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
