The weekly macro review for w/c 19 October 2020 – Global prelim PMIs for Oct indicated mostly consistent momentum in manufacturing growth for the month. The exception was the UK. The Composite UK report was quite downbeat with growth slowing notably but remaining positive. The UK manufacturing result reflected a combination of firms building stock ahead of the final Brexit deadline and firms streamlining inventory to reduce costs. Eurozone manufacturing was lifted by the German manufacturing sector. Japan’s manufacturing output index indicated a decline, but industrial manufacturing production is forecast to be positive for Sep – and export performance in Sep continued to improve. Weaker improvement in Japanese imports suggests some ongoing domestic weakness.
Growth in services PMI’s was mixed. There was a sharper contraction in Europe and a continued contraction in Japan. Growth was notably slower in the UK. Momentum in the US and Aus services activity was only slightly faster – linked to the easing of restrictions.
In the US, services output was higher, as restrictions were lifted, but there was some easing in the growth of orders and employment. Manufacturing growth maintained steady progress. Regional US manufacturing surveys for Oct have indicated continued improvement in manufacturing conditions.
There is some cautious optimism around slowing US initial jobless claims – especially now that California data has been updated. Continuing claims were lower too but falls in state and some fed programs were offset by increases in other fed programs. This could reflect a transition between programs as benefits expire for some people. How rising infections impact consumption behaviour will be important over the next few weeks.
US housing market data for Sep remained very strong. The Northeast has been a key driver of improved housing market conditions, existing home sales, new permits and new housing starts. All regions recorded stronger existing home sales in Sep. There is some caution ahead though from the mortgage application data. While refi activity has continued to grow as mortgage rates have continued to fall, purchase applications have declined now for the last four weeks. The purchase index is a leading 4-6 week indicator of home sales.
There were two interesting points from the minutes of the RBA Oct meeting. The first is the likelihood of further policy easing for Nov and the second is the change in forward guidance on inflation and full employment. The Board noted that it wants to see more than just progress toward full employment. There will likely be less emphasis on forecast inflation and more emphasis on actual inflation outcomes. It was also noted that inflation outcomes are not likely to be achieved until there is a tight labour market.
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 26 October 2020 – This will be another big week across the macro spectrum. We are now in the final week leading into the US Presidential election next Tuesday, Brexit talks are intensifying, Covid-19 cases are reaching new highs around the world, US Q3 earnings and growth data will feature, and there are several central bank interest rate decisions due this week.
We are now into the final week leading up to the US Presidential election. Stimulus discussions continue to simmer. The prelim US Q3 GDP will be reported this week – with likely a strong upturn in growth compared to the significant contraction in Q2.
US Q3 earnings this week will feature: Amazon, Apple, Google, Microsoft, Facebook, Twitter, Pinterest, AMD, Fastly, Shopify, Starbucks, Boeing, GE, Caterpillar, 3M, Pfizer, Moderna, Gilead Science, Visa, Mastercard, Exxon Mobil, Chevron, and Ford.
Brexit talks resumed late last week and have intensified into this week in an effort to reach an agreement. The 31 Oct has been identified as a target date to review progress on negotiations, allowing enough time for a deal to be ratified ahead of the 31 Dec transition deadline.
There are several central bank meetings this week: The ECB, BoJ, and BoC. It will be quiet on the US Fed front ahead of the FOMC meeting next week 4-5 Nov.
Key data points this week include:
US – prelim Q3 GDP will be a key focus this week with the expectations for a strong growth figure, the final half of Oct consumer sentiment reading, personal consumption, income and prices for Sep, and the advance durable goods report for Sep.
Chinese Oct PMI’s will be released over next weekend.
Europe prelim Q3 growth data will also be released along with prelim CPI growth for Oct.
Aus Q3 CPI will be released and will provide a key input into the RBA deliberations and meeting next Tues.
The new schedule of US Fed purchases of Treasury securities and MBS will be released mid-week.
US Treasury issuance will be little changed this week. The US Treasury will settle approx. $302bn in ST Bills and 5yr TIPS this week, raising approx. $5bn in new money. The US Treasury will also auction $210bn in Notes, Bonds, and FRN’s this week, which will settle next week.
This week, approx. $16bn 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
