Macro review for w/c 2 July 2018 – The key highlights;
Tariffs on US and Chinese imports went into effect late last week with some heated language around “igniting the largest trade war in economic history”. “International trade policy” featured in central bank speeches/minutes/interest rate decisions last week – highlighting concerns about escalation and the impact of uncertainty on sentiment and investment/capex decisions.
BoE scenarios for monetary policy contingent on trade protectionism, Brexit uncertainty and ‘tighter global financial conditions”.
US FOMC minutes – risks to the outlook are balanced, gradual rate rises appropriate, FFR likely to be above neutral by next year.
Aus RBA rates kept on hold – slightly less positive language around trade policy, global growth and local employment growth. Likely tighter lending standards to come in Australia.
PMI’s offered a first glimpse at June activity. PMI’s covered here followed a similar pattern – slowing/no expansion in manufacturing (US, Japan, Eurozone, UK, and China) and slightly stronger expansion in services. Continued to highlight impact of trade policies on business uncertainty, prices and availability of certain commodities (so far). Several PMI reports highlighted issues around slowing export sales (US, Asia, Europe).
US data remains positive; the ISM reports (manufacturing and non-manufacturing) showed expansion continued to accelerate versus the Markit PMI’s showing manufacturing and services still expanding, but not accelerating. Headline manufacturers new orders for May increased, driven by non-durable goods. Continued improvement in US non-farm payroll growth. Job cut announcements low compared to recent history but hiring announcements lagging.
Europe; unemployment continued to fall, retail sales growth in Eu28 was steady (flat in the EA19)
UK; announcement of Brexit plans late Friday now under some uncertainty after the key Brexit Minister resigns, citing disagreement with the Cabinet plans. PMI’s suggest stronger services, improved construction and weaker manufacturing activity in June.
More detail is provided in the full review – download it here (hit the back button to return to the site);
The outlook for w/c 9 July 2018 – The major themes for this week include;
Liquidity – relatively light supply in treasuries this week with the US Treasury auctioning/settling $125b in bills with no paydown or new money raised (4wk bill TBA). Several speeches from FOMC members, Fed Monetary Policy report, BoE and BoC rates decision this week.
With US and Chinese tariffs now in effect, waiting for the next level of escalation. Hearings for the next round of US tariffs not until 24 July. Also awaiting the outcome of US investigations on auto imports – impacts on Europe and Asia.
Brexit likely to feature this week after the key minister for Brexit resigns amid disagreement on the direction of UK-EU Brexit deal.
US CPI for June and JOLTS data
Further detail is provided in the full brief – download it here (hit the back button on your browser to return to the site);
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
