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!
by Kim | Dec 17, 2018
Macro review for w/c 10 December 2018 – US data out this week was positive and likely supportive of another hike in Dec. JOLTS data highlighted that job openings and hires remain close to respective recent peaks, while layoffs and discharges were unchanged in the month and remain at low levels. Headline PPI and CPI growth eased on lower energy prices. Core PPI remained elevated (and is now above the headline rate) and core CPI grew at a slightly faster rate (and is now growing on par with the headline rate), suggesting underlying inflation pressure remains. Even though retail sales growth slowed in Nov, spending growth remained elevated. Retail sales were also revised higher for Oct.
US industrial production (IP) was stronger in Nov led by mining and utilities- annual IP growth now at +3.8% just shy of the high point for the year. Manufacturing industrial production has been flat to down over the last two months and annual growth has slowed to 1.8%. Prelim PMI for Dec indicate slower growth across services and manufacturing.
The UK is in a deadlock over Brexit. The key vote on the withdrawal agreement was postponed during the week and the way forward for the UK is unclear. Data out this week indicated resilience in the economy despite the Brexit disruption. The labour market survey showed improved employment growth, while participation increased. Unemployment has started to increase somewhat over the last two quarterly reports. The monthly GDP growth slowed slightly.
Growth concerns remain within Europe. The ECB rates decision this week was as expected – key rates remain on hold while confirming that net asset purchases will end this month. The ECB assessment of current conditions confirm concerns over weaker external demand and country/sector specific issues but are offset by stronger domestic demand. GDP growth targets were revised slightly lower. While industrial production growth stabilized in Oct, the prelim PMI’s for Dec indicate continued weaker growth.
Q3 GDP decline in Japan was revised lower, but there are signs of a stronger end to the year. Prelim Manufacturing PMI for Dec stabilized even though new export orders continued to decline. The final industrial production data for Oct confirmed a stronger rebound after the weaker lead up to Sep. Forecasts are for continued growth in industrial production in Nov & Dec.
In Australia, the house price index confirmed that National house prices declined at an accelerated pace in Q3 at -1.9%. This was the second consecutive annual decline house prices at a National level. Despite a small rebound in housing finance in Oct, bigger picture declines in housing credit remain in place. Syd and Melb so far leading the way with the bigger declines in credit.
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 outlook for w/c 17 December 2018 – The main event for this week will be the US FOMC meeting. At this stage, the probability of a rate hike is high at 77%. The FOMC statement/press conference will be of interest as we look for indications of what to expect in this post-forward guidance world.
In the US this week, the focus will be on the PCE price index, Durable Goods and housing data.
There will be a moderate level of treasury issuance this week with the US Treasury settling approx. $223b in US Treasury securities and raising approx. $34b in new money.
The UK remains in focus this week with the heightened uncertainty surrounding Brexit. The BoE meets this week on interest rates and it will be important to see how the BoE responds to the latest developments/deadlock on Brexit. CPI data for the UK will be out before the BoE meeting. UK retail sales will provide some indication on changes in consumer sentiment.
The BoJ also meets this week. Japan National CPI will be released after the BoJ meeting.
The Eurozone and Japanese trade data will be in focus as we continue to track the impact of slower trade.
The Australian labour market survey will be out this week. This is an important indicator for the economy and how it might fare amid the house price correction. So far, employment growth has remained strong.
Further detail and a calendar of key releases is 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 10, 2018
Macro review for w/c 3 December 2018 – There has been a large shift in the growth narrative over the last few weeks. Increased emphasis has been placed on the likelihood of slower growth in the near-term outlook due to yield curve inversion, fading stimulus and the broader context of slowing global momentum. More dovish Fed statements have started to re-shape the expectations for the path of rate hikes– this is what the Fed signalled it wanted to do in the minutes last week (i.e.no longer follow a ‘gradual path’ of rate hikes).
Several Fed Presidents have been advocating that the low inflation print over the last few months gives the Fed space to pause and reassess. Political pressure has also been mounting on the Fed to slow the rate of increases.
The outcome of the US-China G20 sideline meeting was used to project confidence for the path forward for trade negotiations. But uncertainty and headline risk around trade and tariffs remains. The USTR has confirmed a hard deadline of 1 Mar 2019 to conclude negotiations to avert an intensifying trade war.
