by Kim | Dec 24, 2019
Trade news continued to create a positive context this week.
While few details are yet to emerge on the US-China deal, a deal is expected to
be drafted and signed by early 2020. The USMCA was approved in Congress by a large
majority and that deal now goes to the Senate for approval.
Data on US manufacturing conditions were mostly stable, with
growth remaining low. The improvement in manufacturing industrial production
for Nov was led mostly by the end of the GM strike. The prelim manufacturing
PMI for Dec was little changed from Nov. The regional data for Dec was mixed,
with the only deterioration reported in the Kansas City Fed survey. Philly Fed
survey headline conditions worsened, but all the underlying indicators remained
positive.
US consumer readings indicate that any weakness has yet to broadly
spill-over into consumer metrics. Sentiment
continues to increase, albeit led by the higher income groups. Income and
outlays for the first two months of Q4 indicate stronger growth than in Q3. Services
activity continues to grow. From last week, the labour market remained stable.
JOLT’s data was mixed with weaker growth in hires, but a rebound in involuntary
separations from the month prior. The growth in voluntary separations, quits,
continue to slow – indicating a reduced willingness to voluntarily change jobs.
More broadly, the prelim PMI’s for Dec indicated a worsening
in manufacturing activity in Europe/Germany, but offset by services activity.
In Japan, there appears to be little rebound so far after
the Oct increase in the sales tax and weather disruptions. The prelim composite
PMI for Dec indicated stagnant conditions – with a slight worsening in manufacturing
activity. The Nov merchandise trade data remained weaker with exports and
imports declining again. The decline in
exports was broad-based. Similar to Oct, almost half of the decline in imports
was attributed to a decline in petroleum imports, but declines in imports were
still recorded across most commodity groups. Annual core inflation increased
only slightly. The BoJ kept policy and rates unchanged, noting risks from
external factors affecting the domestic economy.
The BoE kept rates
on hold – although there were two votes to loosen policy further at this time. The
PMI data reflected much weaker conditions in Dec as firms continued to work
through Brexit uncertainty. Retail sales data is unclear because Black Friday
promotion data in 2019 will fall into the Dec report. The labour market for Aug-Oct
remains resilient. Progress on the approval of the EU Withdrawal agreement is
underway with the bill passing its second reading. Some uncertainty is likely
to remain regarding Brexit as PM Johnson amended the Brexit Bill such that
there can be no extension granted to the UK-EU trade deal negotiations – with
the deadline at the end of 2020.
Aus prelim PMI’s for Dec continued to show weaker conditions across both manufacturing and services. The labour market also remains resilient and there are some signs of stabilising employment growth.
More releases are covered in the weekly review for last week – download the full document here;
Comments and feedback are welcome – email me at kim.mofardin@marscapitalpartners.net.
Wishing everyone safe and happy holidays!
by Kim | Dec 16, 2019
The weekly macro review for w/c 9 December 2019 – Several of the larger uncertainties for the global economy are now poised to be resolved positively. There were several major developments during the week.
Firstly, the US and China have agreed on a phase one trade deal.
While details are still emerging, there is at least no further deterioration in
the trade relationship.
The UK election resulted in an increased majority for the UK
Conservative Party. Brexit now looks likely to go ahead by the end of Jan 2020.
We expect that there will be some rebound in activity as firms commence
preparations for 31 Jan 2020.
Finally, the US Democrats also appear to have made an
agreement with the White House on changes to the USMCA/NAFTA. This legislation
is now expected to go to Congress before the end of the year as part of the
process to ratify the deal.
The US FOMC kept rates on hold. Given the cuts already
implemented over the last three (3) meetings, the Fed guidance has shifted to
monitoring the implications of incoming information for the outlook, global
developments and muted inflation pressure. Most FOMC members don’t see, given
the current data and projections, a case for hikes in 2020.
US retail sales were softer in Nov, despite post-holiday
promotions in Thanksgiving – although some of those holiday sales will be
reported in Dec. Producer prices continue to highlight weakness across growth
in service segments of trade margins and transport and warehousing prices in
Nov.
Annual growth in consumer prices accelerated, as energy
prices made a less negative contribution to price growth. Core CPI remains
elevated at +2.3% – led predominantly by services prices.
