by Kim | Sep 14, 2020
The focus this week will be on central bank interest rate and policy decisions and key data releases.
This week, the FOMC, BoJ, and BoE will meet on monetary policy.
Data highlights for the week:
US – retail sales for Aug, prelim consumer sentiment for Sep and the stalling weekly jobless claims will be important metrics of the consumer recovery this week. Manufacturing data includes the first view of Sep activity via the Empire State and the Philadelphia Fed manufacturing surveys. Industrial production data will also be released for Aug – an important hard data point to track the recovery in manufacturing activity and capacity utilization.
The US Senate and House will be back from recess. The US Presidential election is less than two months away and further negotiations (posturing) on stimulus will remain in focus.
China – data on industrial production, fixed asset investment and retail sales for Aug will be released.
Australia – the labour market report for Aug will be released this week – providing an important gauge on the pace of recovery in employment.
The Brexit trade deal negotiations between the EU and the UK will continue this week. The focus will remain on the introduction of Brexit legislation by the UK which breaches the commitment made to ensuring no hard border between Ireland and Northern Ireland as a part of the Brexit agreement.
The forward schedule of US Fed purchases of Treasury Securities and MBS will be released on 14 Sep. Last week, planned purchases of Treasury Securities by the Fed were $11.95bn and purchases of MBS were $22.1bn.
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $393bn in ST Bills, Notes, and Bonds this week, raising approx. $62.4bn in new money.
More detail (including a calendar of key data releases) is provided in the briefing document – download the weekly brief here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Sep 7, 2020
Highlights for this week include the ECB rates decision, Brexit talks in London, and a generally quiet data week across the board.
A short week for the US with the Labor Day National holiday on the 7 Sep. US data highlights this week will be the initial and continuing jobless claims data and the CPI for Aug.
The US Senate and House are both back from recess over the next week. With the US Presidential election less than two months away now, further negotiations on stimulus will likely be in focus.
Other highlights this week:
China trade data for Aug – an important barometer for the recovery of global demand and production.
Germany Industrial Production for Aug – also an important barometer for the recovery of global demand.
The ECB will meet this week on rates and monetary policy.
The Brexit trade deal negotiations between the EU and the UK will be held in London this week. It is expected that the UK PM Johnson will set a 15 Oct deadline for the trade negotiations. There has been little progress on the trade deal negotiations so far.
The US Fed purchase of Treasury securities is again below the $20bn benchmark, while purchases of MBS are above the $20bn benchmark (note that this is a short week). Treasury Security purchases by the Fed this week will be $11.95bn (last week total $15.42bn). The purchase of MBS will be $22.1bn this week (last week $24bn).
US Treasury issuance will be lighter this week and there will be a net paydown. The US Treasury will settle approx. $319bn in ST Bills this week, with a net paydown of $13.7bn.
More detail (including a calendar of key data releases) is provided in the briefing document – download the weekly brief here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Aug 31, 2020
Global PMI’s for Aug, US non-farm payrolls and further US Fed speeches on the new US monetary policy framework will be in focus this week.
Early this week there will be two further speeches by US Fed Vice Chair Clarida and Governor Brainard on the monetary policy framework announced last week. This will likely contain further operational detail.
The global PMI’s for Aug will be released this week.
Data highlights will be –
US: Non-farm payrolls and the monthly employment report for Aug. The Challenger job cut report might become more of a focus to gauge announcements on further job cuts across industries. The ISM manufacturing and services PMI’s will also be released this week for Aug.
Japan: retail trade and industrial production for Jul.
Australia: the RBA meets this week on interest rates and monetary policy. Also of note this week will be the Q2 GDP and retail sales for Jul.
The latest schedule of US Fed purchases of Treasury and Mortgage-Backed Securities was updated last week. The purchase of Treasury securities is again below the $20bn benchmark, while purchases of MBS have been increasing and are above the $20bn benchmark. Treasury Security purchases by the Fed this week will be $15.425bn (last week total $18.75bn). The purchase of MBS will be $24bn this week (last week $27bn).
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $465bn in ST Bills, Notes, Bonds and TIPS this week, raising approx. $111bn in new money.
Next Monday 7 Sep is a National US holiday (Labor Day).
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 | Aug 24, 2020
The weekly macro review for w/c 17 August 2020 – The prelim PMI’s for Aug were mixed.
