by Kim | Jun 25, 2018
Macro review for w/c 18 June 2018 – It was a big week for central banks and central bank signalling last week:-
Central bankers attended the ECB Forum on Central Banking – discussions, panels and presentation of papers on Wage and Price Setting.
US Fed Chairman Powell used the ECB Forum as an opportunity to reinforce the position of the FOMC – a strong case for further gradual increases in the FFR, strong economy and balanced risks. During the week, a speech by Atlanta Fed President Bostic provided a positive view of current economic performance but was more cautious that activity (spending, inflation, wages) wasn’t representing a shift in economic momentum but was the result of transitory factors.
BoJ minutes for April – inflation remains too weak, the chances of the bank achieving its 2% target by 2020 seemed low under current policy guidelines. BoJ to discuss at length in June & July meetings. Comments suggest possibly setting up for further accommodations. A speech by Board member Funo highlighted that the BoJ will not be tapering any time soon, highlighted risks to the economy from trade protectionism.
RBA minutes had a large change in wording – removed the reference that the next move for the cash rate would be up and provided more hints at general concerns about low wage growth, excess capacity in the labour markets, high household debt and further tightening of lending standards in the future. House prices fell during Q1 at a National level.
The BoE kept rates on hold and policy unchanged, except advised that any tapering of stock of QE assets would not occur until Bank Rate reached 1.5% (had previously advised 2%). A speech later by Governor Carney outlined that the BoE will receive a capital injection – to significantly increase the amount of liquidity the bank can provide, as the bank prepares for Brexit. The key piece of Brexit legislation was finally passed by the UK parliament this week.
China is easing – PBoC cut its Required Reserve Ratio (RRR) by 0.5% (effective 5 July) to provide liquidity support as the crackdown on shadow banking continues and trade tensions with the US escalate. Issues are seen in the Chinese stock market and reports of increasing difficulty in securing domestic funding. The PBoC also widened the range of eligible collateral for short-term loans.
On global growth –
Prelim PMI’s for June – while all PMI’s still in expansion, across US, Europe and Japan a similar result, a slowing of momentum in June, with manufacturing conditions weakening, off-set somewhat by activity in services. Key themes – slowing new orders, trade and political concerns have been emerging across different reports (not just PMI’s).
Consistent with Prelim PMI, US Philly Fed manufacturing outlook activity index fell in the latest month, highlighting continued moderation in conditions 6mths from now.
Continued slowing of Canadian retail sales and low CPI growth.
US-China tariffs – threats and retaliatory actions continued during the week. The focus now is on how China may escalate beyond trade tariffs (currency depreciation).
More detail is provided in the full report. There are some formatting changes that make it easier to move to different sections. Download the Macro Review here (hit the back button to return to the site);
Weekly Macro Review 18June2018
The focus for the upcoming w/c 25 June 2018;
Trade, tariffs and protectionism remain a key theme.
Central banks and liquidity –
- Rates decision from RBNZ.
- Further signalling by central bankers with speeches from the BoE, BoC and the BoJ summary opinion report. Regional US Fed speeches throughout the week also.
- Month-end roll-off of maturing Fed balance sheet holdings – likely a lower impact liquidity week with the US Treasury auctioning/settling $156b in notes & bills and raising $21b in new money (4week bill TBA).
US growth will be in focus after lacklustre manufacturing readings in the prelim June PMI & Philly Fed released last week – regional manufacturing and activity surveys from Chicago Fed, Dallas Fed, Richmond Fed and Kansas Fed. Also up; Durable Goods Orders, Chicago PMI and third release of Q1 GDP/PCE Indexes.
An important read on the latest European inflation – prelim June CPI will be released this week for the Eurozone and Germany.
UK growth and Brexit remain a focus with Q1 GDP (third release), EC meeting with an agenda item reviewing the state of Brexit negotiations.
Download the calendar for this week (hit the back button to return to the site);-
Weekly Macro Brief 25June2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Jun 18, 2018
Macro review for w/c 11 June 2018 – One of our bigger themes last week was central bank meetings. The outcomes highlight how monetary policy is diverging among the major central banks –
US Fed median projections imply an additional rate increase this year from three to four – with an increase looking likely in the Sept and Dec meetings now.
ECB is holding rates for at least another year and ending QE by the end of the year. Changes to policy accommodations come with data dependant caveats.
BoJ made no changes to monetary policy and remains accommodative amid recent weaker GDP and CPI numbers.
Key US & UK data was positive;
US retail sales growth accelerated higher and core CPI growth was slightly higher in the month and in the year. Energy is playing a role in higher headline CPI growth.
UK – Retail sales (volume) growth was slightly lower in the month but remains elevated. The recent trend suggests retail growth has been increasing. Annual employment growth has been increasing – currently above recent averages. But the extremely high employment rate appears to be partly a function of slowing working-age population growth. Core CPI growth remained steady at 2.1% and has been slowing over the last nine months.
