by Kim | Oct 29, 2018
The macro review for w/c 22 October 2018 – Fed speakers addressed whether it is time for a pause in interest rate increases given current market volatility, some weaker earnings outlook going into 2019 and weaker housing/auto sales. Fed outlook was always for more ‘moderate’ growth going into 2019, especially as fiscal stimulus waned. Unless employment and inflation indicators turn lower than forecasts, Fed unlikely to change course. Yet, the probabilities for another rate hike in Dec have fallen over the last week.
Most data this week pointed to continued strength in US economy, but some ongoing weakness in housing and weaker private investment figures in the GDP report. Chicago Fed National Activity Index has the economy still expanding above the historical average. Prelim PMI’s for Oct indicated improved momentum, especially in the domestic economy, but ‘export activity stagnating’. Durable goods remained strong on the back of defense and non-defense transport manufacturing – ex transport, new orders grew by a much small 0.1%. US Q3 GDP growth slowed somewhat – weakness in net export growth and private fixed investment was offset by growth in inventories and continued growth in personal consumption expenditure. Of note was the slowdown in the growth of the core PCE price index for Q3 – slowing from +2.2% in Q2 to +1.6% in Q3 (annualised rates of growth).
Weakness in some Eurozone data appears to be persisting, with the notable slow-down in Eurozone and German prelim PMI’s. Watching for confirmation in ‘hard data’. For example, Eurozone and German industrial production (reported two weeks ago for Aug) showed declines had stabilized.
The ECB kept rates on hold – no change to policy measures. Draghi see’s current European data reflecting ‘weaker momentum, not a downturn’ and weakness likely to be transitory.
Japan prelim manufacturing PMI showed a solid improvement, especially with new export orders growing for the first time since May.
The Bank of Canada increased its overnight rate to 1.75%.
More detail covered in the full review of last week – use the links on the contents page to navigate to different country sections. Download here (hit the back button on your browser to return to the site);
Weekly Macro Review 22Oct2018
The outlook for w/c 29 October 2018 – The US Treasury will settle approx. $281b in ST bills and notes this week (notes were auctioned last week), raising approx. $37b in new money. Its also month end and $23.8b in securities on the Fed balance sheet will mature – there will be no re-investment of principal payments this month.
Several major economic releases this week and central bank decisions;
BoJ and BoE interest rate decisions
Key economic reports;
US – PCE price index, employment cost index, employment report, house price index, ISM manufacturing survey
Europe – Q3 GDP, prelim CPI (Oct), German retail sales
Australia – CPI Q3, retail sales and private sector credit
Manufacturing PMI’s – UK, US, Eurozone and Germany
Brexit remains an unknown – looking for stalled negotiations to recommence this week
Further detail and a calendar of key releases is provided in the full briefing document – download it here (hit the back button on your browser to return to the site);
Weekly Macro Brief 29Oct2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Oct 22, 2018
The macro review for w/c 15 October 2018 – There was no agreement on Brexit at the EC meeting and not enough progress had been made on the withdrawal agreement to schedule an additional EC meeting for November. This leaves timings and options very tight.
US data remained solid; retail sales were lower than expected because of a fall in one category – growth in most categories rebounded. Industrial production continued to grow at a constant pace. Growth in job openings continues to accelerate while growth in hires remains constant.
The key point from the FOMC minutes was the discussion around the expectation that interest rates may need to become ‘modestly’ restrictive for a period – to be decided though within the context of continued good US economic performance.
CPI’s in the Eurozone, UK and Japan continued to be influenced by higher energy prices. Annual Euro area CPI grew at 2.1% in Sep but ex energy was 1.3%. In the UK, CPI-H annual growth slowed to 2.2% – but ex energy/food/alcohol/tobacco CPI growth was lower at +1.8%. In Japan, CPI ex fresh food grew at +1% (annual), but ex fresh food and energy grew at a lower annual rate of +0.4%.
UK data was mixed; retail sales missed in Sep. The UK labour market remains resilient, but latest quarter data points to some weakness with employment declining in the quarter.
Chinese GDP growth slowed in Q3 to +1.6% versus +1.8% in Q2. The annual rate slowed to +6.5%.
