by Kim | Jan 28, 2019
The macro review for w/c 21 January 2019 – The slow-down in global trade (and growth) continued to be a key theme from the data last week.
The US data was somewhat stronger, but there were some mixed
results. The two regional surveys showed some improvement in headline
manufacturing activity in Jan after the weaker readings from Dec. But an
underlying theme was that new order growth remained weak and headline output
grew as firms worked through backlogs. That said, the broader prelim manufacturing
PMI for Jan was stronger with domestic demand offsetting weaker new export
orders. The services PMI was mostly unchanged.
US existing home sales came in weaker with falls across all
regions and led by larger falls in the Midwest.
The ECB kept rates on hold. While the minutes of the last
meeting in Dec and the Jan press conference have introduced more caution on the
broader environment, the ECB still appears to be fundamentally optimistic about
the economy and the outlook. The data continues to indicate a weaker growth
environment and the Jan PMI’s did little allay concerns about the slow-down.
The broader Eurozone composite PMI showed subdued growth and weaker internal
results such as declining new orders – led by both manufacturing and services.
The BoJ kept rates on hold and reduced the inflation forecast for fiscal year 2019. Data on merchandise trade was weaker with exports declining in Dec. This weakness was mostly driven by Asia with exports to Asia -7% in Dec. Exports to China were -6.9%. The prelim Jan Manufacturing PMI fell to a neutral 50 reading as key indicators of demand (new orders and production) fell into contraction.
Trade data from the Asia region was also released during the
week, further highlighting the weaker trade environment.
Ending on a good note. UK labour force data remained strong.
The Australian labour force data was also strong, although employment growth
has moderated somewhat.
The US Senate and House voted unanimously on Friday to fund the Government until 15 Feb as negotiations on funding for the border wall continue. It will likely take some time to restore the data flow by key agencies.
There are more data releases covered in last weeks review. Use the links on the contents page to navigate to different country sections. Download the review here;
The outlook for w/c 28 January 2019 – While the ‘hard data’ will be important this week, there are several events lining up that could be important to sentiment.
High level US-China trade talks will take place in
Washington 30-31 Jan. President Trump’s key economic advisor, Larry Kudlow has
called this meeting “determinative” (Source:http://www.atimes.com/article/chinese-vice-ministers-heading-to-washington-ahead-of-trade-talks/),
underlining the importance of these particular talks. The 30 Jan is also the
final date for the US to file an extradition order for Huawei CFO Meng. US
authorities have previously confirmed that they will request the extradition
from Canada. China’s Foreign Ministry hit back last week ‘strongly urging’ that
the US ‘correct its mistake’ and cancel the arrest order. The US has continued
to take a hard-line on China outside of these talks and it’s possible that this
highly visible case could impact the sentiment of the talks this week.
The FOMC also meets this week and rates are expected to
remain on hold. Details that the Fed is considering rolling back its balance
sheet run off were reported by the WSJ late last week. As we are in the Fed
blackout period leading up to the FOMC meeting, there has been no confirmation
or denial by the Fed – yet the markets responded positively to the report. The
messaging by the Fed will be important to watch this week.
Finally, there is Brexit. There will be another vote in the
UK Parliament this coming week on a plan that the EU has already (previously)
ruled out. Other amendments will be tabled within the Parliament to request an
extension to 29 Mar deadline. If any of the amendments are successful, this
could lead the way to a second referendum possibly breaking the current
deadlock.
There will also be heavy US treasury supply this week with
the US Treasury settling $333bn in bills, notes and TIPS this week, raising
approx. $31bn in new money. Its also month end, and approx. $14.2bn in Fed
holdings of treasury securities will roll off the Fed balance sheet.
There are several important data releases this week;
US Non-farm payrolls, the first estimate of US Q4 GDP
(possibly delayed), the ISM Manufacturing PMI for Jan and the final Markit
Manufacturing PMI for Jan.
Final Manufacturing PMI’s for Jan will also be released; UK,
Japan and Eurozone.
Australian Q4 CPI
US earnings announcements will continue this week.
Further detail and a calendar of key releases are provided in the briefing document – download it here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Jan 22, 2019
The macro review for w/c 14 January 2019; A much quieter week on the central bank front. Both key speeches this week by ECB President Mario Draghi and NY Fed President John Williams reiterated the central banks’ commitment to deploy their policy tools “if and when” it is needed. In other words, confirming that the central banks will be there to step in if needed.
For the most part, US data was good this week. Several key
reports are missing due to the ongoing government shutdown. While the NY Empire
State Manufacturing Survey weakened, the Philadelphia Fed Business Outlook Survey
showed a stronger result on the back of growth in new orders. US Industrial
production growth grew at a constant pace in the month as utilities output
declined due to warmer than expected weather. The manufacturing component of
industrial production was much stronger than recent US manufacturing data had
suggested – an upside surprise for the month.