The strongest PMI among the larger economies for Aug remains UK services. Given the severe declines recorded around the world from Feb to Jun, the rebound in the UK PMI’s since Jun are more the expected magnitude of growth following such historic low levels of activity followed by a broad reopening of the economy. But UK firms continued to reduce employment and were concerned about future output growth.
The US PMI’s indicated a moderate lift in growth for Aug. The rebound in the US has so far been slow. Context is important – US firms overall recorded significant, consecutive monthly declines between Feb and Jun. The Jul result across both services and manufacturing was a ‘no change’ versus Jun after five months of falls. The Aug result is the first month on month increase for firms on net since Jan 2020. There are more positive signs this month regarding orders, export orders and employment.
The two regional US manufacturing surveys were less encouraging – there was an obvious stalling of growth momentum after the last two months. What was concerning was weaker growth in employment and in the average workweek for the month across both reports.
US housing remains a brighter spot. Housing market conditions improved back to pre-shut-down levels. Existing sales, permits and starts were all stronger this month.
There was some positive news for Japan this month. Exports & imports remain below a year ago but to a lesser degree than last month. There was a further improvement in exports for the month of Jul and this is consistent with the forecast for higher growth in Japanese industrial production for Jul. The improvement in global merchandise export demand will help domestic Japanese industrial production. Japanese industrial production recorded a rebound in Jun with shipment growth higher than production growth.
The growth in Japanese exports over the last two months is a somewhat encouraging sign of an uplift in global demand and trade especially from the two largest Japanese export markets China and the US. Weaker Japanese imports though suggests some weakening of Japanese domestic demand conditions. This was further emphasised in the Japanese Aug PMI – both manufacturing and services activity and output continued to contract, with no improvement from the prior month.
Across the Eurozone, there was a notable slow down in the pace of services growth while growth in manufacturing activity was unchanged at a low level. Excluding Germany and France, the output PMI shifted back into slight contraction. Employment continued to decline across the Eurozone.
In Aus, private sector services activity shifted back into decline. This was expected given the severe restrictions reimposed in on the key states, Victoria. The infection rates are slowing notably in Vic. Growth in manufacturing activity continued at a moderate pace. Reinstated border closures within Aus will likely continue to hamper production growth.
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 outlook for w/c 24 August 2020 – There are two headline events this week. The main one is the Jackson Hole central bank symposium later in the week. US Fed Chairman Powell’s speech on Thurs is expected to present the outcomes from the monetary policy framework review.
The Republican Convention will be at the start of the week.
It will be a lighter week of data, focusing mostly on US data. The important datapoints will be – initial and continuing claims, the second half of Aug consumer sentiment data from the University of Michigan, personal income, consumption and prices for Jul and the advance durable goods data for Jul.
Important Q2 Aus data will be released this week ahead of the Q2 GDP release next week. This week will be Q2 private sector capex and construction work done.
The schedule of US Fed purchases of Treasury and Mortgage-Backed Securities for this week is incomplete – the new schedule will be released on 27 Aug. Purchases are up to and including Thurs 27 Aug. Treasury Security purchases by the Fed this week will be $5.925bn (last week total $21.45bn). The purchase of MBS will be $22bn this week (last week $25.6bn).
US Treasury issuance will be somewhat lighter this week. The US Treasury will settle approx. $307bn in ST bills and FRNs this week, raising approx. $38bn in new money. The US Treasury will also auction approx. $148bn of Notes this week that will settle on 31 Aug.
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 | Aug 17, 2020
The weekly macro review for w/c 10 August 2020 – The good news in this week’s review was the continued slowdown in the pace of US initial and continuing jobless claims. The improvement/reduction in claims was uniform across the US with only four states recording further increases in claims. One possible reason contributing to the improvement is the notable increase in the number of temporary decennial Census workers earning any pay over the last few weeks. The Aug payrolls data will highlight the extent of the growth in government employment. The PMI’s for Jul still indicated somewhat weaker employment growth. The JOLT’s data also highlights a slower rebound in job openings. The implied employment change (hires less separations) has retraced little of the fall in employment from Mar-Apr.
The Pandemic Unemployment Assistance initial claims were almost halved versus the level of two weeks ago – this could be the result of the program expiration. As of wk ending 25 Jul, 28m people in the US were claiming unemployment insurance across both state and federal programs. The weekly numbers and levels remain extremely elevated. So far, there has only been a temporary Executive Order by US President Trump to extend benefits, while negotiations on the broader stimulus package have stalled. Both the House and the Senate are not due back to Washington until Sep.
