by Kim | Jan 4, 2021
It will be a relatively full week for the first week of the New Year. In the US, the focus will be on the results of the two important Georgia Senate runoff elections this week. The results will determine which party will control the US Senate. The focus over the next few weeks will be on the transition to the new Democrat-led administration.
News of the rollout of Covid-19 vaccines is now starting to reflect a slower pace of vaccination than planned. At the same time, new infections continue to increase, and numbers are extremely elevated. Restrictions remain in place across many countries, mostly affecting services sectors this time around.
On the data front, global PMI’s for Dec will be released this week – providing some insight into the rebound across countries and regions. Restrictions across many countries are likely to see further depressed activity across services sectors.
In the US, the key data releases will be non-farm payrolls and employment for Dec, initial and continuing claims, and ISM PMI’s for manufacturing and services for Dec.
The minutes of the latest FOMC meeting will also be released this week.
The latest schedule of US Fed purchases of Treasuries and MBS has been released and purchases will be elevated relative to benchmarks. The Fed plans to purchase $26.4bn in US Treasury securities this week. The Fed will also continue to purchase MBS at a faster rate this week buying $28.8bn in MBS. The Fed target for MBS purchases is approx. $40bn/mth.
US Treasury issuance will be lighter this week. The US Treasury will settle approx. $285bn in ST Bills this week, with zero net new money raised for the week.
This week, approx. $19bn 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.
by Kim | Dec 28, 2020
Highlights for the short week between the Christmas and New Year break include the sign off on the latest US government spending and relief bill and a light data week.
News of the Covid-19 vaccination rollout is running alongside reports of new outbreaks, new faster-spreading strains, and case flare-ups across several countries.
Last week, the UK PM announced further restrictions in response to the discovery of a faster-spreading strain of Covid-19. A further fast-spreading strain has since been identified in South Africa:
The British authorities have detected two cases of the South Africa variant, Mr. Hancock said. In both cases, the infected people had been in contact with people who had traveled to Britain from South Africa in recent weeks. Mr. Hancock said that those infected with the new variant and their close contacts would be quarantined, and that travel from South Africa would be restricted. https://www.nytimes.com/live/2020/12/23/world/covid-updates-coronavirus
The UK parliament will be recalled to vote on the Brexit trade agreement this week. EU members will review the agreement before a formal vote, likely later in Jan.
It will be a quiet week on the data front. The highlights include US initial jobless claims.
The latest schedule of US Fed purchases of Treasuries and MBS will be announced on 28 Dec. Last week’s purchases were lower, in line with the short week. Last week, the Fed purchased approx. $9bn in US Treasury securities and approx. $18.4bn in MBS.
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $558bn in ST Bills, Notes, FRN’s, TIPS, and Bonds this week, raising approx. $188bn in new money. This brings the total of new money raised for the quarter to $575bn – which is approx 93% of the estimated requirement for the quarter.
This week, approx. $62bn in Bills, Notes, and Bonds 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.
We wish all of our valued clients a safe and prosperous New Year.
by Kim | Dec 21, 2020
The weekly macro review for w/c 14 December 2020 – Last week we noted that sentiment across many countries had been buoyed by news of a Covid-19 vaccine. But this has not stopped the rolling outbreaks from continuing to affect economies and households. In many cases, countries or regions within countries are reinstating travel and distancing restrictions. This is affecting the trajectory of the recovery from the more severe shutdowns at the start of the year.
In the US, the severity of the current outbreak of Covid-19 is worse (absolute numbers) than at the start of the year. But this time there has been no nationally mandated shutdown or restrictions – this has been handled on a local basis. Data continues to reflect at least a slowing of recovery momentum. US manufacturing is faring better than services. Data for Dec is reflecting ongoing growth, just no further acceleration in that growth. Services activity slowed notably in Dec but stayed positive. Retail sales for Nov were weak – especially given the Thanksgiving holiday. Initial and continuing claims have been increasing again since Thanksgiving. A sizeable level of unemployment remains, and the US Congress appears to have finally made some progress on a relief bill to help fill the income gap through cash payments and an extension to benefits. The FOMC made no changes to its high levels of monetary easing. The Chairman reinforced that accommodative policy would remain in place until inflation at least averages 2%.
In Europe, restrictions had been imposed again in many countries through Nov and Dec. The Oct production data remained strong – led by stronger growth in Germany. The Dec data suggests some broadening of manufacturing growth among countries. Services remain weak as a result of restrictions.
In the UK, the severe decline in services activity in Nov eased in Dec. Unfortunately, this is likely to be short-lived as greater restrictions have just been announced to combat a new strain of the virus. This will impact the UK and also Europe, which imposed travel bans on the UK. Manufacturing activity was boosted in Dec somewhat by preparations for the final Brexit deadline. At this stage, there is no UK-EU trade deal yet ahead of the 31 Dec deadline. The BoE made no changes to the current stance of policy.