US housing had some good news as mortgage applications
increased at a faster rate last week, to be +11% on the same week a year ago.
At the same time, the prelim reading on consumer sentiment in Jan recorded a
large fall in current sentiment and expected conditions.
Eurozone growth was dealt another blow with industrial
production declining in Nov. Declines in production were recorded across many
Eurozone countries and across the major production categories of intermediate
goods, capital goods and consumer goods. The EU trade balance also deteriorated
in Nov and in the YTD as key export growth continued to underperform and import
growth increased at a faster rate, led by categories such as energy.
Earlier in the week, Chinese trade data for Dec confirmed
that both exports and imports had declined in Dec versus a year ago – an important
development underpinning some of the global production and trade weakness.
CPI’s were released across several key economies. Generally, slower growth in energy prices resulted in lower headline growth of the CPI – except in Canada where headline CPI growth accelerated higher in Dec despite slower growth in energy prices (likely to be an issue for the BoC if that trend continues). Measures of core inflation across Germany, the EU, the UK, and Canada all remain stable. The BoJ’s preferred measure of core CPI in Japan (CPI ex-fresh food) slowed even further in Dec. The lower inflationary pressure will give central bankers room to keep policy accommodative as this ‘slower growth’ environment develops.
There are more data releases covered in last weeks review. Use the links on the contents page to navigate to different country sections. Download the review here;
The outlook for w/c 21 January 2019; Of most interest this week will be the Jan prelim PMI’s for the major economies. This should provide some insight into whether production and export weakness has extended into 2019.
The
ECB and BoJ hand down interest rate decisions this week – no change is
expected. It’s possible the BoJ will revise inflation forecasts lower. As the
US Fed will be on board next week, the blackout period for communications is in
effect.
US
data flow will likely continue to be interrupted by the Government shutdown and
this week we will miss the US Durable Goods and New Home Sales reports for Dec.
We will get further reads on regional
manufacturing activity in Jan from the Richmond Fed and Kansas City Fed.
Very
light treasury supply this week. The US Treasury will settle $151b in ST bills,
paying down $9bn.
Labour market surveys for Dec will be out for Australia and
the UK this week. This will be an important indicator for the Australian
economy as the housing market continues to decline and Chinese growth continues
to slow.
After the large defeat of the Brexit Article 50 vote last
week, PM May outlined her plan B for Brexit to the UK Parliament on Monday. This
mostly consists of the UK seeking further concessions from the EU – something that
has already been rejected by the EU.
The
next stage of US-China trade negotiations will continue next week. Expecting
headline risk to remain elevated.
US earnings announcements will continue this week.
Further detail and a calendar of key releases are provided in the briefing document – download it here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Jan 14, 2019
The macro review for w/c 7 January 2019 – The stance of several key central banks has now shifted from removing policy accommodations to a ‘wait and see’ approach as growth concerns increase.
Fed speeches throughout the week and the FOMC minutes,
continued to reinforce the key position of the Fed now; low inflation is
providing room to ‘wait and see’, no set path for rates, won’t hesitate to
change course if policy or normalisation hinders achievement of dual mandate
goals. The FOMC is
likely to see how the data and risks to growth play out on the domestic front
before hiking rates again.
The ECB minutes reflected 1)
a shift in growth sentiment with the balance of risks now moving to the
downside, although still assessed as ‘broadly balanced’, 2) rates “lift-off”
likely pushed out to late 2019 and 3) the introduction of “chained guidance”.
This roughly translates into “removal of accommodation is on hold for now”.
After raising the benchmark
rate several times in 2018, the BoC kept rates on hold in Jan highlighting
further growth concerns for the Canadian economy. Growth is expected to slow in
Q4 and Q1 2019 as a result of lower oil prices. Rates likely to remain on hold until the
impact of lower oil prices and global trade developments becomes apparent on
inflation, spending and the housing market.
One
central bank has been steadily increasing policy accommodations over the last
year; the PBoC.
On
the trade front; little news on the outcomes of the US-China trade talks during
the week, but the meeting has likely set the foundations for higher-level
negotiations in late Jan. Trade talks with Japan and the EU are likely to start
within the next month as negotiating objectives have now been released by the
USTR.
US data was limited due to the ongoing government shut down and we, unfortunately, missed a key indicator of manufacturing activity in Factory Orders. Headline CPI growth slowed to +1.9% on the back of lower energy prices, while growth in core CPI ex-food and energy remained unchanged at +2.2% – led by growth in services. Growth in the non-manufacturing PMI slowed but remains elevated. JOLTS data show openings and hires remain at high levels, but it appears that the strong upward momentum during 2018 has paused.
