by Kim | Sep 28, 2020
The Weekly Macro Review for w/c 21 September 2020 – The prelim PMI’s for Sep indicated that the pace of the global rebound was similar compared to Aug growth. The broader Eurozone result was mixed though. Strong manufacturing growth in Europe was led by Germany which recorded accelerated export demand. Eurozone services shifted back to slight decline after no change in Aug. Output growth in the UK remained robust across services and manufacturing, slowing only slightly.
The Japanese PMI’s were also little changed from Aug, indicating a similar pace of decline in services and manufacturing output. The Japanese manufacturing PMI had already been weak throughout 2019. The output indexes indicated that most firms reported declines throughout 2020. There is some recent divergence with official industrial production data with Jul manufacturing increasing by +8.7% month on month.
US PMI’s for manufacturing and services output indicated a continued and steady pace of growth across firms in Sep. Services output growth was little changed and manufacturing output growth was slightly faster.
The US advance durable goods report for Aug was insightful. Monthly growth in orders and shipments slowed notably after two extremely strong months – and this likely reflects the restart of supply chains, especially for motor vehicle production. Excluding transportation, orders and shipments for industry were on par with a year ago in Aug.
Globally, motor vehicle production has been picking up speed over the last two months (pipeline fill) and this is one important indicator of the lift in global activity. In the US, motor vehicle orders and shipments declined slightly in Aug versus the prior month, but levels remain elevated and are still above those from a year ago. From here, the level of consumer demand will be important. The US manufacturing industry of most concern is non-defense aircraft. Orders have been negative for five of the last six months (representing approx. -$41bn in likely cancelled orders), leading to bigger falls in unfilled orders, shipments are -44% below a year ago, and inventory is +17% ahead of a year ago.
US initial jobless claims for the 19 Sep remain highly elevated and little changed from the prior week levels at 1.45m people (federal plus state programs). Continuing claims for both state and federal programs were notably lower for 5 Sep (than in the prior week) but remain elevated at 26m people.
There are more data releases covered in the review document. Use the links on the contents page to navigate to different country sections. Download the review here;
The macro outlook for w/c 28 September 2020 – Highlights this week will be US Fed speeches, the first US Presidential debate, and key data releases.
This week there are several US Fed Governors speaking. On Tue, Vice Chair Clarida will speak on Treasury Market Resilience and Vice Chair Quarles will speak on Financial Regulation and Financial Stability – https://www.federalreserve.gov/newsevents/calendar.htm. The ECB President Lagarde will also speak early this week.
US domestic politics will continue to feature. The first of three US Presidential debates between US President Trump and Democrat nominee Joe Biden will take place on 29 Sep this week. The next two debates will be held on 15 and 22 Oct. US President Trump has also announced his nomination for a Supreme Court Justice to replace Justice Ginsburg. The confirmation process is expected to be swift. There was also news late last week that US Treasury Secretary Mnuchin and House Speaker Pelosi would restart stimulus talks.
The key data points this week include: US non-farm payrolls and employment for Sep, the ISM manufacturing PMI for Sep, the PCE and price index data for Aug, and the final reading of consumer sentiment for Sep.
More broadly, the release of the global manufacturing PMI’s for Sep will commence this week, with services covered next week.
The next schedule for US Fed purchases of US Treasuries and MBS will be released on 28 Sep.
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $474bn in ST Bills, TIPS, Notes, and Bonds this week raising approx. $103bn in new money. This week, approx. $40bn in Bills, Notes, and Bonds will mature on the Fed balance sheet and will be rolled over.
More detail (including a calendar of key data releases) is provided in the briefing document – download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Mars Capital Partners | Sep 28, 2020
Last week, equities continued to stair step lower but rallied strongly to end the week. Unfortunately, the decline has not done enough to confirm a bigger picture change in trend as the decline is not clearly impulsive. The US$ rebounded sharply as expected but is only 3 waves up of equality from the lows so […]
by Kim | Sep 21, 2020
We are entering a bumpy period of political uncertainty against the backdrop of a global economy still reeling, and rebounding, from the Covid-19 pandemic.
Over the next few months, the US domestic political scene will likely be dominated by the replacement of US Supreme Court Justice Ginsburg, amid the lead up to the US Presidential election. The passing of another US stimulus bill remains in the mix but may take a backseat – with obvious implications for the pace of the economic rebound. US monetary policy will remain a key lever. This week, US Fed Chairman Powell will give three days of testimony regarding the CARES Act. There will also be speeches by Vice Chair Quarles and Governor Brainard regarding the economic outlook.
The BoE announced last week that it was exploring how negative rates could be implemented effectively. The BoE Governor Bailey will speak early this week and several risks for the UK economy are front and center. As noted in the minutes last week, UK annual inflation fell to 0.2% in Aug, triggering the exchange of letters between the Governor and Chancellor. One of the evolving risks is the lack of progress on the negotiation of the Brexit free trade agreement with the EU. The BoE noted in the minutes last week that the current path of growth for the UK economy was based on an orderly Brexit with the establishment of a free-trade agreement with the EU. The BoE will review this at the Nov meeting. The other risk is the rising trend in new covid-19 cases in the UK (and Europe). Its unclear what steps may be taken, if any, to contain a further outbreak.
The prelim global PMI’s for Sep will be released this week. This will provide some further insight into the pace of the rebound across some of the major economies.
US Fed purchases of Treasuries and MBS will ramp up. This week, the US Fed will purchase $21bn in Treasury Securities (last week $17bn). The purchase of MBS has been elevated over the last few weeks and will increase further this week to $29.6bn (last week $24bn).
US Treasury issuance will be slightly lighter this week. The US Treasury will settle approx. $307bn in ST Bills and FRNs, raising approx. $6bn in new money. The US Treasury will also auction $155bn in Notes this week that will settle next week.
More detail (including a calendar of key data releases for the week) is provided in the briefing document – download the weekly brief here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Mars Capital Partners | Sep 21, 2020
The Nasdaq indices led on the way up and now leads on the way down. The small cap Russell would still look best with a marginal new 5th wave high while the DJIA , SPX and NDX may have already topped for this cycle. The recent decline from ATH's is NOT clearly impulsive so we […]
by Kim | Sep 14, 2020
The focus this week will be on central bank interest rate and policy decisions and key data releases.
This week, the FOMC, BoJ, and BoE will meet on monetary policy.
Data highlights for the week:
US – retail sales for Aug, prelim consumer sentiment for Sep and the stalling weekly jobless claims will be important metrics of the consumer recovery this week. Manufacturing data includes the first view of Sep activity via the Empire State and the Philadelphia Fed manufacturing surveys. Industrial production data will also be released for Aug – an important hard data point to track the recovery in manufacturing activity and capacity utilization.
The US Senate and House will be back from recess. The US Presidential election is less than two months away and further negotiations (posturing) on stimulus will remain in focus.
China – data on industrial production, fixed asset investment and retail sales for Aug will be released.
Australia – the labour market report for Aug will be released this week – providing an important gauge on the pace of recovery in employment.
The Brexit trade deal negotiations between the EU and the UK will continue this week. The focus will remain on the introduction of Brexit legislation by the UK which breaches the commitment made to ensuring no hard border between Ireland and Northern Ireland as a part of the Brexit agreement.
The forward schedule of US Fed purchases of Treasury Securities and MBS will be released on 14 Sep. Last week, planned purchases of Treasury Securities by the Fed were $11.95bn and purchases of MBS were $22.1bn.
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $393bn in ST Bills, Notes, and Bonds this week, raising approx. $62.4bn in new money.
More detail (including a calendar of key data releases) is provided in the briefing document – download the weekly brief here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