The business inventories report for Oct highlighted weaker
sales through the distributive trade channels while inventory continued to
grow.
The ECB also kept rates on hold and made no change policy.
This was the first meeting for the new ECB President Christine Lagarde.
In Japan, the second
estimate for Q3 real GDP growth was revised higher – due mostly to upward
revisions in household consumption (possibly stockpiling ahead of the
consumption tax increase in Oct (Q4)) and private investment spending. The
weaker industrial production data for Oct was also revised further lower in the
final release.
House prices in Australia increased in Q3 but prices across
most states remains below a year ago. This was in line with the growth in new
credit since Jun 2019. In Nov, business conditions were unchanged and business
confidence declined again – so far indicating little improvement in the economy
in Q4. Consumer sentiment also declined in again in Dec, although remains above
the recent low. The report suggests that rate cuts are not instilling
confidence (as in 2011) and consumers are likely to keep a tight rein on
spending during the holidays.
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 16 December 2019 – A busy week ahead with both data and events.
US Congress – possible votes on USMCA, Government funding
bills ahead of the Friday deadline and impeachment this week.
Central bank decisions –
BoJ and BoE. The BoJ will be interesting in light of the weaker data
post-consumption tax. Changes in guidance from the BoE will be important now
after the general election result.
Data highlights this
week;
Prelim PMI’s for Dec across
the US, Europe, Japan, UK and Australia.
US – Personal income,
outlays and the PCE price index for Nov, industrial production, JOLTS, final
consumer sentiment for Dec and regional manufacturing surveys.
UK data – Q3 GDP, employment and retail sales.
Japan – CPI for Nov, the
second read after the consumption tax increase and trade (Oct trade data was
disappointing, so looking for a rebound post weather and consumption tax
disruptions).
The Australian
government released its mid-year economic and financial outlook (a mid-year
budget statement). Overall, expected/forecast surplus was lower due to the
slowing economy. No further expenditure measures for the economy were
announced.
This week, the RBA will be
focused on the employment data for Nov.
US Treasury supply will be heavier. The US Treasury will settle $231bn in ST Bills, Notes and Bonds this week, raising approx. $39bn in new money. Reserve management operations for this week will see the Fed purchase approx. $30bn in treasury bills. Also, the Fed will reinvest approx. $6.9bn of maturing securities.
The Fed has announced additional term repo operations and also
increased offering amounts further in the lead up to year end.
Friday is also Quadruple Witching.
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 9, 2019
The weekly macro review for w/c 2 December 2019 – Global manufacturing weakness persisted into Nov across the US, Europe, Japan and Australia. But one of the main sources of recent weakness, China, was the stronger performer this month with activity rebounding into expansion. If this continues, then it could have a positive impact on activity across key markets.
US manufacturing
activity remained lackluster (across various indicators) – the accelerated
decline in manufacturing overtime hours in Nov was an important highlight this
week.
The ISM for
Nov manufacturing activity continued to contract at a slightly faster pace. Yet
the Markit PMI recorded faster growth in Nov. The detailed Oct factory orders
report was little changed – orders increased in the month led mostly by
defense aircraft orders. Excluding defense orders, new order growth was flat to
the month prior. Manufacturing weakness still seems mostly focused on transport
equipment, but orders continue to decline on an annual basis including and
excluding transports.
Services activity reported across the Markit and ISM reports
indicated that growth remained low in Nov. The ISM recorded a small
deceleration in growth while the Markit report recorded a slight acceleration.
Employment and sentiment data suggested little impact on the
consumer despite the deceleration in activity. Non-farm payrolls growth for Nov
was higher – partly led by the return of striking manufacturing workers. The
household survey indicated that annual growth in employment had slowed
slightly, but total unemployed persons still declined. Employment growth slowed
notably on a monthly basis – but unemployed persons still declined due to a
larger decrease in participation in the month.
Growth in hours of all employees indicated no change on an
annual basis (0% growth). But the average overtime hours of manufacturing
employees declined at an accelerated pace of -11%.
The prelim consumer sentiment reading for Dec was stronger
across current sentiment, current conditions and expected conditions. Sentiment
readings are now at the “upper end of the favourable range is has travelled
since the start of 2017”.
“Nearly all of the early December gain was among upper income households, who also reported near record gains in household wealth, largely due to increased stock prices.”