US data this week shows that the economy continues to do well. The ISM’s indicate continued high rates of expansion across manufacturing and non-manufacturing sectors. Factory orders headline data were lower but highly influenced by volatile transports. Growth in core (ex-transports) new orders and shipments have been slowing (growing at a slower rate) throughout the year. Non-farm payroll growth was lower in the month, but the household survey shows that the higher level of employment growth continues to ‘absorb’ new/returning workers to the labour force and reduce unemployment. Avg wages continue to grow. On the more interest rate sensitive parts of the economy; consumer credit growth continued to accelerate while motor vehicle sales were down slightly.
Outside of the US, there is growing caution about growth.
The BoC minutes clearly stress the concern of the potential negative impact on the Canadian economy from the oil price ‘shock’ of the last few weeks as well as generally slower momentum going into Q4.
The Aus GDP Q3 print was much lower than expected. There is now a growing focus on slower growth amid a house price correction.
The ECB has previously stated that it will closely watch the data leading up the Dec meeting. Data this week suggests that the weakness is enduring. Eurozone PMI data indicated that expansion in both manufacturing and services activity continues to slow – led by core Eurozone countries. Production data in Germany was mixed – new orders remain lower than last year, but production growth had improved over the last two months. Eurozone GDP growth was confirmed at +0.2% and employment growth has similarly slowed to +0.2% in Q3.
Finally, Chinese trade data was well below expectations with exports and imports growing at a much slower pace. This lower level of activity is likely to continue to have far reaching effects throughout the global economy.
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 (hit the back button on your browser to return to the site);
The outlook for the w/c 10 December 2018 – This week there will likely be a rare paydown by the US Treasury. The US Treasury will auction and settle $145b in ST bills this week, creating a net paydown of $20bn. The US Treasury will also auction $78b in 3/10/30yr securities, raising approx. $54b in new money – these will settle next week. There are no Fed holdings of securities that will mature this week.
UK Brexit will be a key focus this week with the UK Parliament expected to vote on 11 Dec.
Prelim PMI’s for
Dec are out this week for Japan, Eurozone and the US providing a first glimpse
at momentum going into the last month of Q4 and the last month of the year.
For the US this week, the focus will be on the PPI and CPI reports as well as retail sales and industrial production.
The ECB rates decision is this week. The ECB will provide a further assessment of current economic conditions in the Eurozone. It is still expected that Net Asset Purchases will reduce to zero at the end of the month.
A final read on Japanese Q3 GDP will be out this week. The important industrial production data will also be confirmed for Oct.
We’ll get further signs of the slowing housing market in Australia with the Q3 house price index and Oct housing lending data out this week.
The US trade deal negotiations process continues this week. The first public hearing will take place on Monday 10 Dec for the US-Japan trade negotiations. A public hearing for the US-Europe trade negotiations was scheduled for 14 Dec but has not yet been confirmed by the USTR.
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);
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Dec 3, 2018
The macro review for w/c 25 November 2018 – Despite a positive assessment of current conditions, a point in Chairman Powell’s speech during the week was interpreted as a change to the view of where we are in the hiking cycle – shifting from ‘a long way from neutral’ to ‘close to neutral’. That said, the FOMC minutes suggest that a further rate hike is likely in Dec. After that, policy will change if incoming data ‘prompts a meaningful reassessment of the outlook’ rather than follow the ‘gradual increases’ path. Expect to see this wording change in the FOMC statements.
Data this week indicated stronger growth in real personal consumption expenditure and real disposable personal income. The Oct core PCE price index growth was lower and is now outside of the lower end of the current FOMC projection range for inflation. This is not likely to represent a material change just yet, especially given the stronger consumption/income data. The regional surveys continue to record price and wage pressures.
On more interest-rate sensitive sectors; new home sales continued to fall. House prices slowed on an annual basis but were somewhat firmer in the month to month change.
ECB Draghi continued to err on the side that current European weakness is transitory. Net asset purchases are still likely to finish at the end of Dec. The prelim Euro area and German CPI growth slowed somewhat.
Japanese industrial production bounced back strongly in Oct. While the forecasts are for further increases in Nov and Dec, the Prelim PMI for Nov suggests that manufacturing growth continued to slow again, including weaker new orders.
Declines in private capex and construction for Australia are likely to detract from GDP growth in Q3.
The meeting between Presidents Trump and Xi has been broadly positive. The outcome was an agreement to move forward to address key issues on tariffs, IP protections and the trade imbalance. No further tariffs/escalations will be applied while negotiations take place. There is a 90-day window for discussions. The US will also be kicking off trade negotiations with Japan, Europe and the UK during that time.
