by Kim | Oct 26, 2020
The weekly macro review for w/c 19 October 2020 – Global prelim PMIs for Oct indicated mostly consistent momentum in manufacturing growth for the month. The exception was the UK. The Composite UK report was quite downbeat with growth slowing notably but remaining positive. The UK manufacturing result reflected a combination of firms building stock ahead of the final Brexit deadline and firms streamlining inventory to reduce costs. Eurozone manufacturing was lifted by the German manufacturing sector. Japan’s manufacturing output index indicated a decline, but industrial manufacturing production is forecast to be positive for Sep – and export performance in Sep continued to improve. Weaker improvement in Japanese imports suggests some ongoing domestic weakness.
Growth in services PMI’s was mixed. There was a sharper contraction in Europe and a continued contraction in Japan. Growth was notably slower in the UK. Momentum in the US and Aus services activity was only slightly faster – linked to the easing of restrictions.
In the US, services output was higher, as restrictions were lifted, but there was some easing in the growth of orders and employment. Manufacturing growth maintained steady progress. Regional US manufacturing surveys for Oct have indicated continued improvement in manufacturing conditions.
There is some cautious optimism around slowing US initial jobless claims – especially now that California data has been updated. Continuing claims were lower too but falls in state and some fed programs were offset by increases in other fed programs. This could reflect a transition between programs as benefits expire for some people. How rising infections impact consumption behaviour will be important over the next few weeks.
US housing market data for Sep remained very strong. The Northeast has been a key driver of improved housing market conditions, existing home sales, new permits and new housing starts. All regions recorded stronger existing home sales in Sep. There is some caution ahead though from the mortgage application data. While refi activity has continued to grow as mortgage rates have continued to fall, purchase applications have declined now for the last four weeks. The purchase index is a leading 4-6 week indicator of home sales.
There were two interesting points from the minutes of the RBA Oct meeting. The first is the likelihood of further policy easing for Nov and the second is the change in forward guidance on inflation and full employment. The Board noted that it wants to see more than just progress toward full employment. There will likely be less emphasis on forecast inflation and more emphasis on actual inflation outcomes. It was also noted that inflation outcomes are not likely to be achieved until there is a tight labour market.
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 26 October 2020 – This will be another big week across the macro spectrum. We are now in the final week leading into the US Presidential election next Tuesday, Brexit talks are intensifying, Covid-19 cases are reaching new highs around the world, US Q3 earnings and growth data will feature, and there are several central bank interest rate decisions due this week.
We are now into the final week leading up to the US Presidential election. Stimulus discussions continue to simmer. The prelim US Q3 GDP will be reported this week – with likely a strong upturn in growth compared to the significant contraction in Q2.
US Q3 earnings this week will feature: Amazon, Apple, Google, Microsoft, Facebook, Twitter, Pinterest, AMD, Fastly, Shopify, Starbucks, Boeing, GE, Caterpillar, 3M, Pfizer, Moderna, Gilead Science, Visa, Mastercard, Exxon Mobil, Chevron, and Ford.
Brexit talks resumed late last week and have intensified into this week in an effort to reach an agreement. The 31 Oct has been identified as a target date to review progress on negotiations, allowing enough time for a deal to be ratified ahead of the 31 Dec transition deadline.
There are several central bank meetings this week: The ECB, BoJ, and BoC. It will be quiet on the US Fed front ahead of the FOMC meeting next week 4-5 Nov.
Key data points this week include:
US – prelim Q3 GDP will be a key focus this week with the expectations for a strong growth figure, the final half of Oct consumer sentiment reading, personal consumption, income and prices for Sep, and the advance durable goods report for Sep.
Chinese Oct PMI’s will be released over next weekend.
Europe prelim Q3 growth data will also be released along with prelim CPI growth for Oct.
Aus Q3 CPI will be released and will provide a key input into the RBA deliberations and meeting next Tues.