Europe – Growth in Q3 was slightly faster across the broader
Eurozone – led by households and improvement in the external sector. This
helped to offset a lower contribution from private investment spending. So far
Q4 results remain weaker, with little improvement regarding the decline in Eurozone
manufacturing activity. Services activity also continued to slow. Retail sales
in Oct declined at a faster pace.
Weakness in manufacturing persisted in Oct for the largest
EU member Germany. New orders, especially for the domestic market continued to
decline. Industrial production also declined at an accelerated pace in Oct –
led by manufacturing and construction. Overall production levels are now 8% below
the peak of Nov 2017.
Japan – There was little evidence of a rebound in Japan
manufacturing conditions in Nov. Services activity improved, recording marginal
growth. Overall, a fairly neutral result after the increase in the sales tax and
rebound from storm disrupted trade and manufacturing in Oct.
Australia – Growth slowed further in Q3 led by lower
contributions from households, government and trade. Private investment also
continued to decline, but at a slower pace. The RBA was likely hoping to see
some positive impact from interest rate cuts, tax relief and small increases in
house prices on consumption. But households tightened expenditure in Q3. While household
income growth has not been accelerating, household disposable incomes were
boosted by tax relief in Q3. Instead of spending that additional disposable
income, households increased saving. There has been a shift in household
sentiment and behaviour.
Australian retail sales in Oct (nominal value) recorded no growth in the month. Several factors to consider; drought and bushfires in NSW & QLD could be impacting performance and consumers could be holding out for the Nov US-style Black Friday promotions.
The RBA rates decision was made prior to the release of this data and the Board kept rates on hold. The performance of the labour market will be an important datapoint over the next few weeks.
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 9 December 2019 – Not a very data heavy week, but there are several important events;
Central bank decisions this week – FOMC, ECB and SNB. The
current target rate probabilities indicate rates likely to remain on hold in
the US. Source; https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html?utm_source=cmegroup&utm_medium=friendly&utm_campaign=fedwatch&redirect=/fedwatch
The UK general election will take place this week. An
increased majority for the Conservative party will see Brexit likely go ahead
by the end of Jan 2020.
On 15 Dec, the tariff rate on certain imports from China is
due to increase. There is little indication at this stage that talks have
progressed enough on a phase one deal to avoid this increase. Expecting
headline risk on trade deals this week.
The Australian government will release its mid-year economic
and financial outlook (a mid-year budget statement). While there has been no
indication so far, there is still the possibility that stimulus measures could
be announced for the economy.
Data highlights this week;
US retail sales, CPI & PPI
China trade, CPI, PPI and new loans data
Australia Q3 house price index, Governor Lowe speech
US Treasury supply will be much lighter and with a rare paydown. . The US Treasury will settle $153bn in ST bills this week paying down approx. $38bn in outstanding bills. The 16-day CMB from late Nov will also mature this week and there is no indication that it will be rolled over at this stage. The effect is likely to continue to help ease pressure on primary dealer balance sheets.
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 2, 2019
The weekly macro review for w/c 25 November 2019 – US data this week continued to highlight generally weaker manufacturing activity across the three regional reports for Nov.
The advance Durable Goods report for Oct was mixed. Orders
rebounded across most categories, but was led mostly by defence aircraft
orders. Shipments remained weak with no growth in the month. Unfilled orders
increased due to defense aircraft orders. Inventory still increased this month,
albeit at a slower pace. The single largest contributor to inventory growth was
non-defense aircraft.
We continue to track weakness in several categories –
non-defense aircraft and motor vehicles. The annual increase in inventory for
non-defense aircraft continued to accelerate and is now at +18%, compared to
the 25% and 24% respective annual declines for orders and
shipments. Motor vehicles was also weak;
inventory is growing at an annual pace of 6% (consistently) while orders are
down -4% and shipments are down -3% (both slowing). While there may some GM
effect in this month’s data, the slowing growth trend was established before
that.
It’s important to note that last week’s US prelim
manufacturing PMI continued to build on the improvement seen in Oct, so it’s
possible that there will be an improvement in manufacturing activity in the following
months.
