The weekly macro review for w/c 18 Mar 2019; Two points stand out from this week.
The first is the FOMC decision. There was a shift in the signalling of the future path of rates since the Dec meeting – no change in rates through 2019. Growth and inflation targets were revised lower for the year and u/e revised higher. The FOMC sees inflation as muted and acknowledges that the committee is not meeting the inflation target in a symmetrical way. Data is softening at this stage. Details of QT ending and reduction in reinvestment caps were outlined. For now, the Fed is easing without cutting rates, including its signalling of rates on hold.
US data out this week continued to confirm a ‘softening’ trend, with factory orders and the prelim Mar PMI indicating slower growth. On the other hand, there has been a small improvement and stabilization in some housing metrics.
The second point was the acceleration in the contraction of manufacturing PMI’s (prelim) in Europe for Mar – especially in Germany. The magnitude of the contraction was unexpected and raised concerns more broadly over the trajectory of growth. Final reports will provide more detail, but the early indications suggest declines in new orders, including export orders and continued falls in order backlogs, are likely to continue to impact output for some time.
Japanese data was mixed. Inflation remains well below the BoJ target. Trade data for Feb indicated exports continued to decline, but stronger export performance was reported for the two main export markets US and China. Final industrial production numbers for Jan were revised slightly higher on the back of unusually strong growth in Food & Tobacco production & shipments. The prelim Mar PMI indicated that the contraction in manufacturing continued.
The decline in Australian house prices accelerated in Q4. The RBA minutes indicate heightened uncertainty regarding the domestic economy. The bias for rates is no longer ‘the next move will be up’. The RBA minutes clearly state that developments in the labour market will be important. The Australian labour market data this week was mostly strong, but employment growth continued to slow.
Brexit disruption continued this week. The third vote was pulled and an extension was granted by the EU27, contingent upon the outcome of another vote or other such agreement by the UK Parliament on the direction of Brexit. The dates for the extension are now shaped by the upcoming EU parliamentary elections. UK data out this week indicated that the
There are more data releases covered in last weeks review. Use the links on the contents page to navigate to different country sections. Download the review here;
The outlook for w/c 25 Mar 2019; A less data-heavy week but events are in place that could impact sentiment, nonetheless.
Speeches by Central Bankers will feature this week; speeches by US Fed Presidents will be numerous, as well as ECB President Draghi and RBA board members throughout the week. The RBNZ will meet for its rates decision this week.
Some form of Brexit vote (a third vote) or agreement on the direction on Brexit should take place in the UK Parliament this week. The Brexit deadline has been extended and the date will be contingent on what happens in the UK Parliament.
The US-China trade negotiations will continue this week with USTR Lighthizer and Treasury Secretary Mnuchin traveling to Beijing for meetings from 28 Mar.
US data will focus on growth, housing, and regional manufacturing. Of note; the
The prelim Japanese industrial production data for Feb will be released – against a backdrop of weaker/contracting manufacturing PMI’s.
US Treasury supply will be somewhat heavier this week. The US Treasury will settle approx. $237bn in ST bills, TIPS and FRN’s, raising approx. $47bn in new money. The US Treasury will also auction approx $113bn in 2/5/7yr notes this week – which will settle on 1 Apr, raising approx $41bn in new money.
As it is
More detail (including a calendar of events) is provided in the briefing document – you can download the file here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
