by Kim | Oct 8, 2018
Macro review for w/c 1 October 2018 – “Stalling export trade” was a key theme from the latest round of PMI’s for September. This was evident in the manufacturing PMI’s for the Eurozone, including Germany, Japan, China and Canada. There was ‘modest’ improvement in the US and UK export orders.
The manufacturing PMI for China is on the verge of contraction. The PBOC announced a reduction of 1% in the RRR for some banks. Chinese officials are also considering further fiscal stimulus measures.
The US ISM Manufacturing PMI and the Markit Manufacturing PMI, although not as strong as each other, were consistent with the final US Factory Orders data for Aug. Growth in factory orders for all manufacturing industries recorded the second strongest growth in new orders for the last year. Stronger factory orders data can be traced back to transport equipment manufacturing activity.
The divergence remains between the US ISM non-manufacturing PMI and the Markit Services PMI data. Activity in the ISM non-manufacturing reached all-time highs in Sep while growth in the US Markit Services PMI continued to slow in Sep.
US payrolls data was lower for Sep, but previous months were revised higher. From the household survey (16yrs+), annual employment growth continued to slow, and participation declined over the last year. Real earnings continued to grow at a constant rate.
US Consumer credit growth continued to accelerate in Aug, which is likely to support consumption/spending growth.
A busy week of US Federal Reserve speeches. A full range of views were expressed from hiking rates to a point that are somewhat restrictive, to taking a more cautious path and a slower rate of hikes. Chairman Powell’s interview garnered the most attention, but also noteworthy was Atlanta Fed President/CEO Bostic speech. He has previously been more cautious on hikes but admitted that the strength of the economy had surprised to the upside – with the potential for overheating, a higher path for rates would be required.
The RBA kept rates on hold and Australian retail sales rebounded in Aug after a weaker Jul.
There is more detail covered in the full review for last week – use the links in the contents page to navigate to different country sections. Download here (hit the back button on your browser to return to the site);
Weekly Macro Review 01Oct2018
The outlook for w/c 8 October 2018 – Light supply of US Treasuries this week with the US Treasury auctioning and settling $156b in ST bills, raising approx. $1b in new money. Only $26m will roll off the Fed balance sheet this week on 11 Oct. The US Treasury will also auction approx. $74b in longer-term notes and bonds which will settle next Monday 15 Oct.
The key releases this week;
US PPI and CPI data for Sep
Eurozone and German Industrial production and German trade data – providing further insight on the slow-down in export/manufacturing demand
Aussie housing lending data for August – as we track the slowdown in the housing market
UK monthly GDP for Aug
Brexit is approaching critical timings – likely a heightened level of activity over the next week and a half. At the EC meeting next week on 17-18 Oct it will be decided whether there has been enough progress on the Brexit withdrawal agreement to call an additional EC summit on 17-18 Nov to agree and formalise the agreement.
Further detail and the calendar of key releases is provided in the full briefing document – download it here (hit the back button on your browser to return to the site);
Weekly Macro Brief 08Oct2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Sep 30, 2018
Macro review for w/c 24 September 2018 – As expected the US Federal Reserve increased the FFR by 25bps last week. A key change to the statement was the removal of “stance remains accommodative” but this did not signal a change in the path of policy. Projections for real GDP growth were upgraded in line with fiscal stimulus.
US data this week confirmed that real GDP growth in Q2 was 4.2% annualised and that inflation is not accelerating. In fact, core PCE price index growth slowed and came in at 0% in Aug. The annual headline rate also slowed slightly and remains around the Fed target.
Fixed mortgage rates continued to increase to new post GFC highs this week. Growth in house prices slowed. New home sales posted a slightly better month of growth after slowing for several months. From last week, existing home sales have declined over the last few months.
European inflation data continues to be led higher by accelerating energy prices. Prelim German and Euro-area CPI growth increased in Sept, coming in at +2.3% and +2.1% respectively. Euro-area CPI ex energy in the prelim estimate was +1.3% (annual).
Bank of Japan Governor Kuroda discouraged the idea that the BoJ might start to normalise rates. Governor Kuroda confirmed that extremely low rates will remain for an “extended period of time” meaning “a fairly long period of time”.
Brexit remains in a state of flux. Awaiting revised details of the trade component of Brexit, likely after the Conservative Party conference next week (from 30 Sep). UK GDP growth for Q2 was confirmed at +0.4% but Q1 growth was revised lower to +0.1%.
Expecting the US and Canada to announce details of an agreement on NAFTA early this week (Sunday). The US and Japan have agreed to commenced talks for a bilateral trade deal. The start of talks protects Japanese automakers from the threat of tariffs for now.