There is more detail covered in the full review for last week – use the links in the contents page to navigate to different country sections. Download here (hit the back button on your browser to return to the site);
Weekly Macro Review 15Oct2018
The outlook for w/c 22 October 2018 – The US Treasury will auction approx. $276b in ST bills and notes this week. The bills will settle this week and the US Treasury will raise approx. $16b in new money (a moderate week).
Brexit negotiations will continue this week. There are several (contentious and likely unacceptable) options under consideration to break the current deadlock on the Irish border issue.
The key data releases this week;
US Q3 GDP and Durable Goods
Preliminary PMI’s for October
ECB and BoC interest rate decisions this week
Further detail and a calendar of key releases is provided in the full briefing document – download it here (hit the back button on your browser to return to the site);
Weekly Macro Brief 22Oct2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Oct 15, 2018
The macro review for w/c 8 October 2018 – Inflation reports in the US were somewhat mixed. Growth in producer prices in Aug was higher, due to transport and warehouse prices. The annual core PPI growth remains at its highest level of the last 12months at +2.9%. In September, consumer price growth was slower – with a lower impact from energy prices, but continued pressure from shelter. Annual growth in core CPI remained at 2.2%, while the headline CPI slowed to +2.3%.
An important speech by the NY Fed President/CEO and Vice Chairman of the FOMC – John Williams. The Fed will review its current framework for managing interest rates over the coming months. Will either continue using the current system or go back to the pre-crisis system – possible implications for the value of excess bank reserves held at the Fed. Also, re-iterated that the Fed is nearing the end of the normalization process – less role for forward guidance and a shift away from using the ‘neutral’ rate benchmark.
European industrial production rebounded in August. But within that, German industrial production continued to decline, albeit to a lesser degree than the prior month.
German CPI reached its highest level in seven years at +2.3% on the back of higher energy prices – core CPI growth remains lower at +1.5%.
Australian housing – new lending for housing continued to fall in Aug. This time, the decline included owner occupier housing credit, notably in the two key states of NSW and to a lesser degree Vic. This data is prior to the out-of-cycle mortgage rate hikes taken by several of the major banks back at the start of September. Auction clearance rates remain at their lows (NSW & Vic). The data suggests further falls in house/apartment prices.
Brexit – at this stage, no further progress has been made on resolving the key issues of the Brexit withdrawal agreement. Unless progress is made over the next few days, its not likely that an additional EC summit will be announced for November.
It now looks likely that US President Trump and Chinese President Xi will meet on the sidelines of the G20 in late November.
There is more detail covered in the full review for last week – use the links in the contents page to navigate to different country sections. Download here (hit the back button on your browser to return to the site);
Weekly Macro Review 08Oct2018
The outlook for w/c 15 October 2018 – The new 8 week bill will go to auction for the first time this week, slightly ahead of schedule. It will be a heavy week of treasury settlements. This week with the US Treasury will auction and settle approx. $154b in ST bills (the 4wk and 8wk are yet to be announced), raising approx. $21b in new money. The longer-term notes and bonds auctioned last week will settle on Monday 15 Oct – raising approx. $50b in new money. In all, $228b in auctions will settle this week, raising approx. $71b in new money (net new issuance).
The key releases this week;
US Retail Sales and FOMC minutes
Chinese data will be in focus – especially Q3 GDP growth and New Loans
The UK will be in the thick of it this week – the EC summit, CPI, PPI, Retail Sales and the Labour Market Survey. The EC summit is on 17-18 Oct and it will likely be announced on the 18 Oct whether enough progress has been made on the agreement to call an emergency EU meeting in November to finalize the Brexit deal. The next EC meeting will be December and it should be clear whether negotiations will/can get pushed out in time for an agreement to be finalized at the December meeting.
Further detail and a calendar of key releases is provided in the full briefing document – download it here (hit the back button on your browser to return to the site);
Weekly Macro Brief 15Oct2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Oct 8, 2018
Macro review for w/c 1 October 2018 – “Stalling export trade” was a key theme from the latest round of PMI’s for September. This was evident in the manufacturing PMI’s for the Eurozone, including Germany, Japan, China and Canada. There was ‘modest’ improvement in the US and UK export orders.
The manufacturing PMI for China is on the verge of contraction. The PBOC announced a reduction of 1% in the RRR for some banks. Chinese officials are also considering further fiscal stimulus measures.