European industrial data was disappointing while consumer retail sales growth improved. The low-light of the week was the poor German manufacturing orders and industrial production data for Nov – confirming the recent weaker PMI reads and indicating further declines are likely. Of concern is that the decline in new orders and production was no longer limited to foreign markets and durable goods. German trade data showed both exports and imports declined in the month and the overall trade surplus is well below last year.
There are more data releases covered in last weeks review. Use the links on the contents page to navigate to different country sections. Download the review here;
The outlook for w/c 14 January 2019 – US Q4 earnings announcements are likely to be a focus over the next few weeks given concerns over growth.
It
will be a much quieter week on the central bank front. The highlights; ECB’s
Draghi and NY Fed President Williams will give speeches this week.
Treasury
supply will be more moderate this week as the US Treasury settles approx.
$223bn in bills, notes and bonds this week, raising approx. $24bn in new money.
It’s also mid-month and approx. $2.1bn in securities will mature and roll off
the Fed balance sheet.
US
data flow will likely be interrupted by the continued Government shutdown and
this week we will miss the US retail sales data for Dec, housing starts and
business inventories. The housing market index will provide some insight on the
performance of the housing market leading into the end of the year.
CPI’s
will be in focus this week, with key reports for UK, Germany, Eurozone, Japan
and Canada. The reversal of higher energy prices will likely be a key driver of
CPI changes.
Global
manufacturing and industrial growth will be in focus this week with US,
Eurozone and Japan (revised) industrial production data.
The UK vote on Brexit will likely be held this week on 15 Jan. UK retail sales data for Dec should provide a good read on consumer spending/sentiment.
Further detail and a calendar of key releases are provided in the full briefing document – download it here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Jan 7, 2019
The macro review for w/c 31 December 2018 – Several central banks stepped in to calm the markets last week. First, US Fed Chairman Powell made it explicit that the Fed will be flexible and will adjust policy, and significantly, if required. Chairman Powell referenced the ‘tension’ between balancing the markets (and what the shift in bond yields is saying about future growth) and data on the economy. A continued or extended Government shutdown will hinder that data flow.
US data was very mixed. Further slowing in manufacturing
activity, including the larger fall in the ISM manufacturing index, contrasted
with the very strong non-farm payrolls number. The Dec Uni of Michigan Consumer
sentiment survey highlighted that “consumers
reported more negative than positive news about job prospects for the first
time in two years, with the shift widespread”. This is a one-month shift, but
negative news may be starting to play a role.
Second, the PBoC cut the RRR for the fourth time since the
start of 2018 on the back of continued weaker readings of economic activity. The
PBoC’s benchmark interest rate has remained unchanged since 2016.
The range of opinions in the BoJ summary of opinions report was
skewed to a more positive view on the Japanese economy. More candid opinions
stood out claiming that “it cannot be said that the actual condition of
restoration-related demand and production stemming from natural disasters has
been strong”. The BoJ may also further downgrade its inflation forecasts. In
Nov, Japanese industrial production declined in the month (expecting an
increase) and retail sales also declined with annual growth more than halving.
The Dec manufacturing PMI confirmed renewed falls in new export orders with “unfavourable workload growth” cited in markets such
as Nth America, China and Taiwan.
The European PMI’s for Dec continued to disappoint. To some degree, Eurozone results were lower on the back of ongoing French protests. But Italy and Germany PMI’s (manufacturing and now services) slowed even further on the back of weak/declining new orders. Production levels were maintained as firms worked through backlogs.
There are more data releases covered in last weeks review. Use the links on the contents page to navigate to different country sections. Download the review here;
The outlook for w/c 7 January 2019 – Trade talks and the Fed will feature this week.
A US delegation will attend trade talks in China on 7-8 Jan this week. President Trump continues to stoke the fires with optimistic tweets about progress between the two countries. We have been here before and there is a possible headline risk – but a positive outcome is something that could shift sentiment, especially regarding the business outlook in the US.
There are many Fed speeches scheduled for this week including Fed Chairman Powell. The two speeches of most interest will be Chairman Powell at the Economic Club of Washington and Vice Chairman Clarida giving a speech on the economic outlook and monetary policy at the Downtown Association in New York.
The
FOMC Dec minutes will be released this week.
US
data flow will likely be interrupted with the continued Government shutdown. The
CPI report for Dec still looks like it will be released on Friday. CPI, ISM
Non-Manufacturing and Factory Orders (likely delayed) will be the highlights
for the week.