Consumer sentiment in early Aug was little changed from the Jul levels – and are only marginally above the Apr lows.
Two significant changes since April have been that consumers have become more pessimistic about the five-year economic outlook (-18 points) and more optimistic about buying conditions (+21). Lower interest rates by the Fed prompted more favorable buying, especially for homes, and the DC policy gridlock was responsible for the weaker outlook.
The Jul industrial production data was interesting. Manufacturing output and capacity utilization continued to increase month on month but remains below a year ago. One important area of manufacturing that has lagged is the production of motor vehicles. This month, capacity utilization for motor vehicles was almost back on par with a year ago and pre-pandemic levels. Production levels increased notably in Jul. At the same time, motor vehicle retail sales declined in Jul. A function of constrained inventory or weaker demand?
EZ industrial production continued to rebound in Jun – only at a slightly slower pace compared to May.
Data out of China over the last few weeks indicates some recovery in global demand for Chinese exports, but still reflects weakness in domestic Chinese conditions. The China trade surplus increased. Exports increased in the month and on a year ago basis. But import growth slowed in the month and declined slightly on a year ago basis. Weaker import demand by China will likely hamper exports/production growth of its key trading partners. Chinese producer prices indicated further pressure on margins as input prices increased at a faster pace than producer selling prices. Consumer prices also increased at a faster pace – food price growth remains elevated and retail sales growth remains weaker.
In Australia, wage growth slowed to the lowest level since the series began. There was also a notable increase in “genuine market-based reductions in jobs paid by individual arrangement to ease financial pressure” – especially for managerial workers. This highlights the risk of broader negative income effects of the shutdowns not just for consumer-facing and hospitality workers.
Aus employment growth continued to rebound, but at a slower pace. The increase in participation though resulted in an increase in total unemployment for the month. The official unemployment rate was 7.5% – or just on 1m people unemployed. The actual number of people claiming the Aus govt Job-Seeker program is 1.6m people – and this suggests the unemployment rate may already be over 10%.
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 outlook for w/c 17 August 2020 – Central bank minutes and prelim Aug PMI’s will be the focus this week. The Aug data, more generally, will likely begin to show the underlying pace of recovery in services and manufacturing activity. Much of the current momentum has been driven by reopening and restocking as supply chains have come back online (still a globally uneven process).
The meeting minutes of the US FOMC, ECB, and RBA will be released this week. There are no surprises expected, given that the policy focus remains extremely accommodative.
The prelim Aug PMI’s will be released for the US, Japan, Australia, the Eurozone, and the UK. While all these markets recorded improvements in activity in Jul, the UK and Aus services rebound was the strongest. The Aus data may start to reflect some of the targeted lockdown measures.
In the US, there has so far been no further progress on the stimulus bill. Both the House and the Senate have left Washington until Sep. The Senate could be recalled if an agreement can be reached and a vote scheduled.
Other US data of note will be initial claims data (which has been slowing notably – possibly due to Census hiring) and regional manufacturing surveys for Aug.
The schedule of US Fed purchases of Treasury and Mortgage-Backed Securities for this week will remain higher. Treasury Security purchases by the Fed this week will be $21.45bn (last week total $20.63bn). The purchase of MBS will be $25.6bn this week (last week $22.03bn).
US Treasury issuance will be heavier this week. The US Treasury will settle approx. $397bn in ST Bills, Notes, and Bonds this week, raising approx. $70bn in new money. The US Treasury will also auction approx. $32bn in Bonds and 30-yr TIPS this week that will settle on 31 Aug.
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 | Aug 10, 2020
The weekly macro review for w/c 3 August 2020 – In the US, there was a more notable improvement/reduction in the number of new and continuing claims across both state and federal programs this week. Similarly, non-farm payrolls also recorded further growth in new jobs. But that pace of job growth slowed notably compared to the prior two months – and the levels of continuing claims, despite some improvement, remain extremely elevated.
On the broader tally, 22.16m payroll jobs were lost in Mar and Apr this year. So far, 9.28m payroll jobs have been regained during May-Jul. This month, most of the growth in employment was in part-time rather than full-time jobs.
To provide some context, the proportion of the US population now employed is back down to levels last seen in the 1960’s. The employment to population ratio highlights just how much damage has been done to the US labour market – and how critical ongoing fiscal support is for the recovery process.
