by Kim | Aug 6, 2018
Macro Review for w/c 30 July 2018 – The US Fed kept rates on hold but affirmed its view of a ‘strong’ economy. This further increased the probability for rate increases in Sept and Dec 2018. The BoJ kept rates on hold and made adjustments to the implementation of monetary policy – widening the trading range of the 10yr yield, among other measures, in order to improve the sustainability of the framework. The BoE increased rates citing future inflation expectations.
US data – The acceleration in the growth of personal consumption and real disposable income data for June were highlights of the week. These helped to underpin stronger consumption growth in the Q2 GDP data. PCE price index was higher, around the Fed target rate. Growth in non-farm payrolls slipped and was below the current 12month average. Regional manufacturing and business surveys were stronger. The PMI’s for July show that overall private sector activity continues to grow, but without the acceleration seen in recent months.
Eurozone data was softer – GDP flash for Q2 highlighted slowing growth, headline CPI growth was influenced by energy prices, CPI ex energy coming in at 1.4%, Eurozone PMI’s for July highlighted weaker expansion in private sector activity, with slower growth in new orders across member states – the exception was Germany.
UK Services and Manufacturing PMI’s for the start of Q3 also highlighted slower growth across the private sector.
The PMI’s out of China highlighted slower growth, weaker demand and optimism reaching some of the lowest on record (esp Services). From the Chinese PMI report; “In July, the State Council, China’s cabinet, said the country will adopt a more proactive policy to support the economy in response to uncertainty abroad. The risk of an economic downturn has diminished.”
The US and China continued the tit-for-tat approach to tariffs.
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 30July2018
The outlook for w/c 6 August 2018 – A quieter week on the liquidity front with the US Treasury auctioning and settling approx. $141b in ST bills raising approx. $16b in new money (4wk bill TBA). The US Treasury will also auction $78b in 3,10, 30yr treasury securities that will settle next week.
Central bank decisions this week from the RBA and the RBNZ.
Key data this week will be US CPI (July) and prelim Q2 GDP growth for the UK and Japan.
On the trade front. NAFTA negotiations have taken on a higher gear between US and Mexico. Mexico is keen to finalise an agreement, but Canada is yet to re-join the negotiations. There are US public hearing outcomes still due for various tariff proposals that may influence the direction on potential auto tariffs and US-China discussions.
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 06Aug2018
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by Kim | Jul 30, 2018
Macro Review for w/c 23 July 2018 – Positive news on trade last week. The US and EC agreed to at least halt the threat of tariffs while they begin talks to reduce trade barriers. High level NAFTA meetings also recommenced but with little detail/outcome.
The negotiation of the Brexit Withdrawal Agreement continued. Most of the agreement is in place but significant sticking points remain especially regarding frictionless trade borders. Key UK ministers, including PM May, have been meeting with EU members to try and build support. Meetings with the EC resume in mid-August.
The ECB kept rates on hold.
Core measures of Australian CPI growth continued to slow in Q2, edging down and out of the RBA target band of 2-3%. Its not likely that the RBA will start to cut rates based on slowing consumer prices at this stage.
US GDP growth didn’t disappoint with Q2 real GDP growth at +4.1%. Consumption, investment and net exports all contributed to higher growth in the quarter. Other measures of the US economy remained positive – growth in Durable Goods in June after two weaker months prior and the Chicago Fed National Activity Index for June returned to a higher than average rate of growth. Early July data was a little mixed, showing expansion in regional manufacturing surveys and the composite PMI, but expanding at a slower pace.
Other global preliminary Composite PMI’s for July were also mixed; slower expansion in the Eurozone (remaining near recent lows and downbeat commentary) and continued slower expansion in Japan. The German prelim composite PMI was stronger with expansion accelerating (led by manufacturing), continuing its rebound off recent lows.
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 23July2018
The outlook for w/c 30 July 2018 – It will be a big week ahead with several central bank interest rate decisions, important data releases and heavier US treasury supply.
Central bank decisions this week – BoJ, especially of interest given reports of possible changes to monetary policy accommodations, FOMC and BoE.