German
data this week should help to confirm the weaker PMI reads with Industrial Production,
New Orders and Trade for Nov. Retail sales for Germany and Europe should
provide a good read on consumer sentiment.
The
BoC interest rate decision is also this week. This is first meeting since
further large falls in the oil price during Dec – will be important for signalling
on growth and rates.
Treasury supply will be very light this week, with the US
Treasury settling approx. $145b in ST bills, paying down approx. $15b. More
moderate supply will likely return next week.
The UK vote on Brexit remains on the radar with a vote now likely during the week of 14 Jan 2019.
Further detail and a calendar of key releases are provided in the full briefing document – download it here;
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Dec 31, 2018
We pick up the new year with a full schedule of data, heavy treasury issuance, Fed speeches and ongoing trade negotiations.
Heavy supply of
US treasuries to be settled this week with the US Treasury settling approx. $298bn
in bill and note auctions throughout the week, raising approx. $42b in new
money.
The partial US
govt shutdown continues amid escalating threats/posturing to shut down the
border with Mexico if funding for the border wall is not approved. Democrats
will take control of the House of Representatives this week on 3 Jan 2019.
US Fed Chairman
Powell will take part in a panel discussion on Friday – looking for any further
signalling on rates from the Fed Chairman.
Data releases
this week keep trade and growth in focus;
US ISM
Manufacturing PMI to provide further insight into US manufacturing momentum
after several weaker regional survey results recently.
US non-farm
payrolls will be released on Friday (despite the partial govt shutdown).
Final versions
of the Dec PMI’s will be released across key economies during the week to also provide
some insight into the extent of export new orders/trade and manufacturing slow-down
especially within the Eurozone, China and Japan.
Trade
negotiations between the US and China are set to continue next week. The 1
March deadline for negotiations remains in place.
The UK vote on Brexit remains on the radar with a vote now likely during the week of 14 Jan 2019.
More detail is provided in the full briefing document. You can download it here;
The Macro Review will be posted next Monday.
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Dec 22, 2018
The most anticipated event of the week was the FOMC meeting.
The FFR was increased for the fourth time this year. The statement of the
decision had an unexpected hawkish tone including retaining the reference to “further
hikes”. Chairman Powell’s news conference, though, emphasised more the downside
risks. At this stage, FOMC participants have revised growth somewhat lower for
2019 and “judge” that there may be a further two hikes in rates in 2019. There
were some important changes to the wording of the decision statement which were
clarified by NY Fed President Williams in his CNBC interview on Friday morning.
US data was mostly good this week. Core PCE growth ticked up
in the latest month, in line with Fed estimates. The third estimate for Q3 GDP
growth was revised slightly lower to +3.4% as personal consumption expenditure
and the contribution of net exports were revised lower. The contribution from
inventories remains high. The latest month of PCE data for Nov indicates that
real spending growth has been somewhat lower so far in Q4 than in Q3.
US housing data had some positive news. Although the
conditions index continued to deteriorate in Nov, existing home sales and new
residential construction increased in the latest month.
One area to watch for is slowing US manufacturing growth. Data this week and over the last few weeks is hinting at slower momentum, especially from Dec. The three regional surveys this week were much softer. Advance durable goods new orders and shipments ex-transports for Nov was softer. In the previous month final durable goods report, core orders & shipments growth had been trending somewhat slower throughout the year. Last weeks industrial production data for manufacturing had growth slowing and the prelim PMI for Dec also showed manufacturing activity growing at a slower pace. Something to watch.
Other interest rates decisions this week; the BoE (concerned
about Brexit), BoJ (inflation not remotely close to targets) and RBA (concerned
banks are tightening credit too much) all kept rates on hold.
The impact of slower global trade was mostly evident in the
monthly Japanese trade data. Japanese export growth slowed to a mere +0.1% as
exports to two (Asia and Western Europe) of the top three Japanese export
markets declined versus last year. The Eurozone trade deficit also increased as
exports and import growth accelerated (but imports grew at a faster pace).
Consumer price data out this week indicates that the impact
of recent growth in energy costs is starting to reverse.
US-China trade talks; a ‘notice of modification of action’ was posted onto the US Federal Register by the USTR on 19 Dec 2018 – confirming that “the rate of additional duty for the products covered by the September 2018 action will increase to 25 percent on March 2, 2019”. This confirms a hard deadline of 1 March 2019 for the US-China Section 301 trade negotiations to be completed by. As we come back from the holiday season, trade negotiation activity will likely ramp up – along with headline risk.
There are more topics/data releases covered in this weeks review. Use the links in the contents page to navigate to different country sections. Download the review here;
The next weekly briefing document will be published next weekend.
As always, comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
Happy holidays and best wishes to you and your family!