More detail is provided in the full review of last week – download it here (hit the back button on your browser to return to the site);
Weekly Macro Review 24Sept2018
The outlook for w/c 1 October 2018 – Medium supply of treasuries this week with the US Treasury auctioning and settling $135b in ST bills and settling $106b in note auctions from last week (settlement 1 Oct). The US Treasury will raise approx. $22b in new money this week. The 4wk bill is yet to be announced.
It’s the start of a new quarter and the monthly cap for reinvestment of maturing securities on the Fed balance sheet increases to $30b for treasuries and $20b for MBS. These are now the maximum cap levels and are not scheduled to increase further.
A big data week;
PMI’s for Sept will be released for the US, Asian and European economies.
US jobs data.
A heavy schedule of US Fed speeches, including Chairman Powell.
Australia RBA rates decision and retail sales.
Expecting an announcement on a NAFTA agreement between the US and Canada early in the week.
Brexit – the new form of the trade component of the Brexit withdrawal agreement will likely be announced after the Conservative party conference this week. Less than 4 weeks remain to negotiate the Irish border backstop and the broader trade element of the withdrawal agreement.
Further detail is provided in the full brief – download it here (hit the back button on your browser to return to the site);
Weekly Macro Brief 01Oct2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Sep 24, 2018
Macro review for w/c 17 Sept 2018 – Trade and Brexit negotiations took a negative turn this week. The US-China trade dispute escalated with further tariffs implemented by both sides. The next round of trade talks was cancelled by China. Negotiations between US and Canada have yet to resolve issues on NAFTA. The EU rejected the UK Chequers plan for the post Brexit trade relationship and this now leaves four weeks to create a new deal, while no further progress has been made on the issues of the Irish border.
The preliminary PMI’s didn’t hold much good news either. The US composite PMI slowed further, led by services – the overall pace of expansion has been slower in Q3. The Eurozone composite PMI also continued to slow – with further evidence of slowing manufacturing and export activity, especially in core markets of France and Germany. Japanese manufacturing PMI improved.
Annual CPI growth continues to be influenced by higher energy/transport costs –
Eurozone; annual headline CPI growth slowed to +2%, around the ECB’s target, but annual growth of CPI ex energy lower at +1.4%.
UK; annual growth of CPI-H incl owner occ housing costs came in at +2.4%, but ex volatile items CPI growth was lower at +1.9%.
Japan; the BoJ measures CPI less fresh food, which came in higher at +0.9%, but still well below the BoJ target, annual growth in CPI ex fresh food and energy was less than half that rate at +0.4%.
Canada; headline CPI growth slowed to +2.8%, but again CPI ex energy annual growth was lower at +2.2%. The BoC measures of core CPI accelerated somewhat in the latest month and are now sitting between +2 and 2.2%.
The BoJ left monetary policy settings unchanged at the latest meeting.
More detail is provided in the full review of last week – download it here (hit the back button on your browser to return to the site);
Weekly Macro Review 17Sept2018
The outlook for w/c 24 Sept 2018 – Relatively light supply of treasuries this week. The US Treasury will settle approx. $163b in treasuries this week, raising approx. $6b in new money – 4wk bill is yet to be announced.
New tariffs imposed by the US and China will go into effect this week. Considering previous threats, it is possible that the US could impose the further $267b in tariffs after China retaliated with tariffs and cancelled its high-level trade visit.
President Trump and JapanesePM Abe will meet this week on the sidelines of the UN General Assembly. Auto tariffs and the trade deficit are likely to be in focus.
The uncertainty surrounding Brexit is now heightened after the EU rejected the UK Chequers plan. Awaiting the next steps for UK-EU to reconnect on trade and work through the Irish border issues. A deadline of four weeks remains.
FOMC meets this week – expectations are for another 25bps increase to 2-2.25%
This is the last week before the ECB reduces it net asset purchases by half. As of Oct, the ECB net asset purchases will be at a rate of €15b/month.
Important data this week;
US Q2 GDP third estimate, PCE for Aug, regional surveys
Eurozone prelim CPI for Sep
UK Q2 GDP
Further detail is provided in the full brief – download it here (hit the back button on your browser to return to the site);
Weekly Macro Brief 24Sept2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Sep 17, 2018
Macro review for w/c 10 September 2018 – The week ended with threats of escalation in the trade dispute between US and China. Reports of possible retaliation from China amounts to what would be a major disruption to US supply chains in China. Escalation from China will be contingent on whether the US moves ahead with the next round of tariffs.
