by Kim | May 31, 2021
It will be a big week of data, central bank speeches, the RBA rates decision, and OPEC.
Markets currently expect US inflation to be transitory and are looking through the higher prints as we cycle over the low points of consumer inflation last year. The latest Apr US PCE data was the last of the lower base readings from 2020 – the 2020 base will start to increase from May. The latest PCE trimmed mean shows that underlying inflation continued to increase from 1.71% in Mar to 1.79% in Apr (annualized) – but remains well below recent peaks of 2.1% in Feb 2020.
The main highlights this week will be:
US non-farm payrolls for May will be the focus – especially after the much weaker than expected Apr result. Expectations are currently for a +650k increase in May (prior actual was +266k increase in payroll jobs in Apr and a substantial downward revision to the Mar result).
US central bank speeches including Chair Powell, Vice Chair Quarles, and Governor Brainard.
US ISM Manufacturing and Services PMI’s for May – while ongoing expansion of demand is expected especially in Services, the prices, delivery lead times, and unfilled orders indexes will also be in focus, providing some insight into any easing of supply chain disruptions and input price pressures.
The RBA meeting on rates. While no change in rates is expected, the RBA is expected to provide commentary on the TFF which is due to wind-up on 30 Jun. Commentary is expected to remain focused on reducing labour market spare capacity before any change in rates. Labour market outcomes are likely to be made worse by another state-wide lockdown in Victoria (second-most populous state) – just as National support programs have ended.
Australia Q1 GDP will be released. Growth in Q1 is expected to have slowed slightly to +2.5% (from +3.1% in Q4 2020).
There will be several other central bank speeches this week: ECB President Lagarde, RBNZ Governor Orr, BoE Governor Bailey, and the Indian central bank will also meet this week.
OPEC will meet this week:
OPEC and its allies are expected to stick with a decision to boost output in July when the group gathers Tuesday, according to a Bloomberg survey last week. https://www.bloomberg.com/news/articles/2021-05-30/oil-edges-higher-with-market-set-to-focus-on-opec-policy-meet
This week, the US Treasury will settle $476bn in ST Bills, Notes, and Bonds, raising approx. $91bn in new money. The net new cash raised for the quarter to date is approx. $119bn (est of +$463bn in Q2). This week, approx. $62bn in ST Bills and Notes & 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 | May 31, 2021
Last week, equity bears failed to make a stand as risk markets pressed higher. The Russell 2000 remains in the latter stages of a wave 4 bullish triangle / pennant. The Russell remains our clearest wave structure as the large caps continue to lag. The DXY attempted a bullish reversal from its wedge lows but […]
by Kim | May 24, 2021
The focus this week will be on US data, notably the personal income, consumption, and PCE price index data for Apr. There will also be several speeches and testimony by US Fed Vice Chair Quarles and the rates decision by the RBNZ.
The key US data highlights this week are:
Personal income, consumption, and the PCE price index data for Apr. The consumer inflation number will be important – this is the release followed by the FOMC. There was a relatively large acceleration in the annual inflation rate for Mar, which increased to 2.3% from 1.5% in Feb. The Apr 21 result will cycle over the lowest point of the price index for 2020, so base effects should be more notable. This will be the last month of a lower base contributing to the headline inflation number. Annual core inflation is expected to increase from 1.8% in Mar to 3% in Apr.
US durable goods orders will be released for Apr – expecting a +0.7% increase in orders (slower than the 1% increase in Mar).
US new home sales for Apr are expected to increase at a slightly slower pace of 975k (down from 1.021m SAAR basis in Mar) – as material delays continue to impact construction and higher mortgage rates impacted demand somewhat.
There will also be several regional US manufacturing surveys released this week for May. Expecting similar themes of production impacts from supply chain disruptions, higher prices, and rising order backlogs. From the Markit prelim US PMI report last week:
Nonetheless, a further marked deterioration in vendor performance limited operating capacity and reportedly held back output growth. https://www.markiteconomics.com/Public/Home/PressRelease/392edb090fd34a7cb68bf22a1ddb7789
In Australia, the Q1 construction work and private sector CAPEX reports will be released this week, ahead of Q1 GDP next week. Aus employment data for Apr disappointed last week with an overall decline in total employment for the month. The unemployment rate still declined due to a fall in participation.
This week, the US Treasury will settle $305bn in ST Bills, 10yr TIPS, and 2yr FRN’s, with a net paydown of -$5bn. The net new cash raised for the quarter to date is approx. $29bn. The US Treasury will also auction the 2yr, 5yr, and 7yr Notes this week which will settle next week on 1 Jun.
This week, approx. $15bn in ST Bills will mature on the Fed balance sheet and will be rolled over. Next Mon 31 May will be the US Memorial Day Holiday.
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 | May 24, 2021
Last week US equities saw a hard test of structural trend support and held - the trend is your friend until it bends. It is important to note that the recent rally up off the lows appears corrective and is at risk of reversing early this week. All bullish market trends previously identified remain in […]
by Kim | May 17, 2021
The focus this week will be on the FOMC minutes, US housing data, and the global prelim PMI’s for May.
The upside surprise for US CPI in Apr dominated the news last week. Other data was generally in line with expectations, although PPI growth also came in higher. US retail sales “disappointed” with a 0% change after a 10% increase in the prior month. Of interest was the University of Michigan consumer sentiment result – consumer sentiment fell unexpectedly by 6pts (despite record stimulus, etc.). The fall was the result of higher inflation expectations and expectations for real income growth the weakest in five years. Despite negative mentions of buying conditions (for homes, vehicles, durables), the expectation is for spending to still advance – supported by rising employment/re-opening, stimulus, and savings. The rationale is interesting:
This combination of persistent demand in the face of rising prices creates the potential for an inflationary psychology, fostering buy-in-advance rationales and cost-of-living increases in wages. At present, these rationales remain relatively uncommon, and the power of corrective economic policies is now relatively potent.
Policy commitments to establish full employment while allowing inflation to meaningfully rise have never been attempted with the additional micro goals of equity and fairness across population subgroups. http://www.sca.isr.umich.edu/
This week in the US, the FOMC minutes will be released. There will also be several Federal Reserve Governors speaking during the week, including US Fed Vice Chair Clarida. Housing data will be in focus with permits (exp 1.77m SAAR), starts (exp 1.71m), and existing home sales (exp 6.09m) for Apr.
The prelim global PMI’s for May will also be released later in the week for the US, Europe, Japan, UK, and Australia. Input price pressures and supply chain disruptions will be of interest.
In Australia, the RBA will also release the latest minutes. Also out this week will be the Q1 wage price index (exp +0.5%), and the labour market survey for Apr (employment growth exp +15k). The Apr labour market survey will be the first since the end of a major business support program – the JobKeeper subsidy.
This week, the US Treasury will settle $426bn in ST Bills, Notes, and Bonds, raising approx. $37bn in new money. The net new cash raised for the quarter to date is approx. $34bn.
This week, approx. $24bn in ST 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
