by Kim | Mar 1, 2020
Markets are likely to continue to grapple with the potential impact of Coronavirus this week. The level of uncertainty regarding the impact on health, production, trade, expenditure, travel and supply chains remains extremely high. The first view of the quarantine impact on Chinese economic activity indicated a record level of contraction in both the manufacturing and non-manufacturing PMI’s for Feb. Other economic data out of China was not released last week. In the coming week, we’ll see the Caixin PMI’s for manufacturing and services as a comparison to the official NBS data. Chinese trade data for Jan and Feb is due to be released at the end of the week, but delays are likely.
This is a data
heavy week and there is likely to be greater headline risk around some of the releases
as the narrative of the economic impact starts to develop. That said – some impacts
may not appear negative on the surface. Firms may increase orders in order to
stockpile parts etc. or look for alternative sources of supply. This also
highlights the importance of tracking CPI and PPI over the coming months.
Global PMIs
for Feb are due out this week. The prelim Feb PMI’s indicated some weakening/contraction
in activity – this week’s release will include a broader view of economies. Production
and order data for Germany and US factory orders for Jan may be too early to
record much impact – although German data was already very weak in Dec.
US data of
note also includes the ISM manufacturing and non-manufacturing PMI’s for Feb as
well as non-farm payrolls for Feb.
US domestic
politics will also be in focus this week with the Democratic Super Tuesday
primaries on 3 Mar. So far, Bernie Sanders has taken the lead and the outcome
on Tues will have implications for the expected path of the election and
assessment of policy implications.
The Aust
economy will also be in greater focus given the reliance on the Chinese economy.
The RBA meets this week and the ‘official’ probability of a rate cut at this
meeting remains very low (given the circumstances) – only 11% expectation for a
rate cut to 0.5% on 3 Mar as of 27 Feb. This may evolve in the next few days – refer
to the tracker here; https://www.asx.com.au/prices/targetratetracker.htmtrack
Other
Aussie data out this week (after the RBA meeting) includes Q4 GDP (noting unexpected
declines in Q4 investment numbers last week), retail sales and monthly trade
data (important in tracking the slow-down in Australia’s largest trading
partner).
Also this week; OPEC meets on 5 and 6 Mar and the UK and EU commence Brexit trade negotiations.
The supply of US Treasuries settling this week will again be heavy. The US Treasury will settle approx. $292bn in ST Bills and Notes this week, raising approx. $51bn in new money. This will continue to be supported with overnight repo operations on each business day of up to $100bn as well as two 14-day term repo operations this week of up to $20bn each ($5bn lower for both term repo operations).
More detail, including a one-page calendar of key data releases for the week, 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 | Feb 23, 2020
The major data highlights this week will be China data, US Q4 prelim GDP and Japan retail sales and industrial production. This will be amid the likely ongoing headlines regarding the coronavirus.
Data out for China this week includes retail sales, industrial production and fixed asset investment. At the end of the week, the Chinese NBS will also release the Manufacturing and Non-Manufacturing PMI’s for Feb. Note that this data could be delayed as a result of managing fallout from the spread of coronavirus.
US data will feature the prelim reading
of Q4 GDP. More regional survey data for Feb will also be released this week.
The feature of the regional surveys last week was the acceleration in growth of
new orders (as well as inventories). The US manufacturing PMI showed growth
slowing and services were even weaker, falling into contraction – at odds so
far with the stronger readings from the regional surveys. It’s possible that supply
chain disruptions due to coronavirus could manifest in several ways (aside from
just the halt in supply) – firms could start to stockpile parts/finished goods in
the short term, resulting in the spike in new orders and some firms could
benefit as alternative suppliers are sought. More detail should come to light
as further regional survey results and durable goods data are released this
week. The final consumer sentiment reading for Feb will also be released – looking
to see whether there has been any revision to US sentiment from the coronavirus
news (there was minimal mention in the prelim Feb release).
The
main Fed speaker this week is Vice Chair Clarida – US Economic Outlook and Monetary Policy, at the
36th Annual National Association for Business Economics Economic Policy
Conference, Washington, D.C.
Japan remains firmly on the radar –
especially after last weeks’ decline in GDP for Q4 and now the accelerated
contraction in the Feb prelim PMI’s. This week, retail sales and the prelim industrial
production for Jan will be released.
Also note that Germany will release this
week the detail (and possible revision) for Q4 GDP.
The supply of US Treasuries settling this week will again be heavy, but not to the same degree as the week prior. The US Treasury will settle approx. $231bn in ST Bills, FRNs and TIPS this week, raising approx. $45.9bn in new money. This will continue to be supported with overnight repo operations on each business day of up to $100bn as well as two 14-day term repo operations this week of up to $25bn each.
