by Kim | Nov 30, 2020
Key highlights for the week will be important US data, global PMI’s for Nov, and US Fed Chairman Powell’s testimony on the CARES Act.
In the short-term, managing the spread of Covid-19 infections continues to impact economic activity. New cases remain extremely high in the UK, Europe, and the US (as well as many other countries). Longer-term, a vaccine now seems likely to be released around the middle of next year and fast-tracking is expected.
The prelim PMI’s from last week reflect the impact of different approaches to managing the spread of infections. There was a sharp contraction in output across the UK and Europe as both regions implemented restrictions. Whereas, the US prelim PMI’s indicated that growth accelerated across manufacturing and services in Nov – there has been no nationally mandated approach to managing the spread of the virus.
The stronger prelim PMI for US manufacturing was expected. Regional surveys had been strong for Nov. This week the ISM PMI’s will provide more detail across services and manufacturing for Nov. US non-farm payrolls and employment for Nov will also provide a vital gauge on the pace of the recovery. There has been some hint of stalled improvement in initial unemployment claims over the last two weeks, so this will be important to watch.
Key data points this week include:
US – Non-farm payrolls for Nov, initial unemployment claims, and the ISM PMI’s across manufacturing and services.
US Fed Chairman Powell will give two days of testimony on the CARES Act to the US Congress.
The final version of the global PMIs will be released this week and will likely reflect the marked contraction across the UK and European economies, the somewhat weaker growth in Japan, and the likely acceleration of growth in the US.
In Australia, the RBA will meet on rates on Tue 1 Dec. As of 30 Nov, there was a 43% expectation of no change to rates (source: https://www2.asx.com.au/markets/trade-our-derivatives-market/futures-market/rba-rate-tracker). Aus Q3 GDP will also be released this week.
Data on US Fed purchases of Treasury securities and MBS are incomplete as of the time of posting. The new schedule will be released late on 30 Nov. Last week, purchases of US Treasuries totaled approx. $4bn. Purchases of MBS were elevated, and the Fed appears to be buying well above the $40bn/month rate. Last week’s purchases of MBS were approx. $20bn.
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $527bn in ST Bills, Notes, TIPS, and Bonds this week, raising approx. $140bn in new money. The bulk of the settlements will take place on Mon 30 Nov.
This week, approx. $27bn in Bills will mature on the Fed balance sheet and will be rolled over.
More detail (including a calendar of key data releases) is provided in the briefing document – download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Mars Capital Partners | Nov 30, 2020
Note: Due to the Thanksgiving holiday the COT data has not yet been released. We will update when available. Low rates coupled with a weak US$ remain supportive of risk assets while the PM's continue to underperform. The SPX / ES failed to confirm a bearish change in trend with only 3 waves down last […]
by Kim | Nov 23, 2020
The weekly macro review for w/c 16 November 2020 – Data from the US this week showed that the rebound in activity continued. A slight uptick in initial claims hinted at some possible impact from the growing level of state and regional restrictions. This will be something to watch in the coming weeks. Continuing claims remained elevated and the fall in regular state ongoing claims was mostly offset by an increase in the uptake of federal pandemic programs.
US retail sales growth slowed in Oct. The breadth of growth across categories was narrower this month. The monthly retail growth was led mostly by the increase in non-store retail sales. Year-to-date retail sales are now only -0.1% below the same period a year ago.
Manufacturing activity continued to recover. Industrial production in Oct increased at a faster pace led by faster growth in manufacturing output. Output and utilization remain below a year ago. The regional manufacturing surveys for Nov indicated that growth remained consistent.
Housing conditions were especially strong in Nov – reaching another new high for the conditions index. This was led by single-family sales (present conditions) and further improvement of conditions in the Midwest and the South. Existing home sales also continued to increase at a fast pace, albeit slower than in the prior month. All regions contributed to growth. Mortgage applications recorded an increase in purchase applications – for the second time out of the last eight weeks.
The rebound in Japan, especially for manufacturing and exports, continued. Industrial output in Sep increased for the fourth month in a row, despite the headline contraction in the manufacturing output PMI. Aiding this recovery has been the steady rebound in export growth over the last few months. Two points of caution from the prelim Nov PMI was the renewed contraction in new export work and the faster decline in output prices.
In Australia, the Reserve Bank minutes reiterated that reducing unemployment was a National priority amid concerns over subdued demand conditions. The full suite of exceptional monetary measures introduced in Nov, including QE for the first time, was aimed at providing further traction for the recovery alongside fiscal measures.
Previously, the RBA has acknowledged that inflation would not be likely to return to the 2-3% range until wage growth started to accelerate. This is not likely to happen until labour market slack is greatly reduced. In Q3, annual wage growth slowed to the slowest pace in the series (short) history. The labour market survey for Oct recorded faster growth in the number of employed persons – one of the stronger monthly rebounds in employment since the pandemic shutdowns. The important takeaway is that while employment increased notably, the supply of labour increased by a larger degree (participation had increased). This means that the total number of unemployed persons continued to increase on a monthly and annual basis. For the moment, employment growth/labour demand is lagging behind the increase in the supply of labour. As domestic restrictions continue to be lifted, employment growth will need to accelerate further to reduce the extremely high level of unemployment and underemployment.
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 23 November 2020 – It will be a short week in the US with the National Thanksgiving Day holiday. Despite the short week, it will still be a heavy data week including the FOMC minutes, and the prelim PMI’s for Nov.
Key data points this week include:
Most of the US data will be released on Wednesday this week including weekly initial claims data, durable goods orders for Oct, the prelim Q3 GDP (2nd release), personal income, expenditures, and prices for Oct, Uni of Michigan consumer sentiment final for Nov, and the FOMC minutes.