Liquidity – heavier supply of treasuries this week with the US Treasury auctioning and settling $273b in notes, bills and TIPS, raising approx. $43b in new money (4wk bill TBA). Its also month end, so the US Fed will see $30b in securities maturing in its SOMA portfolio on 31 July – only $7b will be reinvested.
This is also a heavy data week – US PCE and Outlays, US Non-Farm Payrolls, Eurozone CPI and Eurozone Q2 GDP are among the bigger reports.
PMI’s will also be released this week across the major economies.
Earnings continue and the last of the FAANG’s report this week – Apple Q2. Also, of interest is Caterpillar Q2.
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 30July2018
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by Kim | Jul 23, 2018
Macro Review for w/c 16 July; It was another important week on trade. Japan and the EU signed a large free trade deal, including specific provisions linked to the Paris Climate Agreement – “We are sending a strong signal to the world that two of its biggest economies still believe in open trade, opposing both unilateralism and protectionism.”
Late last week President Trump signalled he is willing to “go to 500”, further escalating the trade dispute with China by imposing tariffs on all Chinese imports.
Fed Chairman Powell provided an optimistic view of the US economy in his Senate Banking Committee testimony. It was seen as further support for two more rate increases this year – Sept and Dec.
US data was good – with continued growth in retail sales and stronger growth in industrial production in June after May was revised even lower. Regional surveys for NY and Philadelphia were a little mixed – current activity still in expansion, but some forward-looking indicators moderating.
UK data; retail sales declined in June but still a stronger Q2 overall, UK employment growth remains stable, but the decline in unemployment is becoming smaller as more workers enter the labour market and CPI growth mostly unchanged, with underlying/core CPI lower. This is amid the deep divisions and debate on the governments’ plan for Brexit. Stripping away the noise, the UK representatives will return to Brussels this week to “negotiate an operative backstop – an “all-weather insurance policy” – to address the issues of Ireland and Northern Ireland”. This will be an important step towards completing a withdrawal agreement (due mid-Oct 2018) to avoid a no-deal Brexit.
Headline CPI data in the Eurozone was influenced by higher energy prices and underlying CPI growth remains little changed +1.3% (annual).
Japanese headline CPI growth was also influenced by higher energy prices; ex-food & energy CPI declined in June by -0.1% and the annual rate slowed to +0.2%. The BoJ is planning a special review of the causes of enduring weakness in price growth.
More detail is provided in the full review – download it here (hit the back button on your browser to return to the site);
Weekly Macro Review 16July2018
The outlook for w/c 23 July 2018; Brexit negotiations shift to Brussels this week (26 July) where an important element of the withdrawal agreement will be addressed/negotiated; the issues of Ireland and Northern Ireland.
Trade disputes and negotiations remain a focus. President Trump has threatened a further escalation of tariffs on China, NAFTA negotiations resume albeit in a fragmented approach, US-Japan trade talks were supposed to be scheduled for July, President Trump also meets with European Commissioner Jean-Claude Juncker in Washington this week to continue trade talks and awaiting outcomes of public hearings on section 232 auto tariffs held last week.
Liquidity – moderate supply of treasuries this week with the US Treasury auctioning and settling approx. $141b in ST bills and raising approx. $16b in new money this week (could <$10b – 4wk bill TBA). The key date to watch is 26 July. The US Treasury will also auction $119b in notes, to settle next week.
ECB rates decision this week.
US GDP Q2 – the consensus currently at +4.2% (real GDP, qtr annualized), a large acceleration from Q1 growth of 2%.
Australia CPI Q2.
Preliminary PMI’s July – first gauge of activity for July across US, Japan, Eurozone and Germany.
Earnings continue and several of the FAANG’s report this week – Alphabet/Google, Amazon and Facebook.
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 23July2018
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by Kim | Jul 16, 2018
Macro review for 9 July 2018; Escalation in the US-China trade dispute didn’t take long to materialise during the week – starting with China’s announcement of a significant increase in anti-dumping duties of US optical fiber. The US then announced a further investigation by the USTR for another 10% on $200b Chinese imports.