The new schedule of US Fed purchases of Treasury securities and MBS will be released mid-week.
US Treasury issuance will be little changed this week. The US Treasury will settle approx. $302bn in ST Bills and 5yr TIPS this week, raising approx. $5bn in new money. The US Treasury will also auction $210bn in Notes, Bonds, and FRN’s this week, which will settle next week.
This week, approx. $16bn in Bills 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 | Oct 26, 2020
Markets appear to be treading water with a bullish bias leading into the all-important US elections - what is NOT being priced into the markets is a contested election result or continued gridlock with split house and senate. The markets appear to be relying heavily on the "hope" of a large stimulus package to continue […]
by Kim | Oct 20, 2020
The weekly macro review for w/c 12 October 2020 – The current US initial and continuing jobless claims are still missing up-to-date California figures. This is likely to updated in the following week. As of the 26 Sep, continuing claims across all programs still totaled more than 25m people.
US retail sales growth in Sep was stronger. The general theme reflected the ongoing shift in consumer behaviour from lockdowns and restricted activity (mainly home-based consumption) to more on-the-go consumption.
US consumer prices increased at a slightly faster pace in Sep. Underlying CPI growth was little changed. Some acceleration in core goods prices (used cars mainly) offset some slower growth in core services, including shelter.
Despite more positive Sep figures, sentiment at the start of Oct reflected increased concern for current weakening conditions. But there was an improvement in expectations for future conditions.
“Slowing employment growth, the resurgence in covid-19 infections, and the absence of additional federal relief payments prompted consumers to become more concerned about the current economic conditions.“
US industrial production was weaker in Sep, especially for manufacturing and utilities output. The two regional manufacturing surveys for Oct were quite strong though – suggesting some firming of activity.
Employment in Australia declined in Sep – led by a decline in full-time employment. This only partially offset the stronger employment growth from the prior month. Total unemployed persons increased. The increase in total unemployed persons would have been larger if not for the decline in participation. The underutilisation rate increased slightly to 18.3%. Aside from the four months between Apr and Jul 2020, the underutilization rate in Sep is the still the highest in the series history – highlighting the weakness and slack the remains in the labour market.
Chinese trade data reflected more moderate export growth in Sep. Import growth though was stronger for the month – this included a larger increase in imports from the US for the month.
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 19 October 2020 – Key highlights for the week ahead include the final US Presidential debate in the lead up to the US Presidential election, the EU-UK Brexit trade negotiations at an inflection point, central bank speeches, and the prelim Oct PMI’s.
There are now only two weeks until the US Presidential election. The focus this week will be the final Presidential debate (last week’s debate was cancelled) and the ongoing posturing around a stimulus bill.
Given the lack of progress on the trade deal negotiations, the UK-EU posturing ramped up in earnest leading into the EC summit last week. The EC summit had been a key milestone for deal outline, and this has now been missed. Talks are currently at a standstill and its not clear whether there will be face to face meetings this week.
There are several central bank speeches this week. The US Fed Chairman Powell, Vice Chair Clairda, Vice Chair Quarles and Governor Brainard will speak early in the week. Also speaking this week will be ECB President Lagarde and RBA’s Kent and Debelle.
Late this week, the Markit prelim PMI’s will provide a further update to the economic rebound as of Oct. We note the increase in trading restrictions throughout Europe and the UK, as virus cases start to rise again. The re-imposition of restrictions is likely to impact services activity in the coming months.
Other key data points this week include:
US – Housing will feature this week with permits, starts, existing home sales, and the housing conditions index. There will be a further read on regional manufacturing activity for Oct (last weeks’ regional results were positive for Oct).
China industrial production, retail sales, and fixed asset investment for Sep and Q3 GDP.
The RBA will release the minutes of the Oct meeting – looking for hints of further easing bias.
The US Fed will further increase purchases of MBS this week with $26bn in purchases planned for the week. Purchase of Treasuries will remain constant at $19.5bn.