US Fed Vice Chair Clarida will give a speech at the IMF Conference on New Policy Frameworks for a “lower for longer” world. The link is provided in the calendar.
The prelim PMI’s for Nov will be released this week. These will provide some insight into the impact on activity from the latest Covid restrictions in Europe and the UK especially. Services will likely remain weaker.
In Australia, construction work done and private sector CAPEX for Q3 will be released this week. Both reports are key inputs into the Q3 GDP release scheduled for the following week.
US Fed purchases of Treasury securities and MBS will be lower this week due to the shorter week. Last week, purchases of US Treasuries totaled approx. $34bn, and this week, purchases will be around $4bn. Purchases of MBS will remain elevated and the Fed appears to be buying well above the $40bn/month rate. Last week’s purchases were approx. $36bn and this week’s purchases are expected to total $20bn, even with the shorter week.
US Treasury issuance will be somewhat lighter this week. The US Treasury will settle approx. $309bn in ST Bills and 2yr FRN’s this week, raising approx. $11bn in new money.
The US Treasury will also auction $169bn in 2, 5, and 7-year Notes this week that will settle on 30 Nov. Note that the settlement of 10yr TIPS, Notes, and Bonds on Monday 30 Nov will be heavy at $208bn – raising approx. $130bn in new money. This does not include the regular ST Bills for the week.
This week, approx. $15bn in Bills will mature on the Fed balance sheet and will be rolled over.
More detail (including a calendar of key data releases) is provided in the briefing document – download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Mars Capital Partners | Nov 23, 2020
Last week global equities consolidated recent gains with an inside week. The US$ remained under pressure supporting commodities while bonds rallied across the board. Importantly, the SPX / ES held our key near term resistance and stair stepped lower but the decline is not clearly impulsive and we have no confirmation of a market top. […]
by Kim | Nov 16, 2020
The weekly macro review for w/c 9 November 2020 – Headline US consumer sentiment and expectations of future conditions both declined markedly at the start of Nov. This was the result of the election outcome and growing concern over the increase in Covid-19 infections. Current conditions remained little changed. The rebound in sentiment since Apr has been mixed and all three sentiment indexes are still more than 20% below a year ago.
A potential Covid-19 vaccine was announced at the start of the week with a possible roll-out date for mid-2021. The situation in the US and other major economies is concerning for the next few months. The number and growth of Covid-19 infections in the US are now more severe than in the two prior peaks this year. A National shutdown is unlikely, but affected states are implementing restrictions locally to manage the outbreak. This is happening against the backdrop of a federal political impasse – at least until Jan 20, 2021. The US Congress is yet to progress on any form of emergency funding or extensions to programs at this stage.
The US weekly initial claims still recorded over 1m new claims made by people for the week ending 7 Nov – across both state and federal programs. The continuing claims data highlights that while uptake of state-based programs is falling, people are moving over to the emergency federal programs. The net result is that total continuing claims for the wk ending 24 Oct was little changed at 21.1m people (down from 21.5m people in the prior week). Of this total, over 13m people are utilizing federal programs that are due to expire at the end of the year.
According to the global PMI’s in Sep and Oct, Germany remained the key to overall growth in EU manufacturing output. In Sep, German output increased after declining in Aug, but output remains well below a year ago. Across the broader Eurozone, industrial production was mostly flat for Sep. While output has improved it remains below a year ago. The tenuous recovery will likely be impacted by another severe wave of Covid-19 infections and subsequent restrictions.
The Chinese Oct trade data for China showed that imports fell by -11% for the month – likely affecting some of the larger export markets. Imports from Germany fell by -15% in Oct (Germany is the third-largest import market for China), after increasing by 16.8% in Sep. Imports from the broader EU region were down by -11.4% in Oct. The Chinese import data also highlighted some weaknesses for Japanese exporters in the short-term.
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 16 November 2020 – Data will be in focus this week ahead of the US Thanksgiving holiday next week. The G20 summit will be held later this week (virtually) and discussion will focus on Covid-19 response and management.
Key data points this week include:
US – housing market data (conditions for Nov, existing home sales, and permits) will be released this week. Mortgage purchase applications have been falling for six out of the last seven weeks, so there may be some stalling of recent improvements. US retail sales for Oct will be released this week. Several regional manufacturing surveys will provide the first view of US manufacturing activity for Nov. We will be looking for any impact on factory activity from rising infection rates, especially export orders.
China Oct data will continue to be released this week – including industrial production and retail trade.
Japan – merchandise trade data for Oct will be released and there will likely be some impact from the notable decline in Chinese imports for the month. The prelim manufacturing PMI for Nov will be released, and we will be looking for a possible impact on activity due to the renewed COVID-19 outbreak among key trading partners.
Australia – the RBA minutes will be released this week, providing some insight into deliberations behind the launch of QE. The important employment and labour market survey for Oct will be released this week.
US Fed purchases of Treasury securities and MBS will be significantly higher this week ahead of the shorter Thanksgiving week next week. Last week, purchases totaled approx. $17bn, and this week, purchases will be around $34bn. The schedule for Thanksgiving week has approx. $4bn in purchases of US Treasuries.
Purchases of MBS remain elevated and the Fed appears to be buying well above the $40bn/month rate. Last week’s purchases were approx. $20bn and this week’s purchases are expected to total $36bn. The schedule for Thanksgiving week has approx. $20bn in purchases of MBS. This is all in-line with continued declines in mortgage rates.
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $407bn in ST Bills, Notes, and Bonds this week, raising approx. $48bn in new money.
The US Treasury will also auction $39bn in 10yr TIPS and 20yr Bonds this week that will settle on 30 Nov.
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