More detail is provided in the full overview – download it here (then hit the back button to return to the site):
Weekly Macro Review 11June2018
The focus for the upcoming w/c 18 June:-
Central bank signalling – heavy calendar of US Fed, ECB and BoJ speeches and events this week, possible discussion of policy decisions, also minutes released by RBA and BoJ
Central bank interest rate decisions – Bank of England, SNB
OPEC
Prelim PMI’s for June – US, Europe, Germany
US-China tariffs – fall out from the latest escalation
Download the full calendar for this week (hit the back button to return to the site):
Weekly Macro Brief 18June2018
Comments and feedback are welcome – please email me at kim.mofardin@marscapitalpartners.net
by Kim | Jun 11, 2018
Weekly Macro Review w/c 4th June 2018 – trade, trade negotiations and tariff threats continued to dominate the headlines, especially after the G7: –
On trade, the US is working across a number of fronts: –
- The form NAFTA will take may change with the US favouring agreements with individual nations. An agreement is not likely to be approved by the current US Congress.
- Outcomes from latest negotiations with China didn’t produce any breakthrough agreements and a day later, the US announced that a 25% tariff would go ahead on $50b of imports. List to be announced on 15 June.
- G7 summit produced little in the way of changes to current tariff threats.
- US-Japan trade talks to commence in July amid the US national security investigation into auto imports.
Other important themes and data released last week;
Australian GDP growth was strong +1% in the quarter. The RBA left rates on hold, citing inflation lower than its 2-3% target, household debt still high – lower rates and higher GDP growth to support household spending.
European growth rates were unchanged in the revised Q1 GDP release. Whilst Draghi’s speech did not go ahead, Praet’s speech provided an upbeat evaluation of the impact of ECB monetary policy actions, setting the scene for possible changes to ECB’s monetary policy accommodations. The ECB has previously flagged September 2018 for changes to its QE program.
UK data, especially Services PMI and Like for like Retail Sales, have rebounded somewhat in the latest month. But it’s worth noting the down-beat commentary in the Services PMI report. BoE’s Ramsden speech – looks most likely that the soft patch in UK data was due to temporary factors, data for Q2 better so far. Still looking for 3 rate rises over next 3 years, depending on data. Brexit remains a large risk and still potential for more downside in consumer spending.
US data showed continued growth with ongoing expansion in services PMI, narrowing of the trade deficit, factory orders ex-transports continuing to grow and JOLTs data was little changed remaining at near-term highs. Slowing consumer credit growth was a soft patch in the data.
More details are provided in the full report – download it here (then hit the ‘back’ button to return to the site);
Weekly Macro Review 04June2018
The focus of the upcoming week (w/c 11th June 2018) is US liquidity and central banks: –
US liquidity will be important this week;
- Approx $203b in treasury auctions will take place this week with approx $44b in new money to be raised. This is slightly higher than some of the heavier weeks we’ve seen recently.
- There will be no Fed holdings of Treasuries maturing this week – no reinvestments to off-set against new issuance.
- Key settlement dates 14 & 15 June and options expiration on 15 June also.
Central bank meetings and rates decisions;
- US FOMC – meeting 12-13 June; expected to raise rates to 1.75% – 2%.
- ECB rates decision 14 June; expected to start outlining changes to its monetary policy accommodations.
- SNB rates decision – not expecting any changes this meeting, it will likely take some direction from the course taken by the ECB.
- BoJ – not expecting any changes but will be looking for its reaction to the recent downturn in Japanese growth and CPI. New Deputy Governor Masazumi Wakatabe will be on board.
In the background this week;
- Key US data; retail sales and CPI
- Important UK data will be out this week to help answer whether softer Q1 data is persisting.
- Trade negotiations will be ongoing with a focus on China, NAFTA and European trade partners.
Download the full calendar for this week (then hit the back button to return the site);
Weekly Macro Brief 11June2018
Feedback is welcome. Please send any comments or questions to kim.mofardin@marscapitalpartners.net.
by Kim | Jun 4, 2018
Data from last week highlighted slower growth in Q1 across US, Europe, Canada; PMI’s improving in the US but the “soft patch” likely persisting in Europe; CPI’s higher impacted by energy costs.
US – GDP growth remains steady, though lower than recent growth, stronger employment growth than recent average, signs of continued wage growth and inflation remains close to the Fed’s target. PMI’s and regional surveys starting to post improvements after weakness earlier in the year, suggesting further growth. Trade/tariffs: uncertainty impacting sentiment and input prices – regional survey anecdotes, impact already seen in higher input prices, some supply issues emerging.
Europe – CPI growth higher but driven by a continued acceleration in energy prices, manufacturing PMI suggesting soft patch is persisting. Stronger retail growth in Germany, slowing Q1 GDP growth in France.
Canada – GDP growth slowing in Q1, rates on hold, BoC watching for impact on households and the housing market from higher mortgage rates and tighter lending.
