by Kim | Nov 29, 2021
Key themes for the week ahead – US non-farm payrolls, growth momentum, and central bank speeches
It will be another big week of economic data and central bank speeches. Other things to be aware of this week; the lead-up to the debt ceiling limit, finalizing the passage of the Democrats spending bill in the Senate, OPEC+ meeting, and reactions to the new Covid-19 variant.
US Non-Farm Payrolls
Non-farm payrolls are expected to increase by +550k for Nov (compared to +531k in Oct). Payrolls growth before Oct had been revised higher which added to the FOMC case to begin the taper. Last week, Fed Governor Bostic noted that a faster taper could be possible. A stronger result for Nov may put this more firmly on the table. The FOMC meets 14/15 Dec so will likely have time to weigh up risks from a new Covid variant.
Growth Momentum
The final Nov Markit PMI’s will be released this week. Last week, the prelim Markit PMIs for Nov showed continued moderate output growth across manufacturing and services. Momentum in the Eurozone, Japan, and Aus was better than expected. Services growth was slower in the US and the UK. Supply constraints continued to hinder output growth (e.g., Germany auto manufacture), higher input price growth weighed more broadly, and selling prices also increased broadly.
The US ISM reports will be released this week – commentary and growth momentum (esp. in services) will be in focus. The headline ISM manufacturing index is expected to reach 61 in Nov (up from 60.8 in Oct). The headline ISM services index is expected to ease to 65.5 in Nov (from 66.7 in Oct).
Central Bank Speeches
This week there will be several central bank speeches including FOMC Chair Powell (Senate testimony), BoJ Governor Kuroda, and BoE Governor Bailey. There will be other US Fed Governor speeches – including Williams, Clarida, Bowman, and Quarles.
The renomination of Chair Powell and the nomination of Governor Brainard to Vice-Chair was announced last week.
This week, the US Treasury will auction and settle approx. $520bn in ST Bills, Notes, Bonds, and TIPS, raising approx. $54bn in new money. Approx. $45bn in ST Bills, Notes, and Bonds will mature on the Fed balance sheet this week and will be rolled over.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Nov 22, 2021
Key themes for the week ahead – central banks, global growth momentum, and US inflation.
It might be a shortened holiday week, but there will be much to digest.
Central Banks
The latest FOMC and ECB meeting minutes will be released. The next US Fed Chair is expected to be announced this week. The RBNZ meets this week and a 25bps increase in the cash rate is possible. There will also be several speeches including BoE Governor Bailey and ECB President Lagarde.
Global Growth Momentum
This week, the prelim PMI’s for Nov are expected to show continued modest acceleration in US manufacturing and services activity. Private sector growth across the UK and Europe is expected to have slowed. Covid disruptions within Europe remain an issue.
US industrial production last week improved across the three key industries, with a notable rebound in motor vehicle output. Initial US regional manufacturing data for Nov indicated that input and selling price growth remained widespread and growth in delivery lead-times remained elevated. Demand growth was mixed.
Inflation
This week, the US Fed preferred view of consumer prices will be released. The PCE price index is expected to increase by +4.6% in Oct (from 4.4% in Sep) and the core PCE price index is expected to accelerate from 3.6% in Sep to 4.1% in Oct.
Last week, consumer price inflation data from the UK and Canada showed a further acceleration. UK CPI was higher than expected at 4.2% (expecting 3.9%) and consumer prices in Canada increased by 4.7% (expecting 4.7%) versus +4.4% in Sep. Aus wages growth was a little higher than expected at +0.6% for the quarter (prior +0.4%). Japan consumer price growth remained weak with headline CPI -0.1% (expecting +0.5%) for the year to Oct.
The monthly US personal consumption expenditure and income data for Oct will also be released this week. Incomes are expected to increase by +0.2% (MoM) after declining by -1% in Sep. Personal expenditures are expected to increase by 1% (prior month +0.6%). The final University of Michigan consumer sentiment data for Nov is expected to show little improvement with headline sentiment at 67 (versus 66.8 prelim Nov).