US Treasury issuance will be lighter this week. The US Treasury will settle approx. $285bn in ST Bills this week with a net paydown of -$17bn.
This week, approx. $20bn in Bills 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 | Oct 20, 2020
Last week, the equity markets extended gains in what appears to be a corrective overlapping 3 wave rally of equality (the Russell rallied in an impulsive 5 waves). The DXY also rallied in 3 waves of equality before turning lower confirming that the bigger picture trend remains down. Rates little changed on the week while […]
by Kim | Oct 12, 2020
The weekly macro review for w/c 5 October 2020 – Global services activity increased at a broadly similar pace in Sep as in Aug. The Eurozone slipped into slight contraction and Japan continued to contract at a similar, marginal pace. The US and UK services PMI’s indicated that the pace of growth remained on par with the prior month.
The US ISM business activity and domestic new orders, especially, indicated a faster pace of growth in the services sector.
Given the tentative recoveries so far, especially in services and consumer facing industries, the renewed outbreak of infections in Europe, the UK, and starting again in the US, will test whether policy makers can balance the economic recovery with controlling another outbreak.
US JOLTS data indicated that employment continued to expand in Aug, but job openings were weaker in the month. The pace of layoffs and discharges fell to a series low – which is inconsistent with the rising permanent layoffs from the household employment survey. On a rolling 12-month basis to Aug, the difference between hires and separations implies a net employment loss of 7m as of Aug. This has improved from the -13.5m employment loss in Apr but remains well below the average growth of +2m prior to the shutdowns.
US consumers continued to pay down credit card debt with revolving credit leading another decline in overall consumer credit for the month. This is the sixth month of decline in the value of outstanding revolving credit (this also happened through the GFC). Non-revolving credit growth also slowed.
This week the MBA released the mortgage credit availability index for Sep. This showed a further tightening in mortgage lending standards:
“Across all loan types, there continues to be fewer low credit score and high-LTV loan programs. The housing market overall is on strong footing, but the data show that lenders are being cautious, given the spike in mortgage delinquency rates in the second quarter, as well as the ongoing economic uncertainty.”
Despite the US Fed maintaining very easy/accommodative conditions (and mortgage rates continuing to fall as the Fed buys up MBS), banks are limiting lending due to the weaker economic environment.
In Aus, housing finance recorded a substantial increase in Aug – mostly the result of lenders catching up on backlogs (as noted by the Aus Bureau of Statistics). Still, this has locked in 3 months of gains in mortgage lending commitments. The RBA kept rates on hold this month. After the meeting and the Fed budget release, the probability of another rate cut in Nov increased.
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 12 October 2020 – A big week ahead – the key highlights include the next Presidential debate in the lead up to the US Presidential election, the EU-UK Brexit trade agreement, central bank Governor speeches this week, and important data releases.
There are now only 3 weeks until the US Presidential election. The focus this week will be the second Presidential debate and the ongoing posturing around a second stimulus bill.
The EC meeting this week 15-16 Oct will be important for Brexit trade deal proceedings. The status of negotiations will be reviewed and a trade deal has so far not yet been agreed upon. It was originally hoped that a deal would be completed by this week to enable enough time for parties to ratify the trade deal.
There are several central bank Governor speeches this week – the ECB’s Lagarde, BoE’s Bailey, and RBA’s Lowe will all speak this week (different events). There will also be speeches by US Fed Vice Chair Clarida and Vice Chair for Supervision Quarles.
The key data points this week include:
US – Retail sales, CPI, and industrial production for Sep. The first view of Oct production data with NY and Philadelphia regional surveys and the prelim Uni of Michigan consumer confidence data for Oct will also be released.
China trade data, CPI, and PPI for Sep.
Aus employment and labour market survey for Sep.
The next schedule of US Fed purchases of Treasury and MBS will be released this week.
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $395bn in ST Bills, Notes, and Bonds this week raising approx. $72bn in new money.
This week, approx. $20bn 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
