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
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
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
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
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
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
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.
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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
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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.
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Weekly Macro Brief 11June2018
Feedback is welcome. Please send any comments or questions to kim.mofardin@marscapitalpartners.net.