In Japan, the rebound in activity is mixed. There has been a recent rise in cases and some restrictions have been re-imposed. Manufacturing production continues to rebound and is still 3% below a year ago. The PMI recorded a contraction led by services, which declined at a faster pace in Dec. The Nov merchandise trade reflected some domestic weakness in demand as well as weaker global export demand. The Dec manufacturing PMI noted an accelerated decline in new export orders. The National CPI declined at an accelerated pace – even excluding fresh food and energy. This reflects some of the weakness experienced in the services sector. The BoJ announced that it will assess further options for ‘effective monetary easing’ likely to be announced at the Mar 2021 meeting (within the current QQE with YCC framework). The Committee judges that current economic activity and inflation will remain under ‘downward pressure’ for a ‘prolonged period’ due to the pandemic.
In Australia, local community transmissions flared up in NSW. The states have been quick to reimpose border restrictions. The Nov employment survey was more positive. Even though employment growth slowed, there was a slower increase in the supply of labour too. This helped to reduce total unemployment in the month. The one caution is that most of the employment growth was the result of the easing of restrictions in Vic while employment across several of the larger states declined in Nov.
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 21 December 2020 – Highlights for the short week leading up to the Christmas holiday celebrations include the announcement of a compromise on stimulus in the US, increased Covid restrictions, and US data.
News of Covid-19 vaccinations is running alongside reports of new outbreaks, a new faster-spreading strain, and flare-ups across several countries.
Over the weekend, the UK PM announced further restrictions in response to the discovery of a faster-spreading strain of Covid-19. European nations responded swiftly with border closures and flight bans, including the closure of the Channel Tunnel “for at least 48 hours”.
The travel restrictions come at a difficult time for many British companies, which are engaged in last-minute stockpiling before December 31, when a status-quo transition period with the European Union ends and new customs rules come into effect. https://www.abc.net.au/news/2020-12-21/european-union-nations-halt-uk-flights-over-covid-19-variant/13002548
A small outbreak of community transmission in Australia (NSW) has resulted in some border closures and social distancing restrictions to be reinstated.
US data is the focus this week. The highlights include initial jobless claims (which have been trending a little higher since Thanksgiving), personal income, expenditure and prices, and consumer sentiment leading into the end of the year.
The US Fed purchases of Treasuries and MBS will be lower in this shorter week. The Fed will purchase approx. $9bn in US Treasury securities this week (last week $31.2bn) and approx. $18.4bn in MBS (last week $27.9bn).
US Treasury issuance will be lighter this week. The US Treasury will settle approx. $310bn in ST Bills this week, raising approx. $22bn in new money. The US Treasury will also auction the FRN, 5yr TIPS, and 20yr Bond this week, which will settle next week. Approx $230bn in Notes and Bonds will be auctioned and settled next week, raising approx. $159bn in new money. This may be revised based on the final stimulus number and the TGA balance..
This week, approx. $10bn 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.
We wish all of our valued clients a very happy and safe holiday!
by Kim | Dec 14, 2020
The weekly macro review for w/c 7 December 2020 – The roll-out of Covid-19 vaccines is helping to improve sentiment. But while prospects for the future are improving, there remains a more immediate/impending issue of the economic impact from the current outbreak as well as the general pace of recovery.
In the US, consumer sentiment recorded a surprising improvement – driven by sentiment around the longer-term outlook. Current prospects for the economy and household finances were unchanged. There were still expectations that in the immediate term unemployment would increase and incomes would decline, given the severity of the current outbreak.
In the week after Thanksgiving, US initial claims increased sharply. This is the first week where a notable increase has been recorded, especially during this latest outbreak of infections. It is not clear whether this is a shift in trend. From the Oct JOLTS and Nov non-farm payrolls data, we know that there were also large layoffs of temporary Census workers.
The JOLTS data for Oct showed a continued improvement in the net employment change for the month, but the annual net employment change was still a -5.65m decline in employment. While this was an improvement from the -6.2m decline in employment in Sep, these results are significantly below the average growth of +2.1m in employment recorded through 2019. Hires are now ahead of a year ago and layoffs and discharges are 5% below a year ago. Quits remain an insightful gauge. The level of quits is still 10% below a year ago – indicating either a lower willingness or ability of workers to change jobs. Job openings are also still 9% below a year ago, so the availability of jobs likely remains an issue.