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 (hit the back button on your browser to return to the site);
Weekly Macro Review 25Nov2018
The outlook for w/c 3 December 2018 – It’s going to be a relatively lighter week for treasury issuance – the US Treasury will auction and settle approx. $171b in short-term bills, raising approx. $11b in new money. The 4wk and 8wk bill amounts are yet to be announced.
This week, Chairman Powell testifies on the US Economic Outlook to the Congress Joint Economic Committee. We’ll be looking for further signalling on the economic outlook and possibly any commentary on the weaker core PCE inflation growth from last week. There are several other FOMC member speeches this week. The key US data release this week will be non-farm payrolls. Also; the ISM reports, PMI’s and mortgage applications.
PMI’s will be released this week for the US, Europe, UK and Asian economies – helping to gain a handle on growth momentum in Q4.
There is a large amount of European data out this week and will be an important follow-up to answering whether current weakness is transitory in nature. This will feed into the ECB assessment at the Dec rate meeting.
Rates decisions for the RBA and BoC this week.
Australian Q3 GDP and retail sales data this week. We’ll be looking for further signs of impact from the slowing housing market.
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 03Dec2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Nov 24, 2018
The macro review for w/c 19 November 2018 – Global growth remained in focus last week.
In the US, the question is whether the Fed will pause rate hikes. Prelim PMI’s for Nov indicated growth had slowed across manufacturing and services. The advance durable goods orders report for Oct had a large headline decline for new orders. This was partly because of large transport orders over the last few months, but there is some evidence that growth in ‘core’ orders have slowed somewhat.
Data on housing was a little mixed, but still shows that housing continues to slow. The housing market conditions index in fell relatively hard in Nov. But the Oct existing home sales recorded the first monthly increase in six months. New residential construction continues to slow.
The ECB minutes confirmed that current European data was weaker than had been expected. The Dec ECB meeting will be an important opportunity, with more data, to determine whether the current weakness is transitory or more persistent in nature.
Data out this week for Europe continues along the slowing theme. Prelim PMI’s highlight growth had slowed further in Nov – across both manufacturing and services in both core and periphery countries. Output growth in manufacturing is almost neutral and new orders declined. In Germany, both services and manufacturing growth continued to slow with manufacturing new orders and export orders declining.
The decline in German Q3 GDP was confirmed. The largest contributor was the decline in exports. But household consumption also contributed to the decline. The positive change in inventories offset the declines to a large degree.
The Japanese trade balance deteriorated in Oct. While exports grew at a faster rate (than in Sep), imports grew faster. CPI growth ex fresh food remained unchanged at 1%. Energy prices continue to impact CPI growth.
The Brexit agreement was approved at the EC meeting on 25 Nov. The UK Parliament is expected to vote on the deal on 12 Dec 2018.
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 (hit the back button on your browser to return to the site);
Weekly Macro Review 19Nov2018
UPDATED – Outlook for w/c 25 November 2018 – A very full week of events, treasury issuance, Fed, ECB, BoE speeches and data releases.
The week kicks off early with the special EC summit on 25 Nov to finalise and formalise the Brexit agreement. The draft agreement then needs to be approved by both sides and there is still much uncertainty regarding the direction of the Brexit agreement through the UK Parliament.
It’s going to be an extremely heavy week for treasury issuance – the US Treasury will auction and settle approx. $285b in US Treasury securities, raising approx. $80.8b in new money. The 4wk and 8wk bill announcements are TBC. Its also month end and $24.9b in treasury securities will mature on the Fed balance sheet of which $12.3b will be reinvested.
The G20 Leaders’ Summit commences at the end of the week with a full week of meetings leading up that event. Presidents Trump & Xi are expected to meet on the sidelines regarding trade. Recent reports/statements/comments (posturing) are setting a more adversarial tone leading up to the meeting.
In the US this week, there will be a relatively full agenda of Fed speeches, included Chairman Powell at the Economic Club in NY. As we move into the realm of ‘no forward guidance’ we’ll be looking for signalling on the future path of rates. FOMC minutes will also be released this week. Data releases of note include the second estimate for GDP, house price data and PCE price index data.
Although there is no formal announcement, expect some US headlines regarding retail sales/traffic results regarding US Black Friday/Cyber Monday.
Prelim Japanese Industrial production this week will be an important follow-up on recent poor results. The expectation is for higher industrial production in Oct.
Eurozone and Germany CPI data.
ECB Draghi and BoE Carney speeches on Monday.
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 25Nov2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