The US ISM Manufacturing PMI and the Markit Manufacturing PMI, although not as strong as each other, were consistent with the final US Factory Orders data for Aug. Growth in factory orders for all manufacturing industries recorded the second strongest growth in new orders for the last year. Stronger factory orders data can be traced back to transport equipment manufacturing activity.
The divergence remains between the US ISM non-manufacturing PMI and the Markit Services PMI data. Activity in the ISM non-manufacturing reached all-time highs in Sep while growth in the US Markit Services PMI continued to slow in Sep.
US payrolls data was lower for Sep, but previous months were revised higher. From the household survey (16yrs+), annual employment growth continued to slow, and participation declined over the last year. Real earnings continued to grow at a constant rate.
US Consumer credit growth continued to accelerate in Aug, which is likely to support consumption/spending growth.
A busy week of US Federal Reserve speeches. A full range of views were expressed from hiking rates to a point that are somewhat restrictive, to taking a more cautious path and a slower rate of hikes. Chairman Powell’s interview garnered the most attention, but also noteworthy was Atlanta Fed President/CEO Bostic speech. He has previously been more cautious on hikes but admitted that the strength of the economy had surprised to the upside – with the potential for overheating, a higher path for rates would be required.
The RBA kept rates on hold and Australian retail sales rebounded in Aug after a weaker Jul.
There is more detail covered in the full review for last week – use the links in the contents page to navigate to different country sections. Download here (hit the back button on your browser to return to the site);
Weekly Macro Review 01Oct2018
The outlook for w/c 8 October 2018 – Light supply of US Treasuries this week with the US Treasury auctioning and settling $156b in ST bills, raising approx. $1b in new money. Only $26m will roll off the Fed balance sheet this week on 11 Oct. The US Treasury will also auction approx. $74b in longer-term notes and bonds which will settle next Monday 15 Oct.
The key releases this week;
US PPI and CPI data for Sep
Eurozone and German Industrial production and German trade data – providing further insight on the slow-down in export/manufacturing demand
Aussie housing lending data for August – as we track the slowdown in the housing market
UK monthly GDP for Aug
Brexit is approaching critical timings – likely a heightened level of activity over the next week and a half. At the EC meeting next week on 17-18 Oct it will be decided whether there has been enough progress on the Brexit withdrawal agreement to call an additional EC summit on 17-18 Nov to agree and formalise the agreement.
Further detail and the calendar of key releases is provided in the full briefing document – download it here (hit the back button on your browser to return to the site);
Weekly Macro Brief 08Oct2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Sep 30, 2018
Macro review for w/c 24 September 2018 – As expected the US Federal Reserve increased the FFR by 25bps last week. A key change to the statement was the removal of “stance remains accommodative” but this did not signal a change in the path of policy. Projections for real GDP growth were upgraded in line with fiscal stimulus.
US data this week confirmed that real GDP growth in Q2 was 4.2% annualised and that inflation is not accelerating. In fact, core PCE price index growth slowed and came in at 0% in Aug. The annual headline rate also slowed slightly and remains around the Fed target.
Fixed mortgage rates continued to increase to new post GFC highs this week. Growth in house prices slowed. New home sales posted a slightly better month of growth after slowing for several months. From last week, existing home sales have declined over the last few months.
European inflation data continues to be led higher by accelerating energy prices. Prelim German and Euro-area CPI growth increased in Sept, coming in at +2.3% and +2.1% respectively. Euro-area CPI ex energy in the prelim estimate was +1.3% (annual).
Bank of Japan Governor Kuroda discouraged the idea that the BoJ might start to normalise rates. Governor Kuroda confirmed that extremely low rates will remain for an “extended period of time” meaning “a fairly long period of time”.
Brexit remains in a state of flux. Awaiting revised details of the trade component of Brexit, likely after the Conservative Party conference next week (from 30 Sep). UK GDP growth for Q2 was confirmed at +0.4% but Q1 growth was revised lower to +0.1%.
Expecting the US and Canada to announce details of an agreement on NAFTA early this week (Sunday). The US and Japan have agreed to commenced talks for a bilateral trade deal. The start of talks protects Japanese automakers from the threat of tariffs for now.