This week, the US Treasury will auction and settle approx. $287bn in ST Bills and FRN’s, raising approx. $7bn in new money. The US Treasury will also auction the 2yr, 5yr, and 7yr Notes this week ($176bn) – to settle next week on 30 Nov.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Nov 15, 2021
Key themes for the week ahead – inflation
Inflation is the key theme for this week with several more CPI reports due for Oct.
There will also be numerous US Fed speeches this week, the first look at US manufacturing momentum going into Nov, and US housing data for Oct.
Inflation
Key central bank policymakers have acknowledged that inflation has been more persistent than expected. Central banks have forecast that Inflation will likely ease through H1 next year as supply chains recover, Covid pressures ease, and labour markets continue to recover. But ST rates still reflect the likelihood that CB’s will start to hike earlier than expected.
From last week, consumer price inflation came in higher than expected in the US and China for Oct. In the US, CPI growth was +6.2% (exp +5.8%) and there was a broad contribution to the acceleration. By the end of the week, ST US rates (1-5yr) reached new YTD highs as the curve flattened even further.
The inflation data out this week is important in the context of the other key CB’s and ST rate forecasts; UK CPI (exp +3.9%), Canada CPI (exp +4.6%), Eurozone CPI (exp +4.1% and +0.8% mth), Japan CPI (exp +0.2%) and the Aus Wage Price Index (exp +2.2% YoY and +0.5% Qtr). Japan is the obvious exception.
Growth Momentum
This week US industrial production data for Oct will be released (exp +0.7% v -1.3% Sep) – last month was lower due mostly to a further 7% decline in motor vehicle output. We will also get the first view of US manufacturing momentum going into Nov with several regional surveys to be released. This will provide further insight into the progress of supply chain issues, prices, and impact on output.
This week, the US Treasury will settle approx. $363bn in ST Bills, Notes, and Bonds, raising approx. $37bn in new money. This includes the addition of a $60bn 14-Day CMB this week.
The US Treasury will also auction 10yr TIPS and the 30yr Bond this week – to settle on 30 Nov.
A decision on the US Fed Chair position is imminent.
Next week is a short week due to the US Thanksgiving holiday.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Nov 1, 2021
Key themes for the week ahead – central bank policy decisions part 2, US payrolls, and global growth momentum.
This is the second of two weeks of major central bank policy decisions. The context of these meetings is significant as markets continue to bring forward rate hikes amid higher (and more persistent-than-expected) inflation and flattening yield curves.
The RBA did not defend the 3yr (Apr ’24 3yr AGB) target of 0.1% last week and by Friday that rate had reached 0.775%. CPI growth was lower-than-expected but the core (trimmed mean) increased into the 2-3% target band. RBA guidance has been more dovish than what market pricing now suggests (RBA see’s wages growth condition not met before 2024). The Board needs to navigate that difference this week – any shift in guidance will be important. At this stage, there is no press conference scheduled (a press conference is usually scheduled if a policy change is announced).
The FOMC is expected to announce the start of QE taper. Market projections of rate hikes have been bought forward and the yield curve has flattened. Details of the taper process will be important. Growth for Q3 came in lower-than-expected last week as did the headline PCE inflation rate – but PCE is still elevated. The ECI indicated faster growth in compensation costs at Q3. Annual wages and salaries growth remained below annual PCE inflation. The Oct regional surveys show supply issues are still acute, price pressures widespread, and employment mostly robust. The non-farm payrolls for Oct will be released on Friday and are expected to increase by 413k jobs (up from 194k in Sep). The ISM surveys for Oct will provide important insight into momentum going into Q4.
The BoE also meets this week. The new BoE chief economist expected inflation to be higher into H1 next year. It was suggested that this meeting could be “live” for a rate hike discussion – but it would be “finely balanced”.