The US CPI report was interesting this month. The pandemic has resulted in sharp shifts in spending patterns. Broadly, less air travel, less eating out, reduced discretionary spending, leaving densely populated areas (if possible), and more local/at home-based consumption. There are some small indications that severe price declines across categories such as apparel and airline fares are starting to reverse. This may be a small indication of returning demand, or at least, less deep discounting required.
The ECB announced additional support at the latest meeting. Rates remained unchanged, but pandemic-related QE was increased. The TLTRO III was also expanded for banks, and most of the other easing measures and emergency programs were extended indefinitely. It will be interesting to see the extent to which the US FOMC will respond this week to the current US situation.
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 14 December 2020 – Key highlights for the week will be central bank meetings and a heavy data week.
This week, the FOMC meets and rates are expected to remain on hold. The Fed will consider the current economic impact of the virus, and while data has not materially deteriorated during this wave of infections, the rebound across some sectors is still weak. The ECB last week adjusted some policy settings and the FOMC could do the same. The BoE meets this week and will also consider the current economic impact of the recent restrictions as well as the upcoming Brexit transition deadline. The BoJ will also meet at the end of the week.
Key data points this week include:
The prelim PMI’s for Dec across the US, Europe, Japan, UK, and Australia. This will provide some insight into the severity of recent virus outbreaks and restrictions on services sectors especially.
Industrial production data will be released across Japan (Oct), the Eurozone, the US, and China for Nov.
US – initial weekly jobless claims will be important after last week’s increase, retail sales for Nov, and building permits and housing starts for Oct.
Australia – the latest RBA minutes and the employment and labour market survey for Nov will be released this week.
The US Fed purchases of Treasuries and MBS will remain elevated this week. There will be a notable increase in the purchase of Treasury securities this week of $31.2bn (up from $$22.4bn last week). The purchase of MBS will slow slightly but remains well above the $40bn/month rate. The Fed will purchase $27.9bn in MBS this week, up from $32.1bn last week.
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $403bn in ST Bills, Notes, and Bonds this week, raising approx. $96bn in new money.
This week, approx. $17bn 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
by Kim | Dec 7, 2020
The weekly macro review for w/c 30 November 2020 – Data out of the US this week reflected some slowdown of the recent growth momentum. There has been a more localized approach to managing the spread of Covid-19 infections rather than any Nationally mandated approach. Infections, and now deaths continue to rise across the US amid early production and roll-out of the vaccine.
Non-Farm payroll growth slowed notably in Nov. The composition of payroll growth reflected a shift away from ‘re-opening’ type service jobs like hospitality, food service, and retail. The increase in services jobs was instead led higher by couriers and messengers, warehousing and storage, and truck transportation. Manufacturing and construction payroll jobs accounted for most of the goods-producing payroll growth.
A weaker result for the labour market this month. The headline focus was on the fall in unemployment and the unemployment rate. Unfortunately, that occurred within the context of a decline in employment for the month (part-time workers) and a larger number of people leaving the labour force this month.
The US ISM reports for Nov recorded slower growth. Manufacturing activity growth slowed slightly, with most indexes remaining stable. Employment shifted back into contraction – but more firms recorded no change to employment levels. Petroleum and coal industry output remained a drag on the ISM manufacturing report. Services growth slowed for the second month, but growth was still moderate overall. Most firms recorded no change across output, orders, and employment.
Across the industry reports, US firms noted some supply chain disruptions, due to Covid infections in some cases, for inputs, higher prices, and longer lead-times as a result.
US vehicle sales declined across both segments in Nov.
The Oct income and personal consumption report from last week recorded a decline in personal income as some government assistance programs started to wind-down. This offset positive, yet slower growth in employee compensation and income from capital. Excluding taxes, disposable income declined in Oct after increasing in Sep. As incomes fell in the month, consumption expenditure also slowed notably. This resulted in a fall in the saving rate (savings as a % of disposable income) – which remains extremely elevated.
The one consistent theme out of the major global PMI reports for Nov was the optimism toward the 12-month outlook given the announcement of the Covid-19 vaccine.
Across Europe and the UK, services sectors were again impacted by the reintroduction of restrictions.
The pace of manufacturing growth in Europe was constant – led by Germany. Excluding Germany, growth in Europe slowed to zero growth. The services sector was again hit hard by the reintroduction of social distancing restrictions and the services PMI contracted sharply.
Similarly in the UK, manufacturing activity was buoyed by stock build preparation for the end of the Brexit transition period at the end of Dec. Services shifted back into a sharp contraction.
In Japan, the headline manufacturing PMI reflected a continued, but a slight, contraction in manufacturing activity. Yet the industrial production data continues to report stronger growth in output and shipments. This discrepancy might reflect a fairly uneven rebound among firms. Services firms recorded a further contraction in business output in Nov.