More detail, including a one-page calendar of key data releases for the week, 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 | Feb 17, 2020
The macro review for w/c 10 February 2020 – US data reflects the ongoing dichotomy between production and consumer metrics. Industrial production continued to decline slightly led by the weakness in aircraft and electricity and gas output. The USTR also announced this week that the US was increasing the import duty on civilian aircraft imports from the EU from 10% to 15% in Mar.
At the same time, measures of consumer
sentiment and expectations lifted to the second highest levels since the GFC. Very
few mentions were made by consumers regarding Coronavirus. Retail sales growth
increased at a slightly faster pace in Jan with annual growth slowing but
remaining elevated. While JOLTS data indicates more significant slowing in job
openings, metrics such as new job hires remains elevated. Consumer price growth
accelerated led by energy.
Outside of the US, growth remains
weaker.
Weaker economic conditions persisted in
Q4 for Europe. Industrial production declined notably in Dec across the
Eurozone. GDP growth in Q4 was much slower – and particularly weak in the
larger economies – zero growth in Germany and declines in Q4 GDP in Italy and
France.
UK GDP slowed to zero in Q4 – with
distortions in the data due to the Brexit process.
Aus business conditions and confidence
in Jan continued to track well below trend averages – reflecting the ongoing
malaise in the economy. While there was little obvious deterioration in
regional data due to bushfires, trading conditions still weakened and
employment growth slowed notably. Conditions are expected to remain weaker as
forward orders and exports remain in contraction.
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 February 2020 – There are several important highlights this week.
On
the data front, the prelim PMI’s for the US, Europe, Japan, UK and Aus will be
released at the end of the week. This will be one of the broader, earlier
indicators of any disruptions to output from the Coronavirus quarantine.
In
the US, FOMC minutes, PPI for Jan and several regional manufacturing surveys
for Feb will be released.
The
US Treasury will be settling approx. $303bn in in ST bills, notes and bonds
this week – raising approx. $77.5bn in new money. One of the heavier weeks of
supply for a while. This will continue to be supported with overnight repo
operations on each business day of up to $100bn as well as two 14-day term repo
operations this week of up to $25bn each.
The
ECB minutes will also be released this week.
Data
out of Japan this week includes the prelim Q4 GDP result, industrial production
and merchandise trade for Dec and CPI for Jan.
For Aus, the RBA minutes will be released. Important Q4 wage price index and Jan labour market data will be released.
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 | Feb 10, 2020
There has
been resolution across several important fronts so far this year – removing
some of the uncertainties that had been plaguing markets in 2019; the US has
officially ratified the USMCA, the phase one trade deal with China and Japan
has been signed, the impeachment trial of the US President has been dismissed
and the first part of Brexit has been completed.
Headline
risk of late has been centered around the onset of the coronavirus and the
possible implications for global demand (aside from the dreadful human cost).
There has been little data yet to show how quarantine actions to control the
virus has impacted the second largest economy – China. In some regions in
China, firms have been asked to “voluntarily” return to work from 1 Mar after
New Year break. Trade data for Jan due to be released last week, has been postponed
until the Feb data is released. This week we will see several of the major
economic releases from China which may start to show the impact within China;
retail sales, industrial production, CPI, PPI, fixed asset investment and new
loans (Jan).
There are
several other important data highlights this week;
In the US,
retail sales, CPI, industrial production for Jan and the prelim consumer
sentiment for Feb will be released.
US Fed
Chairman Powell will give testimony this week over two days with the semi-annual
Monetary Policy Report to the Congress. The other Fed speech of note will be Vice
Chair Quarles on Bank Supervision (Yale Law School Dean’s Lecture, New Haven,
Conn).
The prelim Q4 GDP will be released for the Eurozone
including Germany and the UK.
In Aus,
housing finance for Dec will be released along with the NAB business conditions
for Jan. There is likely to be some disruption to the economy from
bushfires/natural disasters and the impact from the coronavirus.
It will be a somewhat heavier week for US Treasury settlements from the perspective of new money raised. The US Treasury will settle approx. $209bn in ST Bills this week, including a new 56-day Cash Management Bill (CMB) for $30bn, raising approx. $54.2bn in new money.
More detail, including a one-page calendar of key data releases for the week, 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 | Jan 13, 2020
The weekly macro review for w/c 6 January 2020 – Our w/c 6 Jan 2020 macro review includes several of the larger releases from the last two weeks, focusing mainly on private sector manufacturing and services output.
US
manufacturing weakness was evident in the data out over the last few weeks.