With no clear resolution on new stimulus from the US congress, President Trump signed executive orders (EO’s) for a greatly reduced level ($300/wk) and extension (maybe 6wks) of the PUA benefit (utilizing FEMA funds), deferring some payroll tax, extending the eviction moratorium and continuing the zero-interest for student loans. At this point, its not clear whether these EO’s have an enforceable impact – the measures have been described as small, complex and temporary. But at least it might be a short term stop gap as negotiations continue.
Across all PMI’s for Jul, firms remain cautious about hiring, despite some headline month on month improvement in output and orders. Growth has been driven by domestic markets, while exports mostly remain weak.
US Manufacturing – the ISM report was quite positive for Jul. The Markit report indicated only marginal growth at best compared to the month prior. Production of motor vehicles has now appeared to gather more pace and this was a highlight of the Factory Orders & Shipments data for Jun. Durable goods ex transport orders were also stronger in Jun. Shipments of durable goods excluding transports is interesting – the decline due to the Covid shutdown was not as severe (as say the contraction in motor vehicle production) – and now shipments are ‘only’ 4.2% below a year ago (at the worst level, shipments were down by 8.7% in Apr). But shipment growth across durables ex transports was slowing notably in the 18-months leading up to the pandemic – which makes expectations for the recovery unclear.
Non-durable goods performance was likely impacted by higher oil prices this month. But excluding that, shipment growth of chemicals was stronger, and shipment growth of food remains steady.
As supply chains come back on-line, the next few months results will be important barometers of where final demand is at.
US Services – reports this month were lacklustre. Services accounted for most of the job growth this month, but there was little in either the ISM or Markit PMI’s that suggested acceleration in growth despite several months now of reopening. The ISM index remained elevated, but the underlying shift in firms reporting higher, no change or lower output suggests that firms, on net, are seeing at best more steady conditions this month, rather than accelerating growth. The Markit index also reflect no change in activity this month compared to the prior month.
Across the other regions, the UK and Aus services PMI’s were at levels more consistent with a broader reopening.
Eurozone services PMI recorded stronger month on month growth. Manufacturing growth was only moderate. For context, manufacturing output increased on a month on month basis for the first time this month since the start of 2019, while new orders increased in Jul, month on month for the first time in two years.
In Japan, both services and manufacturing PMI’s indicated a continued contraction in activity, although manufacturing contracted at a slower pace in Jul. The industrial production forecasts were for much higher growth in production for Jul – which has not been reflected in the PMI result.
In Australia, price has played a large factor in the return of retail sales in Q2. The trend in the underlying real (volume) of retail sales indicates that sales (versus the same quarter a year ago) have declined notably in Q2 while nominal growth remained positive, albeit slowed. Of note are the severe declines in Q2 volumes in NSW (-4.3%) and VIC (-6.2%) – well before the latest lock-down in Vic. Aus PMI’s continued to show further month on month growth in activity in Jul. For now, though, this momentum is likely to stall as severe restrictions are reimposed in Vic due to increased infections.
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 outlook for w/c 10 August 2020 – The focus will likely remain on progress of US Congress negotiations for further fiscal stimulus.
Data highlights this week:
US – initial claims data, retail sales for Jul, and the prelim consumer sentiment reading for early Aug. Also, Jul industrial production will be released – an important ‘hard datapoint’ to support the manufacturing PMI’s. It remains a good barometer for how manufacturing production and capacity is recovering.
Most of the Chinese economic data for Jul is out this week – including CPI, PPI, retail sales and industrial production.
Australia – the labour market survey for Jul will be released this week. The Q2 wage price index will also be released.
The schedule of US Fed purchases of Treasury and Mortgage-Backed Securities for this week is incomplete – the next schedule will be released during the week on 13 Aug. Treasury Security purchases by the Fed until Wed this week will be $7.8bn (last week total $9bn). The purchase of MBS so far, will be $17.04bn this week (last week $24.23bn).
US Treasury issuance will be slightly heavier this week. The US Treasury will settle approx. $319bn in ST bills this week, raising approx. +$8.3bn in new money. The US Treasury will also auction approx. $112bn in Notes and Bonds this week that will settle next week – raising approx. $62.5bn in new money. The latest US Treasury financing schedule for Q3 has a revised higher forecast for net cash raised for this quarter of $947bn, up from the initial $677bn estimate. Final numbers will depend on the shape of the final agreed stimulus bill. So far, $42bn (of a forecast $947bn) in new money has been raised this quarter – which means that there could be a significant increase in issuance over the next seven weeks.
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