The second estimate for US GDP was revised higher to +2.1%
from +1.9%. This was mostly the result of a shift in the change in inventories
from a -0.4% decline to a +10% increase in Q3. This revision is not surprising
given the higher levels of inventories recorded across several categories and
seen across several different reports during Q3. As noted in the wholesale
sales and inventory report for Sep, the inventory to sales ratio remains
elevated – with inventory rising faster than sales.
The annual change in the headline PCE price index was
unchanged in the month, but growth slowed further for the core measure of PCE
price growth. Core PCE price growth slowed to 1.6% in Oct after approaching
+1.8% in Aug. This will continue to reinforce the ‘muted inflation pressure’
view of the Fed.
House prices in the US increased at a faster pace in Sep,
after a long period of decelerating growth.
Retail and industrial production data for Japan was
volatile, reflecting the first month of the consumption tax increase. Retail
sales declined in the month (and on an annual basis) reversing the gains in the
two prior months which were likely due to stockpiling before the tax increase.
The stockpiling effect will continue to unwind enabling us to evaluate the
impact of the consumption tax on demand.
Japanese industrial production and shipments also fell hard
with production down 4% in Oct. There was some typhoon related disruption in
Oct and likely an impact from stockpiling prior to the increase in the consumption
tax in Oct.
The value of Australian construction and private capex
continued to decline in real terms in Q3 and will likely detracting from GDP
growth in Q3. Growth in the value of outstanding private credit continued to
slow – led this month by a notable slowdown in the growth of outstanding
business credit.
The RBA Governor’s speech this week reflected on the policy
options available if/when the OCR reaches the effective lower bound – which has
been confirmed as 0.25%. Governor Lowe goes out of his way to downplay any risk
in the Australian economy and yet here we are, two 25bps cuts away from a
scenario where the RBA would consider a QE program in Australia;
“There may come a point where QE could help promote our collective welfare, but we are not at that point and I don’t expect us to get there.”
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 2 December 2019 – This will be a full week of data, some important central bank speeches and rates decisions.
The final manufacturing and services PMI’s for Nov will be
released this week across the major markets.
In the US, data will focus on non-farm payrolls, the ISM’s, factory
orders, wholesale inventories and the first read of consumer sentiment for Dec.
This week, US Fed Vice Chairman for Supervision and
Regulation, Randle Quarles, will provide testimony to the House Financial
Services Committee and the Senate Banking Committee (Wed and Thu). We will look
for any comments or indication of regulatory changes in the lead up to year end
given the issues with repo funding.
The USTR will also announce on 2 Dec the outcome of its S.301
investigation into the digital services tax approved by the French government.
This will include any proposed action.
The ECB President Lagarde will also provide testimony this
week at the ECON hearing of the European Parliament this week. Eurozone data
will focus on the second estimate of Q3 GDP and Germany factory orders and industrial
production.
The RBA meets on Tue regarding rates in Australia. The
current expectations are for rates to stay on hold until at least Feb or Mar.
The Q3 GDP result will be released on Wed and growth is expected to remain low.
Also out this week; building approvals and retail sales.
The Bank of Canada will also meet this week on rates.
US
Treasury supply will be heavier, but with the higher value of securities
maturing, there will be a relatively smaller amount of new money raised this
week. The US Treasury will settle $297bn in ST bills and notes this week raising
approx. $13.6bn in new money.
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 25, 2019
The weekly macro review for w/c 18 November 2019 – The FOMC minutes confirmed a more “wait and see” mode, allowing some time for policy rate changes to flow through to the economy. Guidance was also changed to reflect more focus on incoming data. It was noted in the minutes that the rate cut in Oct was an insurance against ongoing, downsides risks. In particular, the FOMC is concerned that weakness across manufacturing, energy, agriculture and weaker external growth could spill over into the labour market.
Other
points of interest from the FOMC minutes;
Still seeing
pressure in the repo market for year end. There have already been several announcements
since the meeting – mostly to increase size of the Fed repo facility. Still
possible that further measures will be taken to cope with year-end pressure.
The minutes
also included a discussion of policy options in the case of rates reaching the
effective lower bound. Negative rates were discussed at length as a part of the
policy options;
“…participants did not rule out the possibility that circumstances could arise in which it might be appropriate to reassess the potential role of negative interest rates as a policy tool.” FOMC Minutes 29-30 Oct 2019
The PMI’s
at a composite level – overall better view of US activity in Nov with output growth
increasing. Eurozone output growth was stagnant in Nov. Output growth in Germany
was still declining. Japan output growth was stagnant in Nov. UK output declined
in Nov. Australian output shifted into decline in Nov.