Two Fed speeches worth highlighting this week;
Fed Chairman Powell’s first broadcast interview – his speeches have so far emphasised the role of promoting financial stability (or the risk of instability from too easy monetary policy) alongside the price stability and full employment mandates. “If we leave rates too low for too long, then we can have too high inflation or we can have asset bubbles or housing bubbles”.
Philadelphia Fed President Harker interview on Bloomberg – highlighting the importance of watching services inflation, also, comfortable with PCE inflation higher at 2.5% – depending on the level of acceleration.
Data and sentiment in the US continue to be strong. Consumer credit growth was higher in May and we could see this filter into expenditure data (eg May retail sales were stronger). JOLTS data was little changed and remain near all-time high levels. Wholesale sales growth was also stronger, with petroleum accounting for 40% of the growth in the month. PPI growth in final goods for the month slowed somewhat, but the annual rate continued to grow, driven by goods (energy). Annual CPI also continued to accelerate, and CPI ex-food and energy grew by +2.3%.
In Europe, data and sentiment were mixed. ECB President Draghi provided an upbeat picture of growth and inflation in the Eurozone with “risks balanced”. But the Zew economic sentiment index for Germany fell further into negative territory and the Eurozone turned negative in the latest month. German headline CPI was +2.1% but ex-food and energy came in at 1.4%. A bright spot in EU data was stronger industrial production growth in May after a weak result in April. The growth was widespread among key countries.
Brexit featured heavily this week with the resignation of key government officials after PM May released the Cabinet vision for the UK-EU relationship, or “soft Brexit”. The govt is now shoring up support for its white paper on Brexit. Several parliamentary debates in the coming week will be crucial for the government, PM May and the path of Brexit plans. On the data front, the new monthly GDP report highlighted that the current ‘run rate’ for GDP growth in the 3months to May is on par with the Q1 rate of +0.2%.
The BoC continued to lift its benchmark rate for the second time this year. The BoC highlighted that “dampened” HH growth would likely be offset by stronger investment spending in response to capacity pressures and continued export growth.
More detail is provided in the full review – download it here (hit the back button on your browser to return to the site);
Weekly Macro Review 09Jul2018
The outlook for w/c 16 July 2018;
An important week for PM May and her Cabinet Brexit plan. Several debates on the proposal will take place in the UK parliament this week amid the resignation of key ministers last week and deep divisions on Brexit.
Trade will continue to be a focus. The US-Chinese trade dispute likely to continue, as key issues remain unresolved, despite the retaliatory tariffs. On 19 July, the US Dept of Commerce will hold a one-day hearing on the Section 232 action on whether imports of autos and auto parts impair US national security. Outcomes will be important for a range of countries.
Liquidity – heavier supply of treasuries, with the US Treasury auctioning and settling approx. $226b in notes, bonds and bills and raising approx. $41b in new money this week. Key dates to watch are 17 and 19 July.
US Fed Chairman Powell provides the semi-annual monetary policy testimony to the US Senate Banking Committee (two days).
Retail sales will be released this week across the US, UK and Canada.
CPI will also be reported for the UK, Eurozone, Japan and Canada.
It’s also earnings season and the first of the FAANG’s reports this week – Netflix.
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 16July2018
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by Kim | Jul 9, 2018
Macro review for w/c 2 July 2018 – The key highlights;
Tariffs on US and Chinese imports went into effect late last week with some heated language around “igniting the largest trade war in economic history”. “International trade policy” featured in central bank speeches/minutes/interest rate decisions last week – highlighting concerns about escalation and the impact of uncertainty on sentiment and investment/capex decisions.
BoE scenarios for monetary policy contingent on trade protectionism, Brexit uncertainty and ‘tighter global financial conditions”.
US FOMC minutes – risks to the outlook are balanced, gradual rate rises appropriate, FFR likely to be above neutral by next year.
Aus RBA rates kept on hold – slightly less positive language around trade policy, global growth and local employment growth. Likely tighter lending standards to come in Australia.
PMI’s offered a first glimpse at June activity. PMI’s covered here followed a similar pattern – slowing/no expansion in manufacturing (US, Japan, Eurozone, UK, and China) and slightly stronger expansion in services. Continued to highlight impact of trade policies on business uncertainty, prices and availability of certain commodities (so far). Several PMI reports highlighted issues around slowing export sales (US, Asia, Europe).
