by Kim | Aug 27, 2018
Macro review w/c 20 Aug 2018 – From Jackson Hole, the US Fed Chairman reiterated his key principal that rate hikes that are too fast or too slow are undesirable. The path for interest rate increases will continue to be gradual and based on the incoming data. The data so far – good jobs and growth numbers and low inflation.
The FOMC minutes provided further insight, especially around yield curve inversion – and highlights the range of opinions that exist regarding how members view yield curve inversion. It’s possible the yield curve could invert in the short-term (already flat) – it’s not clear how the FOMC members will balance “good data” with possibly hiking into an inversion. The next FOMC meeting is 26 Sept and rates are expected to increase.
The RBA minutes continued to highlight that while the next move in rates is likely to be up, there was no strong case for an increase in the near-term.
US-Mexico trade talks appear to be making headway, especially on key issues regarding the easing of the sunset clause requirement. The Canadian Foreign Minister has stated that Canada will re-join NAFTA negotiations once the US-Mexico deal agreed.
US-China negotiations did not appear to produce any further progress on stalled talks.
Brexit talks last week also appeared to have made little headway. The EU and UK negotiators have now made negotiations ongoing to meet key deadlines. The UK parliament returns next week, and key trade and tax bills will be in focus.
Data across the board remains mostly good with a few pockets of weakness;
US flash PMI’s highlighted that services and manufacturing continued to grow, but at a slightly slower pace in August, Durable Goods new orders and shipments declined in July.
Eurozone flash PMI’s highlighted a consistent rate of growth in August – but with a gap between the faster growth of core nations and the slowing growth in the periphery nations.
Japan flash PMI for Manufacturing highlighted a slightly faster pace of expansion led by domestic demand. Export orders have declined for 3 months in a row. CPI increased in July and the core annual rate accelerated slightly.
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 20Aug2018
The outlook for w/c 27 August 2018 – On liquidity, there is heavy treasury issuance this week. Key dates are 30 and 31 Aug. The US Treasury will auction and settle $267b in bills and coupons, raising approx. $46b in new money. The 4wk bill is yet to be announced. It’s month end and $20.9b of securities in the Fed SOMA will mature on 31 Aug – of that, $9b will be reinvested.
Trade – given previous timelines and current progress, it’s possible that a deal between US and Mexico on NAFTA could be announced this week. The restarting of US-China negotiations last week appears to have made little headway so far – awaiting announcement of further rounds of negotiations and/or escalations.
Brexit negotiations will now become ongoing between the UK and the EU. The UK parliament returns from summer recess next week.
Key data this week is focused on growth and CPI;
US – the second estimate of Q2 GDP and PCE and Core PCE prices for July
Eurozone – Final CPI for July and German prelim CPI for Aug
Canada – 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 27Aug2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Aug 20, 2018
Macro review for w/c 13 August 2018 – Positive developments on trade this week. NAFTA talks between the US and Mexico continued possibly with some breakthroughs on new rules on auto trade and agricultural trade. Canada is yet to re-join talks. Talks are set to resume between the US and China later this month. The USTR process for the next tranche of Chinese tariffs continues with public hearings taking place this week.
Growth and spending data remained positive but CPI data points were weaker in the Eurozone and UK.
US data was somewhat positive. Retail sales were stronger in July, but growth was revised lower for June. Much slower growth in industrial production for the start of Q3. Regional data was mixed – a stronger Empire State Manufacturing Survey, but slower growth from the Philly Fed Business Outlook Survey.
Eurozone –flash GDP quarterly growth was unchanged from the previous quarter and the annual rate slowed slightly to +2.2%. Industrial production declined in June after a stronger result in May – declines were recorded across the larger Euro economies. CPI declined in July (with some larger declines across key Euro economies also) but accelerated higher on an annual basis. The annual rate is still influenced mostly by higher energy prices – annual CPI ex energy is growing at a more moderate +1.4%.
UK retail sales data was stronger with sales volume growth accelerating in July – June results revised higher also. CPI growth was zero for the month (goods components declined) and there was no change in the annual rate of 2.3%.
Brexit – no outcomes announced from the lower level talks of last week, little progress made on key points of the withdrawal agreement. An increasing focus on preparedness for Brexit with ‘no deal’ as the UK government will commence release of ‘no deal’ contingency plans starting this week.
The Zew Financial Market report (25 Jun – 9 Jul) highlights that economic expectation indices have fallen across most major economies, but the assessment of current conditions remains broadly positive.
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 13Aug2018
The outlook for w/c 20 August 2018 – The big event for this week will be the Jackson Hole central banking conference/symposium commencing on 23 August.
Liquidity – A light week with the US Treasury possibly paying down $7b (4wk bill auction amount TBA).
Trade – could expect some further breakthroughs on NAFTA (US-Mexico) – both sides claiming a deal possible by the end of August. Awaiting further detail on the US-China trade talks announced last week. The second tranche of tariffs on Chinese imports goes into effect 23 August.
High-level Brexit talks recommence this week between the UK and EU – 21 August. The UK government will commence release of ‘no deal’ contingency plans this week.
A relatively quiet data week – preliminary August PMI’s will be released, US Durable Goods Orders, Japanese CPI, detailed German Q2 GDP and Canadian Retail Sales.
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 13Aug2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
by Kim | Aug 13, 2018
Macro Review for w/c 6 August 2018 – Starting with central bank meetings – the RBA and RBNZ both kept rates on hold last week. The BoJ summary of opinions report highlighted little differences of opinion on recent MP implementation changes. One opinion stood out – “Under the current policy, the possibility of the inflation rate increasing gradually toward 2 percent is low”.
US data continues to support Fed rate trajectory – CPI continued to grow with CPI ex fuel and food accelerating from 2.3% to 2.4% in June. Services growth (ex-energy services) remained at 3.1%. Consumer credit pulled back in the latest month but was higher overall in Q2 versus Q1. JOLTS, especially job openings, remain at historical highs.
Japan prelim Q2 GDP growth was stronger, driven higher in the quarter by private consumption. What stood out was the acceleration in the growth of compensation of employees in the quarter. Net exports detracted from growth on the back of slower export growth.
UK prelim Q2 GDP was also stronger. From the expenditure perspective, a large adjustment was applied to changes in inventories, making investment look stronger. Services continued to grow and contributed most to overall GDP growth. Construction reversed last quarters decline but was offset by a decline in total production (incl manufacturing).
On the trade front, the USTR confirmed that tariffs on the remaining $16b of the original $50b of Chinese imports would go into effect from 23 August 2018.
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 06August2018
The outlook for w/c 13 August 2018 – A relatively heavy week of treasury issuance with the US Treasury raising approx. $51b in new money (4wk bill TBA). Its also mid-month and $23b in US Fed holdings of securities will mature – $10b of that will be reinvested.
Trade – NAFTA talks will continue between US and Mexico this week – both sides claiming a deal possible by the end of August.
Official Brexit negotiations recommence this week between the UK and EU.
Growth, retail sales and inflation data are in focus this week;
- US Retail Sales for July and a further read on industrial production and regional manufacturing.
- Eurozone Q2 prelim GDP, CPI for July, Industrial production and sentiment.
- Key UK data – Retail Sales and CPI for July.
- Australian Labour Force data for July and the Q2 Wage Price Index.
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 13Aug2018
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
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
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
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
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
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
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
