The weekly macro review for w/c 4 January 2021 – It was a turbulent week with further social and political unrest in the US, some weak data points, and continued peaks in Covid-19 infections and deaths.
In the US, the Democrats won the two Senate runoff races in Georgia. The Democrats will now lead a 50-50 split Senate for the next two years, with Democrat Vice-President Harris to cast the deciding vote. This opens the way for the Democrat agenda. By the end of last week, it was rumoured that another round of relief spending would be considered in the vein of $US3-4tr – made up of another round of one-off payments and infrastructure spending. This would be in addition to the $900bn in relief aid already passed.
The US non-farm payrolls last week highlighted the adverse impact of this current, more severe wave of Covid-19 cases. New peaks in cases and deaths continue to be recorded in the US. In many cases, local restrictions resulted in a severe decline in services (leisure and hospitality) payroll jobs in Dec. This was partially offset by increases across some services jobs such as trade, transport, and retail, as well as increases in goods-producing jobs. The household employment survey was little changed in Dec. The increase in employment was small – but was at least made up of higher growth in full-time jobs (offset though by a severe decline in part-time employed persons).
The main themes from the ISM’s were ongoing and increasing business disruptions from the current wave of infections. Supplier lead times continue to lengthen, led by transport and human resource constraints. There was a notable increase in the proportion of firms reporting higher input prices this month – especially across some commodities. Underlying demand conditions were surprisingly resilient given the disruptions.
The global PMI reports for Dec were generally stronger across manufacturing while services remained weaker. Across several larger economies – Germany, UK, and Japan, new peaks in infections have led to a further tightening of restrictions. This will likely impact the results for the next 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 11 January 2021 – The highlights this week will be key data points, several Fed speeches, and the ongoing US political and social unrest.
After a tumultuous week for the US, the focus is likely to remain on US politics. One of the important points will be how quickly (and how much) the new administration will move on a further round of stimulus/relief spending.
News of the rollout of Covid-19 vaccines continues to be overshadowed by rising infections and the re-imposition of restrictions. Last week, several major economies announced new shutdowns or restrictions including the UK, and countries such as Japan and Germany are also looking at further restrictions to reduce the growth of infections.
In the US, the key data releases will be retail sales for Dec, consumer sentiment for early Jan and, CPI for Dec. There will also be several US Fed Governor speeches including Fed Chair Powell on Thursday.
The new schedule of Fed purchases of Treasuries and MBS will be released on Thur 14 Jan, so the total value for this week is incomplete. So far, the Fed plans to purchase $13.8bn in US Treasury securities this week (last week $26.4bn). The Fed will also continue to purchase MBS at a faster rate this week buying $21.9bn in MBS ($28.8bn last week). The Fed target for MBS purchases is approx. $40bn/mth.
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $405bn in ST Bills, Notes, and Bonds this week, raising approx. $63.6bn in new money for the week.
This week, approx. $19bn 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.