US data continues in line with the Fed’s rate trajectory. Good results from JOLTs data highlights further growth in employment. Consumer credit growth was stronger again, likely to help underpin expenditure growth – although, the motor vehicle component of non-revolving loans has been slowing. This is was highlighted in the slower retail sales growth this month. Retail sales growth was slower across most areas, but notably in auto’s. US CPI data was stable this month and annual rates of growth have been moderating. Slowing PPI suggest lower price pressure coming through the supply chain. Industrial production continued to grow.
The Eurozone industrial production looks like it could be rolling over, consistent with slowing GDP growth, slower German industrial production and slower growth in manufacturing PMI’s. Eurozone international trade data further confirmed the recent anecdotes from the PMI’s of slowing export growth. This will be important to watch.
ECB kept rates on hold – note that after Sept, the ECB will reduce net asset purchases by half to €15b/month.
Despite the increasingly negative and destabilising Brexit process, UK growth remains surprisingly robust. The rolling quarterly GDP was led higher by stronger retail activity throughout May-Jul. Some caution around labour market trends with employment growth clearly slowing. The BoE kept rates on hold.
More detail is provided in the full review of last week – download it here (hit the back button on your browser to return to the site);
Weekly Macro Review 10Sept2018
The outlook for w/c 17 September 2018 – Moderate supply of treasuries this week. The US Treasury will auction approx. $135b in ST bills and settle a total of approx. $208b in bills and coupons (including auctions from last week). The 4wk bill is yet to be announced. The US Treasury will raise approx. $21b in new money this week.
Trade will be a key focus this week. Threats of escalation over the weekend after Vice Premier Lui He was invited to Washington to re-start trade talks. Reports are that China may not accept the invitation if the next round of tariffs are implemented. There is a threat that China could retaliate by creating disruptions to US supply chains in China (such actions would have obvious implications for any other country considering operating within China in the future).
Brexit will be a key focus of an unofficial summit of EU leaders in Salzburg this week 19-20 Sept. No final agreement is likely, but it is hoped that the meeting will create new momentum leading into the final stages of the negotiations.
BoJ rates decision this week.
Important data out this week; Prelim PMI’s across US, Europe and Japan, providing an important read on growth momentum going into the final month of Q3. CPI reports from the Eurozone, UK, Japan and Canada. Australian house price index for Q2 and UK retail sales for Aug.
Further detail is provided in the full brief – download it here (hit the back button on your browser to return to the site);
Weekly Macro Brief 17Sept2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Sep 10, 2018
Macro review for w/c 3 September 2018 – US growth momentum continues into Q3. Employment and non-farm payrolls continue to grow and the annual avg hourly earnings growth accelerated. ISM’s for August show business activity expanding at a faster rate, but PMI’s more subdued.
European data highlights slower momentum. GDP growth slowed in Q2 for the Euro area and growth is well below that of last year. Eurozone manufacturing PMI slowing with weaker gains in new export orders. Of note was the German data – manufacturing new orders, led by exports, and industrial production data is rolling over. German manufacturing PMI at lowest reading for 18 months.
Australia – RBA kept rates on hold, but two of the major banks increased mortgage lending rates anyway. Mortgage lending continues to decline. GDP growth in Q2 slowed versus Q1, but annual growth increased to +3.4%, above the RBA expectation for growth to “average around 3%”.
Trade disputes remained in focus as the US threatened a new round of tariffs of Chinese imports and hinted at the possibility of escalation with Japan.
More detail is provided in the full review of last week – download it here (hit the back button on your browser to return to the site);
Weekly Macro Review 03Sept2018
The outlook for w/c 10 September 2018 – The US Treasury will auction and settle approx. $161b in short term bills (4wk bill TBA), paying down approx. $22b in debt. The US Treasury will also auction $73b in longer term notes and bonds – to settle next week.
It’s possible that a fourth tranche of tariffs on Chinese imports will be announced by the US this week in a further escalation of the trade dispute with China. NAFTA negotiations between US and Canada will continue this week – an outcome may not be finalised until the end of the month.
Brexit negotiations are now ongoing between the UK and EU. Next week’s informal summit of EU leaders at Salzburg is shaping up as an important event for Brexit negotiations.
Key central bank decisions this week – ECB and BoE. Plus, several US Fed speeches – looking for further signalling on US rates/monetary policy.
Important data out this week; US monthly CPI and retail sales, UK monthly GDP.
Further detail is provided in the full brief – download it here (hit the back button on your browser to return to the site);
Weekly Macro Brief 10Sept2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