US – While
the PMI’s were somewhat improved, optimism regarding output growth in the next
12-months across both services and manufacturing was lower. Manufacturing activity
improved in the Philly Fed report, but Kansas City Fed manufacturing activity remained
in contraction.
US existing
home sales are still improving but are yet to exceed the late-2017 cycle highs.
Growth in housing permits likely positive for future construction activity.
The prelim PMI’s
across the Eurozone remained weak. The manufacturing decline abated slightly,
but services activity slowed further.
In Germany,
the composite index of output indicated a weaker pace of decline in Nov.
Services output growth continued to slow while the decline in manufacturing
output also slowed. Despite
most measures remaining weaker, optimism lifted for the first time in four
months.
Japan PMI’s
rebounded slightly – remaining mostly stagnant at the composite level. Services
activity rebounded slightly, and optimism lifted. Manufacturing activity
declined at a slower pace, but measures of demand continued to decline. Sentiment
lifted.
The Japanese
trade data for Oct was weak and the underlying detail was negative. Declines
in exports and imports in value terms were matched by declines in volume terms
(where that detail is provided) and declines were recorded across key customers/markets.
A large portion of the decline in imports versus a year ago is related to
petroleum, but again, other key imports were down in value and volume terms.
Core CPI growth in Japan accelerated slightly in Oct as the
increase in the consumption tax was implemented.
UK PMIs continue
to be heavily influenced by the Brexit process. At the composite level private
sector output declined at the fastest pace since Jul 2016 – led by declines in services
and manufacturing output.
Australian
PMIs deteriorated with both services and manufacturing output shifting into
contraction. Underlying detail on demand was also negative. Bus sentiment declined.
RBA minutes highlighted that consideration had been given to a further cut in rates at the Nov meeting. Instead, the RBA had opted to ‘wait and assess’ based on having “already delivered sizeable monetary stimulus over the last several months”. The overall assessment of the economy was downbeat.
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 November 2019 – This will be a shorter week for US markets with the Thanksgiving Holiday on Thu 28 Nov. Happy holidays to those celebrating this week!
Despite the shorter
week, there will still be relatively moderate data flow in the US, Australia
and Japan.
It will be mostly quiet on the central bank front with speeches by US Fed Chairman Powell on Mon and RBA Governor Lowe on Tue.
Key US data highlights;
durable goods orders, PCE price index, 2nd prelim GDP for Q3, National
house prices and a range of regional manufacturing surveys.
Data in Australia
will focus on important construction activity and private sector capex for Q3 as
key inputs for the Q3 GDP release next week (4 Dec).
In Japan, retail
trade data will be released for Oct. Retail growth has accelerated in the
months leading up to the Oct consumption tax increase – and we’ll see the
degree to which the tax hike has impacted demand.
On the trade front, headline
risk remains high regarding the US-China trade negotiations, which are ongoing.
There was no
agreement reached last week within the US on the USMCA – frustrating efforts
for a vote before Thanksgiving.
It now appears that the US has missed the deadline to announce auto tariffs as a part of the S.232 National security investigation. It’s possible that this action may take another form and we’ll continue to monitor the US Federal register for announcements.
The phase one trade deal between the US and Japan passed the lower house of the Japanese parliament last week – now likely to be ratified by the end of the year.
US Treasury supply will be a little heavier, especially after the addition of a 16-day Cash Management Bill last week which will settle this week. This week, the US Treasury will settle approx. $219bn in ST bills, FRN’s and TIP’s raising approx. $43bn in new money.
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 18, 2019
The weekly macro review for w/c 11 November 2019 – US manufacturing data remained weak in Sep. Total industrial production declined in Sep and manufacturing led the decline. Drilling down, auto manufacturing was a notable area of weakness. Production declined at an accelerated pace of -7.1% in Oct after falling -5.5% in Sep. The NY Fed Industrial Production report still cited the GM strike as the cause of the fall in Sep. Yet, there also appears to be a demand problem. Retail sales of autos only partly rebounded in Oct after the larger fall in Sep – the official BEA data last week had total motor vehicle sales declining in Oct. Last week in the wholesale inventories report for Sep, we saw the inventory to sales ratio for autos jump to 1.8 – there are only ten months during the GFC in 2008 when the inventory to sales ratio was higher.
