Macro review for w/c 25 June 2018 – Trade and tariffs, central banks and the latest reading on growth and inflation all featured last week. Key highlights:
Trade and tariffs ;
- The US decided not to invoke a National emergency law to block Chinese investment in US tech companies
- China announced that it had reduced the number of industries where foreign investment was restricted
- Canada reaffirmed its $12.6b in tariffs on US imports going live on 1 July 2018
- Auto tariffs will likely be a focus, especially for Europe, as President Trump stated that he was close to finalising his study on tariffs on car and truck imports from Europe
Central banks voiced some concerns;
- RBNZ kept rates on hold – expansionary level for a considerable period, citing excess capacity and trade tensions
- Fed President Bullard would prefer to see more gradual increases in rates and is concerned about the possibility of yield curve inverting
- BoE Governor Carney – Conditions could crystalize long standing risks of a ‘snapback’ in interest rates and tightening of global financial conditions – trade tensions, tighter US funding markets
- BoJ – Meeting for July will include further analysis of the weaker price growth in Japan
- ECB – reaffirmed plans to reinvest principal payments from its bond buying program once net asset purchases end in 2019
US growth – data offered mixed insights. Signs of slowing from Chicago Fed, Dallas Fed, US Durable Goods and Q1 GDP revised lower. Underlying price growth in PCE price index showing signs of acceleration. More positive results from Richmond Fed, Kansas Fed and Chicago PMI.
Eurozone CPI was higher on the back of accelerating annual growth in energy prices. Similar for German CPI. German employment was stable, but German Retail Sales declined in the provisional results released for May.
The UK was told to get a move on from the EC this week with regard to detail around Brexit. The UK government will meet on 6 July to agree and outline in more detail the future UK-EU partnership. The third release for Q1 GDP improved slightly – the previous large decline in Construction was revised to a smaller decline.
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The outlook for w/c 2 July 2018;
Liquidity – relatively heavy supply in treasuries this week with the US Treasury auctioning/settling $225b in notes and bills and $25b in new money to be raised.
A relatively quiet week for central banks – RBA rates decision, BoE Carney speech and FOMC minutes out this week.
Trade – US tariffs on Chinese imports go into effect 6 July. Canadian tariffs on US imports went into effect 1 July.
Another important week for the latest readings on global growth;
- Manufacturing and services PMI’s for June released across a range of countries
- US non-farm payrolls & factory orders
- Europe employment, retail sales, German industrial production
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Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