Factory orders data continues to show that declines in non-defense aircraft
production, shipments and (rising) inventory is one of the larger issues
affecting the data. Excluding transport equipment, the value of US factory
orders and shipments is just slightly below a year ago. This is also reflected
in the mixed results across regional manufacturing reports. The ISM
manufacturing PMI for Dec reported a further contraction in activity, while the
Markit manufacturing PMI was positive, albeit reflecting low growth.
The labour
market report for Dec highlighted that overtime hours of US durable goods
manufacturing continued to contract at around 9% in Dec. This is broadly in
line with the weaker growth/conditions. Overall average weekly hours growth was
also still below that of a year ago.
US
employment growth (non-farm payrolls) slowed in Dec – and was lower than
the 12-month average which has now slowed back down to 184k. The unemployment
rate remained broadly unchanged. The labour market performance remains good – from
the household survey, the acceleration in employment growth together with
lower/no growth in what participation added to the labour force, resulted in a
larger decline in total unemployed persons (in the month and on an annual
basis).
Global
PMI’s – manufacturing remained in contraction across Europe incl Germany,
Japan, UK and Australia at the end of 2019. Despite these weaker readings,
firms expressed optimism for 12-months ahead, likely due to greater Brexit
certainty and the phase one trade deal between US-China in early Dec
(reflecting at least no further worsening in trade relations).
Germany recorded
one of the weaker manufacturing PMI results in the Eurozone for Dec. Factory
orders declined for Nov. The data indicates that the declines since late 2017
appear to have at least stabilized at a lower level but are yet to recover the
respective peaks. Similarly, industrial production was stronger in Nov, but at
best, declines in output (for manufacturing especially) may have stabilized –
too early to tell.
Services
PMI’s were generally stronger, except for Australia and Japan, which remained
in contraction. The UK services PMI recovered to the 50/neutral level.
CPI’s for
Dec are worth noting. China CPI growth remained elevated at 4.5%, likely adding
further pressure in a lower growth environment for consumers. Also, some signs
of higher CPI growth across the Eurozone too in the Dec prelim CPI.
There was little rebound in data out of Japan for Nov. Retail sales increased in the month but remained below a year ago across most categories (likely due to stockpiling prior to the Oct sales tax increase). There was no rebound (overall) in industrial production and shipments for Nov. The Dec PMI’s indicate that there is likely more weakness in activity to come as both manufacturing and services PMI’s for Dec contracted at a faster pace.
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 13 January 2020 – The signing of the phase one trade deal between the US and China will be a key focus this week. The signing is planned to take place on 15 Jan and text of the deal will be released after. It was reported late last week by Reuters that Chinese officials were yet to confirm purchase commitments of agriculture of $40-$50bn.
Brexit
legislation will also continue to make its way through the House of Lords in
the UK Parliament this week.
Senate
committees are currently reviewing the USMCA legislation and it’s not likely
that there will be a Senate vote this week.
House
Speaker Pelosi said her caucus will decide this week when to send impeachment
articles to the Senate for trial.
There are
several data highlights this week;
In the US,
retail sales for Dec, CPI and PPI, prelim consumer sentiment for Jan will be
released.
China Q4
GDP will be released this week with the second half of the Dec data – trade,
industrial production, retail sales and new loans.
In Aus –
housing finance for Nov and consumer sentiment for Jan will be released.
It will be a somewhat heavier week for US Treasury
settlements. The US Treasury will settle approx. $226bn in ST Bills. Notes and
Bonds this week, raising approx. $25.1bn in new money. Approx. $12.5bn of
securities on the Fed balance sheet will mature this week. There will also be
approx. $5bn in reinvestment purchases made this week.
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 | Jan 6, 2020
The weekly macro brief for w/c 6 January 2020 – This week, markets are likely to continue to follow geopolitical developments regarding the US and Iran. We will also hear more about a possible signing of the US-China phase one trade agreement. At this stage, there appears to be tentative plans for a delegation from China to visit the US for a 15 Jan signing.
On the data front, there are several important highlights
this week;
In the US; Non-farm payrolls and employment data for Dec,
ISM non-manufacturing PMI for Dec and factory orders for Nov.
There is also a speech of interest coming up this week by
Vice Chair of the US Fed Richard H. Clarida on the
U.S. Economic Outlook and Monetary Policy.
Data for Europe includes the final services PMI’s for Dec as
well as Germany factory orders and industrial production for Nov.
Final services PMI’s for Dec will be released for the UK,
Australia and China as well this week.
Aussie retail sales for Nov will also be released later this
week.
It will be a lighter week for US Treasury settlements. The US Treasury will settle approx. $148bn in ST Bills this week, with a paydown of approx. $12bn. The US Treasury will auction approx. $78bn in notes and bonds this week, that will settle next week, raising approx. $32.6bn in new money.
More detail, including a one-page 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