Last week the BoC ended its QE program and noted that inflation may not be as transitory as previously thought. Guidance – policy rates to remain low until 2% inflation target sustainably achieved and slack in the economy absorbed – which it now projects will happen in the middle quarters of 2022.
The ECB announced a slowing of bond purchases over the next few months. Guidance was maintained – the ECB noted that the current conditions did not suggest rates would increase by mid-2022. But there was little pushback on whether markets were “getting ahead of themselves” by pricing in an earlier start to hikes. Inflation was expected to “last longer than originally expected”. The Oct flash CPI growth accelerated further on the back of accelerating energy prices. Underlying inflation also accelerated and is now at the 2% threshold.
The BoJ remained dovish and downgraded growth and inflation forecasts for 2021.
OPEC+ is expected to meet this week.
The US Treasury will settle approx. $496bn in ST Bills, Notes, Bonds, and FRN’s, raising approx. $135bn in new money. The US Treasury will also release the Q4 TBAC refunding documents on 3 Nov.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Also posted this week is a review of the major economic releases last week. Download the file here:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Oct 25, 2021
Key themes for the week ahead – central bank policy decisions, inflation, and US growth (tech earnings too).
This will be the first of two weeks of major central bank policy decisions. This week: the BoC, BoJ, and ECB. Next week: the RBA, FOMC, and BoE. Policy decisions and signaling will be interesting in the context of recent front-end sell-offs. Market pricing of rate hikes have been brought forward across many countries – even despite some dovish CB guidance.
This week, the BoC is expected to keep rates on hold, but with a chance for a further taper announcement.
The ECB is expected to keep policy settings on hold. Guidance on taper will be important. The Sep CPI was confirmed at +3.4% – led by accelerating energy prices. Underlying inflation is 1.9% ex-energy but accelerating. The Eurozone flash PMI for Oct suggests the Euro growth momentum slowing into Q4. The Euro area Oct prelim CPI is out this week, expecting +3.7% headline growth (up from 3.4% in Sep). Q3 GDP is expected to slow to +3.5%.
The BoJ is expected to keep policy settings unchanged. Last week CPI growth remained well below the BoJ targets. The latest flash PMI’s for Oct indicated a welcomed shift in growth momentum at the start of Q4.
Next week the RBA meets. Rate hikes are being priced in much earlier than RBA guidance. Last week the RBA responded by buying up to $1bn of 2024 3yr AGB to defend the 0.1% target rate. Minutes reaffirmed dovish guidance especially as the country emerges from multiple lockdowns. The Q3 CPI is released this week – expecting inflation to ‘ease’ to 3.1% (from 3.8% – base effects).
The BoE also meets next week. The new BoE chief economist expected inflation to be higher into H1 next year. It was suggested that next week could be “live” for a rate hike discussion – but it would be “finely balanced”.
US rates have also been pricing an earlier liftoff with a flattening yield curve. The lift in ST rates has been in line with a shift in Fed guidance, but concern is rates rising going into a lower growth environment (roll-off of stimulus etc). The PCE inflation is out this week for Sep – expecting core inflation to increase to 3.7% from 3.4%. The ECI for Q3 will provide some insight into wages. US growth has been downgraded throughout Q3 and GDP for Q3 is expected to slow to +2.8% annualized. Looking forward, the flash PMI’s for Oct (released last week), reported a notable lift in services output and activity. Manufacturing output continues to be hampered by ongoing supply chain disruptions while demand has remained robust. Widespread input price increases were again reported by firms.
The US Treasury will settle approx. $286bn in ST Bills and 5yr TIP’s raising approx. $103bn in new money. Additional Cash Management Bills (CMB’s) were added to the schedule as the US Treasury manages the TGA balance amid debt ceiling discussions. Just over $200bn in Notes (2yr, 5yr, and 7yr) and 2yr FRN will be auctioned this week – and will settle next week.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Also posted this week is a review of the major economic releases last week. Download the file here:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