Q3 GDP for Australia recorded a rebound in National output. Despite the high quarterly growth, the rebound has a way to go before output growth is back to the pre-shutdown trajectory. Real GDP remains -3.8% below the same quarter a year ago.
This quarter’s GDP rebound was led mostly by household consumption expenditure and a positive contribution from the change in inventories. Household expenditure has been well supported by enhanced government support, tax-free superannuation withdrawals, and rent/mortgage payment holidays. Government consumption expenditure also made a positive contribution to growth this quarter. Offsetting this growth was a substantial contraction in net exports.
The pre-existing trend of declining private gross fixed capital formation (investment spending) worsened further in the latest quarter. The decline in business investment offset some growth in dwelling construction and investment.
The RBA made no changes to the current interest rate and policy settings.
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 7 December 2020 – Key highlights for the week will be US data, the ECB rates decision, and Brexit negotiations ahead of the EC summit later in the week.
Key data points this week include:
US – CPI for Nov, initial unemployment claims, and the University of Michigan Consumer Sentiment prelim release for Dec. It will be a quiet week for Fed speeches ahead of the FOMC meeting next week on 15-16 Dec.
Chinese trade data, CPI, and PPI for Nov will be released this week.
Europe – ECB rates decision likely to focus on the economic impact of further restrictions to manage Covid infections, German industrial production data for Oct.
As we come into the final weeks of the year, the end of the Brexit transition period will be in focus. The final date is 31 Dec 2020. Negotiations are yet to reach any compromise on a trade deal, but there is some chance for a deal to be presented at the EC summit by Thur/Fri of this week. The end of the transition period is likely to be disruptive for both regions regardless of whether a deal is agreed to or not by the end of the week.
The US Fed purchases of Treasuries and MBS will remain elevated this week. The Fed appears to be purchasing well above the $40bn/month rate of MBS. The US Fed will purchase approx. $22.4bn of Treasury securities this week, slightly above the $19.6bn purchased in the week prior. Purchases of MBS will total approx. $32.1bn this week, just slightly below the $35.2bn purchased in the week prior.
US Treasury issuance will be lighter this week. The US Treasury will settle approx. $285bn in ST Bills this week, with a net paydown of $3bn. Net cash raised this quarter so far, continues to lag behind the $617bn estimated cash required for Q4.
The US Treasury will also auction approx. $118bn in Notes and Bonds this week that will settle on the 15 Dec.
This week, approx. $14bn 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
by Kim | Nov 30, 2020
Key highlights for the week will be important US data, global PMI’s for Nov, and US Fed Chairman Powell’s testimony on the CARES Act.
In the short-term, managing the spread of Covid-19 infections continues to impact economic activity. New cases remain extremely high in the UK, Europe, and the US (as well as many other countries). Longer-term, a vaccine now seems likely to be released around the middle of next year and fast-tracking is expected.
The prelim PMI’s from last week reflect the impact of different approaches to managing the spread of infections. There was a sharp contraction in output across the UK and Europe as both regions implemented restrictions. Whereas, the US prelim PMI’s indicated that growth accelerated across manufacturing and services in Nov – there has been no nationally mandated approach to managing the spread of the virus.
The stronger prelim PMI for US manufacturing was expected. Regional surveys had been strong for Nov. This week the ISM PMI’s will provide more detail across services and manufacturing for Nov. US non-farm payrolls and employment for Nov will also provide a vital gauge on the pace of the recovery. There has been some hint of stalled improvement in initial unemployment claims over the last two weeks, so this will be important to watch.
Key data points this week include:
US – Non-farm payrolls for Nov, initial unemployment claims, and the ISM PMI’s across manufacturing and services.
US Fed Chairman Powell will give two days of testimony on the CARES Act to the US Congress.
The final version of the global PMIs will be released this week and will likely reflect the marked contraction across the UK and European economies, the somewhat weaker growth in Japan, and the likely acceleration of growth in the US.
In Australia, the RBA will meet on rates on Tue 1 Dec. As of 30 Nov, there was a 43% expectation of no change to rates (source: https://www2.asx.com.au/markets/trade-our-derivatives-market/futures-market/rba-rate-tracker). Aus Q3 GDP will also be released this week.
Data on US Fed purchases of Treasury securities and MBS are incomplete as of the time of posting. The new schedule will be released late on 30 Nov. Last week, purchases of US Treasuries totaled approx. $4bn. Purchases of MBS were elevated, and the Fed appears to be buying well above the $40bn/month rate. Last week’s purchases of MBS were approx. $20bn.
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $527bn in ST Bills, Notes, TIPS, and Bonds this week, raising approx. $140bn in new money. The bulk of the settlements will take place on Mon 30 Nov.
This week, approx. $27bn 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
