to upward
revisions in household consumption (possibly stockpiling ahead of the
consumption tax increase in Oct (Q4)) and private investment spending. The
weaker industrial production data for Oct was also revised further lower in the
final release.
House prices in Australia increased in Q3 but prices across
most states remains below a year ago. This was in line with the growth in new
credit since Jun 2019. In Nov, business conditions were unchanged and business
confidence declined again – so far indicating little improvement in the economy
in Q4. Consumer sentiment also declined in again in Dec, although remains above
the recent low. The report suggests that rate cuts are not instilling
confidence (as in 2011) and consumers are likely to keep a tight rein on
spending during the holidays.
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 December 2019 – A busy week ahead with both data and events.
US Congress – possible votes on USMCA, Government funding
bills ahead of the Friday deadline and impeachment this week.
Central bank decisions –
BoJ and BoE. The BoJ will be interesting in light of the weaker data
post-consumption tax. Changes in guidance from the BoE will be important now
after the general election result.
Data highlights this
week;
Prelim PMI’s for Dec across
the US, Europe, Japan, UK and Australia.
US – Personal income,
outlays and the PCE price index for Nov, industrial production, JOLTS, final
consumer sentiment for Dec and regional manufacturing surveys.
UK data – Q3 GDP, employment and retail sales.
Japan – CPI for Nov, the
second read after the consumption tax increase and trade (Oct trade data was
disappointing, so looking for a rebound post weather and consumption tax
disruptions).
The Australian
government released its mid-year economic and financial outlook (a mid-year
budget statement). Overall, expected/forecast surplus was lower due to the
slowing economy. No further expenditure measures for the economy were
announced.
This week, the RBA will be
focused on the employment data for Nov.
US Treasury supply will be heavier. The US Treasury will settle $231bn in ST Bills, Notes and Bonds this week, raising approx. $39bn in new money. Reserve management operations for this week will see the Fed purchase approx. $30bn in treasury bills. Also, the Fed will reinvest approx. $6.9bn of maturing securities.
The Fed has announced additional term repo operations and also
increased offering amounts further in the lead up to year end.
Friday is also Quadruple Witching.
More detail (including a calendar of key data releases) is provided in the briefing document – download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