Prelim Q3
GDP was a highlight – growth remains subdued across Germany, Europe and Japan.
There was a small acceleration in the UK Q3 GDP growth.
The German
economy narrowly averted a technical recession. While Q2 GDP growth was revised
lower to -0.2%, the prelim Q3 GDP growth was reported as +0.1%. The full detail
will be released next week 22 Nov.
The prelim
Q3 Eurozone GDP growth was little changed, growing at +0.2% in Q3 across the
Euro area.
GDP growth in Japan slowed from +0.4% in Q2 to +0.1% in Q3. The annual pace accelerated though. The lower Q3 growth was the result of lower private consumption growth, the change in inventories detracting from growth and net exports also detracting from growth. The complete industrial production report for Sep saw production and shipments revised higher – possibly stronger ahead of the consumption tax increase. Despite the strong growth in the report, both shipments and production of one of the largest weight industry groups, transport/passenger cars, continued to decline.
Auto production remains a problematic area for Japan. In the negotiation of the phase one trade deal, the US provided no assurance that tariffs were off the table. The Japanese parliament is currently debating the US-Japan phase one trade bill with some risk that approval is delayed.
In the UK,
the lagging GDP data recorded a rebound in Q3 due to a less negative
contribution from private investment. The labour market report for Jul-Sep
continued to show deterioration in the more recent 3-month change – with
employment continuing to decline. There was no corresponding increase in
unemployed persons because participation declined over the same period.
Weakness in consumption growth appears to have persisted into Q4 with the
decline in retail sales in Oct.
Aussie data will provide some concern for the RBA. The Q3 wage growth was unchanged in the quarter and slowed on an annual basis. The labour market in Oct remained weaker with low employment growth. Unemployment increased and would have been worse except that participation recorded the first monthly decline in fifteen months. The underutilization rate increased in Oct – this is likely a large reason why wages growth has remained lacklustre and this will not be good news for the RBA. Over the last year, the combination of slower employment growth and increased labour supply have been the key drivers of the higher underutilization rate.
Activity in China continued to expand, but growth/momentum remains at some of the lowest levels recorded. This lower pulse of activity is likely impacting global demand and trade – given the large influence that prior Chinese stimulus and expenditure on fixed asset investment/capital goods had on global growth in the post-GFC period. Chinese consumers are also likely seeing a squeeze on real purchasing power as annual CPI growth accelerated to +3.8% on the back of higher food (meat) prices. Retail sales slowed to the equal lowest pace of growth of the last 12-months. Autos were a large contributor to the weaker retail growth, declining by -3.3% versus Oct a year ago.
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 18 November 2019 – A much lighter week of data flow. The main highlights are;
Prelim composite
PMI’s for our first view of Nov activity across the US, Eurozone, Germany,
Japan and Australia.
Central
bank meeting minutes to be released this week – FOMC, ECB and the RBA. A
relatively quiet week for US Fed speeches.
There are two other notable releases this week;
Japan CPI
for Oct – the first month after the consumption tax increase.
Germany Q3
GDP detailed release – any slight deterioration in the headline growth could
see Germany “officially” in recession.
Headline risks remain
this week;
Details of progress,
or lack of, regarding phase one of the US-China trade deal.
Possible announcement of a vote by the US House of Representatives on the USMCA.
Possible release or
decision on auto tariffs related to the S.232 report into auto imports and
national security.
The Japanese parliament
is also debating the phase one US-Japan trade deal bill. The bill will either
pass the lower house on the 19 Nov or there is the possibility of a delay. Lawmakers
remain concerned about the threat of auto tariffs.
It will be
a much lighter week for US Treasury supply. The US Treasury will settle approx.
$182bn in short term bills this week, raising only approx. $6bn in new money.
Added liquidity will be reasonably strong, especially considering the lighter issuance. There will be approx. $22.6bn in reserve management purchases settling this week – operations this week represent 42% of the total reserve management purchases for the month. The Fed will also purchase approx. $5.3bn in Treasury coupons as a part of the restarted reinvestment of principal payments.
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