More detail is provided in the full review of last week – download it here (hit the back button on your browser to return to the site);
Weekly Macro Review 24Sept2018
The outlook for w/c 1 October 2018 – Medium supply of treasuries this week with the US Treasury auctioning and settling $135b in ST bills and settling $106b in note auctions from last week (settlement 1 Oct). The US Treasury will raise approx. $22b in new money this week. The 4wk bill is yet to be announced.
It’s the start of a new quarter and the monthly cap for reinvestment of maturing securities on the Fed balance sheet increases to $30b for treasuries and $20b for MBS. These are now the maximum cap levels and are not scheduled to increase further.
A big data week;
PMI’s for Sept will be released for the US, Asian and European economies.
US jobs data.
A heavy schedule of US Fed speeches, including Chairman Powell.
Australia RBA rates decision and retail sales.
Expecting an announcement on a NAFTA agreement between the US and Canada early in the week.
Brexit – the new form of the trade component of the Brexit withdrawal agreement will likely be announced after the Conservative party conference this week. Less than 4 weeks remain to negotiate the Irish border backstop and the broader trade element of the withdrawal agreement.
Further detail is provided in the full brief – download it here (hit the back button on your browser to return to the site);
Weekly Macro Brief 01Oct2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Sep 24, 2018
Macro review for w/c 17 Sept 2018 – Trade and Brexit negotiations took a negative turn this week. The US-China trade dispute escalated with further tariffs implemented by both sides. The next round of trade talks was cancelled by China. Negotiations between US and Canada have yet to resolve issues on NAFTA. The EU rejected the UK Chequers plan for the post Brexit trade relationship and this now leaves four weeks to create a new deal, while no further progress has been made on the issues of the Irish border.
The preliminary PMI’s didn’t hold much good news either. The US composite PMI slowed further, led by services – the overall pace of expansion has been slower in Q3. The Eurozone composite PMI also continued to slow – with further evidence of slowing manufacturing and export activity, especially in core markets of France and Germany. Japanese manufacturing PMI improved.
Annual CPI growth continues to be influenced by higher energy/transport costs –
Eurozone; annual headline CPI growth slowed to +2%, around the ECB’s target, but annual growth of CPI ex energy lower at +1.4%.
UK; annual growth of CPI-H incl owner occ housing costs came in at +2.4%, but ex volatile items CPI growth was lower at +1.9%.
Japan; the BoJ measures CPI less fresh food, which came in higher at +0.9%, but still well below the BoJ target, annual growth in CPI ex fresh food and energy was less than half that rate at +0.4%.
Canada; headline CPI growth slowed to +2.8%, but again CPI ex energy annual growth was lower at +2.2%. The BoC measures of core CPI accelerated somewhat in the latest month and are now sitting between +2 and 2.2%.
The BoJ left monetary policy settings unchanged at the latest meeting.
More detail is provided in the full review of last week – download it here (hit the back button on your browser to return to the site);
Weekly Macro Review 17Sept2018
The outlook for w/c 24 Sept 2018 – Relatively light supply of treasuries this week. The US Treasury will settle approx. $163b in treasuries this week, raising approx. $6b in new money – 4wk bill is yet to be announced.
New tariffs imposed by the US and China will go into effect this week. Considering previous threats, it is possible that the US could impose the further $267b in tariffs after China retaliated with tariffs and cancelled its high-level trade visit.
President Trump and JapanesePM Abe will meet this week on the sidelines of the UN General Assembly. Auto tariffs and the trade deficit are likely to be in focus.
The uncertainty surrounding Brexit is now heightened after the EU rejected the UK Chequers plan. Awaiting the next steps for UK-EU to reconnect on trade and work through the Irish border issues. A deadline of four weeks remains.
FOMC meets this week – expectations are for another 25bps increase to 2-2.25%
This is the last week before the ECB reduces it net asset purchases by half. As of Oct, the ECB net asset purchases will be at a rate of €15b/month.
Important data this week;
US Q2 GDP third estimate, PCE for Aug, regional surveys
Eurozone prelim CPI for Sep
UK Q2 GDP
Further detail is provided in the full brief – download it here (hit the back button on your browser to return to the site);
Weekly Macro Brief 24Sept2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