Japan and China PMI’s – expansion in overall manufacturing activity remains mostly unchanged, no sign of an acceleration higher.
Several speeches from US Fed Governors during last week were of interest: –
Brainard: yield curve inversion less of a signal than in the past (Fed keeping rates low), curve movements to be interpreted within context of financial conditions. Yet Bullard’s speech earlier in the week highlighted the risk of allowing the yield curve to invert.
Bostic & Brainard: US treasury fiscal spending likely to impact short-medium term outlook for the economy, risks are to the upside for now, possible case for further rate increases. Not clear that fiscal spend and tax reform (the details yet to be written) will move the economy to a different, higher sustained level of output ie improve productivity. Both Bostic & Brainard see likelihood that positive impacts of fiscal spend will fade over the medium term.
For all the detail, download the full review (then hit the ‘back’ button to return to this post):
Weekly Macro Review 28May2018
Looking forward to this week, trade will be a key theme: –
- Trade:
- Further developments regarding the imposition of tariffs and retaliatory measures among NAFTA/European countries
- Outcomes from latest negotiations with China likely to drive sentiment
- G7 summit 8-9 June
- US, Chinese & German international trade data
- US liquidity: a lighter week with treasury bill auctions, but heavier supply next week approx. $39b in new money to be raised next week (amts TBC via Treasury announcements). No scheduled Fed speeches this week but with FOMC on board next week 13 June, expect some Fed speak
- Australia – RBA rates decision and Q1 GDP
- European growth – Q1 GDP (revised), ECB Draghi speech on Tuesday
- UK – Services PMI and Like for like Retail Sales, plus Monetary Policy Committee Member speeches all week
Download the full calendar for this week (then hit the ‘back’ button to return to this post):
Weekly Macro Brief 04June2018
Feedback is welcome. Please send any comments or questions to kim.mofardin@marscapitalpartners.net.
by Kim | May 28, 2018
A summary around our key themes for last week (w/c 21 May):-
- FOMC – Signalling on rates from minutes & speeches
- No additional rate hikes this year (expect two, rather than three more rate increases), Fed outlook and policy stance hasn’t changed
- Most speeches this week reinforced that Fed will tolerate inflation above 2% for a time
- Econ data tracking in line; no reason to think performance above/below expectations
- Key considerations: inflation just reaching 2% now, continued wage growth, some business uncertainty with regard to trade, shape of the yield curve (future growth expectations “sluggish”)
- Neutral rate: somewhere between 2.25-2.75%. Several speeches highlighted moving to that level and then seeing how the economy develops
- US data – PMI, regional survey’s and durable goods (ex-transport) showing continued expansion. A key theme is rising cost price pressures, some optimism about ability to pass higher costs on.
- Europe – German and European PMI’s continued to slow (expanding at a lower rate), ECB remaining accommodative, core inflation still subdued and has not shown an upward trend yet. Brexit and trade uncertainties.
- UK – slower GDP growth, flat retail sales, inflation moderating (positive), BoE concerned about Brexit, remaining accommodative.
- Japan: Tokyo Inflation continues to moderate, in line with slowing inflation and growth
For all the detail – download the full report:
Weekly Macro Review 21May2018
Another big week ahead with global growth and inflation remaining in focus:-
- US growth, employment and inflation
- EU Inflation, employment
- German retail sales and CPI
- Canada – GDP and BoC rates decision
On the central bank (US) liquidity front this week its month end. Note and bond settlements, Fed holdings mature and Fed balance sheet reduction on 31 May 2018.
Full details of the calendar:
Weekly Macro Brief 28May2018
Feedback is welcome – please send any comments or questions to kim.mofardin@marscapitalpartners.net
by Kim | May 23, 2018
We will commence posting two additional notes each week – a weekly macro brief and a weekly macro review. These notes are not designed to be deep-dive analytical pieces, but instead, provide a guide as to major events and round up of economic performance as related to the markets and key themes that we are following.
Our focus overall:
- Central banks; US liquidity, US Fed normalisation and rates signalling
- Macro context; identify whether data are confirming or challenging views on key themes including growth and inflation
- Alignment with current market analysis
Each week we will post:
- The Weekly Macro Brief – providing an overview of upcoming key events for the week including US Treasury issuance versus US Fed normalization, central bank speeches and key economic events. Posted at the start of the week.
- The Weekly Macro Review – a round-up of the important events, how they relate to key themes around growth, inflation and liquidity (with links to original sources). Posted at the start of the week.
I have posted the Weekly Macro Review for last week w/c 14 May 2018 and the Weekly Macro Brief for w/c 21 May 2018 (filled out with Monday and Tuesday data). The weekly reviews going forward will have an executive summary of how the data relates to key themes and dovetails into our market analysis.
Weekly Macro Review 14May2018
Weekly Macro Brief 21May2018
Comments and feedback are welcome.
kim.mofardin@marscapitalpartners.net