US data remains positive; the ISM reports (manufacturing and non-manufacturing) showed expansion continued to accelerate versus the Markit PMI’s showing manufacturing and services still expanding, but not accelerating. Headline manufacturers new orders for May increased, driven by non-durable goods. Continued improvement in US non-farm payroll growth. Job cut announcements low compared to recent history but hiring announcements lagging.
Europe; unemployment continued to fall, retail sales growth in Eu28 was steady (flat in the EA19)
UK; announcement of Brexit plans late Friday now under some uncertainty after the key Brexit Minister resigns, citing disagreement with the Cabinet plans. PMI’s suggest stronger services, improved construction and weaker manufacturing activity in June.
More detail is provided in the full review – download it here (hit the back button to return to the site);
Weekly Macro Review 02Jul2018
The outlook for w/c 9 July 2018 – The major themes for this week include;
Liquidity – relatively light supply in treasuries this week with the US Treasury auctioning/settling $125b in bills with no paydown or new money raised (4wk bill TBA). Several speeches from FOMC members, Fed Monetary Policy report, BoE and BoC rates decision this week.
With US and Chinese tariffs now in effect, waiting for the next level of escalation. Hearings for the next round of US tariffs not until 24 July. Also awaiting the outcome of US investigations on auto imports – impacts on Europe and Asia.
Brexit likely to feature this week after the key minister for Brexit resigns amid disagreement on the direction of UK-EU Brexit deal.
US CPI for June and JOLTS data
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 9July2018
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by Kim | Jul 2, 2018
Macro review for w/c 25 June 2018 – Trade and tariffs, central banks and the latest reading on growth and inflation all featured last week. Key highlights:
Trade and tariffs ;
- The US decided not to invoke a National emergency law to block Chinese investment in US tech companies
- China announced that it had reduced the number of industries where foreign investment was restricted
- Canada reaffirmed its $12.6b in tariffs on US imports going live on 1 July 2018
- Auto tariffs will likely be a focus, especially for Europe, as President Trump stated that he was close to finalising his study on tariffs on car and truck imports from Europe
Central banks voiced some concerns;
- RBNZ kept rates on hold – expansionary level for a considerable period, citing excess capacity and trade tensions
- Fed President Bullard would prefer to see more gradual increases in rates and is concerned about the possibility of yield curve inverting
- BoE Governor Carney – Conditions could crystalize long standing risks of a ‘snapback’ in interest rates and tightening of global financial conditions – trade tensions, tighter US funding markets
- BoJ – Meeting for July will include further analysis of the weaker price growth in Japan
- ECB – reaffirmed plans to reinvest principal payments from its bond buying program once net asset purchases end in 2019
US growth – data offered mixed insights. Signs of slowing from Chicago Fed, Dallas Fed, US Durable Goods and Q1 GDP revised lower. Underlying price growth in PCE price index showing signs of acceleration. More positive results from Richmond Fed, Kansas Fed and Chicago PMI.
Eurozone CPI was higher on the back of accelerating annual growth in energy prices. Similar for German CPI. German employment was stable, but German Retail Sales declined in the provisional results released for May.
The UK was told to get a move on from the EC this week with regard to detail around Brexit. The UK government will meet on 6 July to agree and outline in more detail the future UK-EU partnership. The third release for Q1 GDP improved slightly – the previous large decline in Construction was revised to a smaller decline.
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Weekly Macro Review 25Jun2018
The outlook for w/c 2 July 2018;
Liquidity – relatively heavy supply in treasuries this week with the US Treasury auctioning/settling $225b in notes and bills and $25b in new money to be raised.
A relatively quiet week for central banks – RBA rates decision, BoE Carney speech and FOMC minutes out this week.
Trade – US tariffs on Chinese imports go into effect 6 July. Canadian tariffs on US imports went into effect 1 July.
Another important week for the latest readings on global growth;
- Manufacturing and services PMI’s for June released across a range of countries
- US non-farm payrolls & factory orders
- Europe employment, retail sales, German industrial production
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Weekly Macro Brief 2July2018
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