Mon, Dec 09, 2019 @ 04:33 GMT

Canada employment dropped -71.2k, unemployment rate surged to 5.9%

    Canada employment dropped -71.2k in November, well below expectation of 10.0k. Unemployment rate surged to 5.9%, up from 5.5% and was way worst than expectation of 5.5%. Employment declined in Quebec, Alberta and British Columbia, while it was little changed in the other provinces.

    In the goods-producing sector, fewer people worked in manufacturing (-28k) and in natural resources (-6.5k), with most of the declines in each of these industries observed in Quebec. The employment decrease in the services-producing sector was mostly accounted for by public administration, where the number of workers fell by -25k.

    Full release here.

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    US non-farm payrolls rose 266k, unemployment rate dropped to 3.5%

      US Non-Farm Payroll report showed 266k growth in November, well above expectation of 183K. Job growth averaged 180k per months thus far in 2019, versus 223k monthly average in 2018. Manufacturing jobs rose 54k, versus -43k contraction back in November.

      Unemployment rate dropped to 3.5%, down from 3.6%, better than expectation of 3.6%. That also matches the lowest since 1969Participation rate was little changed at 63.2%. Average hourly earnings rose 0.2% mom in November, below expectation of 0.3% mom.

      Full release here.

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      Dollar index’s medium term outlook depends on non-farm payrolls today

        US Non-Farm Payrolls report will be the major focus today. Markets are expecting 183k job growth in November. Unemployment rate is expected to be unchanged at 3.6%. Average hourly earnings growth is expected to pick up to 0.3% mom. Dollar dropped sharply this week as poor ISMs pointed to weaker outlook ahead, and revived speculation of Fed cut next year. A strong set of NFP data today is needed to reverse the greenback’s fortune. Otherwise, selloff might accelerate further.

        Other job related data released have been mixed to slightly negative. ISM manufacturing employment dropped from 47.7 to 46.6, suggesting deeper contraction in manufacturing jobs. ISM services employment rose to 55.5, up from 53.7. ADP private sector jobs grew just 67k. The details were also in-line with ISMs’, with goods-producing jobs contracted -18k. Service-providing jobs rose 85k. Four-week moving average of initial claims rose 3k to 217.75k.

        Current development now raised the chance that Dollar index’s recovery from 97.10 was only a corrective rise, and has completed at 98.39. Next focus will be 97.10 support. Break there will also have 55 week EMA firmly taken out. In that case, a medium term should be confirmed at 99.66. And, a medium term correction should at least be started towards 38.2% retracement of 88.30 to 99.66 at 95.32.

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        Japan household spending dropped -5.1%, due to sales tax hike

          A batch of economic data is released from Japan today. Overall household spending dropped -5.1% yoy in October, worse than expectation of -3.0% yoy. The decline in spending was the first time in 11 month, and biggest fall since March 2016. It’s also a sharp reversal from the 9.5% rise in September, fastest growth on record.

          Apparently, the September and October figures were results of the sales tax hike in October, from 8% to 10%. Additionally, impacts from typhoon also accelerated the decline in spending. Overall spending might contract as a whole Q4, before some moderate pick up in Q1.

          Also released, labor cash earnings rose 0.5% yoy in October, above expectation of 0.2% yoy. Leading indicator dropped -0.1 to 91.8, below expectation of 92.0.

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          Australia AiG construction dropped to 40, 15th straight month of contraction

            Australia AiG Performance of Construction Index dropped to 40.0 in November, down from 43.9. The result indicates sharper decline in the construction industry on aggregate. It’s also the 15th straight month of contractionary reading. As AiG said, “this on-going weakness in business conditions was associated with a steeper fall in employment and a continued reduction in deliveries from suppliers.”

            Full release here.

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            US initial jobless claims dropped to 203k, trade deficit narrowed to $47.2B

              US initial jobless claims dropped -10k to 203k in the week ending November 30, below expectation of 215k. Four-week moving average dropped -2k to 217.75k.

              Continuing claims rose 51k to 1.693m in the week ending November 23. Four-week moving average of continuing claims was unchanged at 1.681m.

              US trade deficit dropped -7.6% mom to USD -47.2B in October, smaller than expectation of USD -48.7B. Imports dropped -1.7% mom to USD 254.3B. Exports dropped -0.2% to USD -207.1B.


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              BoC Lane: No reason to move in step with Fed, hinting at no rate cut

                BoC Deputy Governor Timothy Lane said in a speech enduring uncertainty of US-China trade relations has “already done some damage” to the global and Canadian economy. But “Canada also has notable strengths, and inflation remains on target”. He added, “Our strong labour market points to sources of growth, such as computer system design and other professional services, education, health care and financial services. It is because of this strength amid the turmoil that we say Canada is resilient, although it is not immune.”

                Lane also noted Fed has cut interest rate three times this year. But he emphasized “There is no reason for the Bank of Canada to move in step with the Fed. On the contrary, the experience of the past decade shows that Canada and the United States have followed different roads, reflecting differences in our economic conditions.”

                The comments reinforced the message from yesterday’s BoC statement. That is, the central is on hold, with a neutral bias.

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                Eurozone retail sales dropped -0.6% in Oct, worse than expectations

                  Eurozone retail sales dropped -0.6% mom in October, worse than expectation of -0.4% mom. Volume of retail trade decreased by -1.1% mom for non-food products, while food, drinks and tobacco increased by 0.3% mom and automotive fuels by 0.6% mom.

                  EU28 retail sales dropped -0.4% mom. Among Member States for which data are available, the largest decreases in the total retail trade volume were registered in Germany and Ireland (both -1.9%) and Finland (-1.2%). The highest increases were observed in Portugal (2.1%), Poland (0.9%), Belgium and Romania (both 0.8%).

                  Full release here.

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                  Eurozone GDP grew 0.2% qoq in Q3, employment rose 0.1% qoq

                    Eurozone GDP grew 0.2% qoq, 1.2% yoy. Household final consumption expenditure rose 0.5% qoq. Gross fixed capital formation rose 0.3% qoq. Exports rose 0.4% qoq. Imports rose 0.6% qoq. Employment grew 0.1% qoq, 0.9% yoy.

                    Full release here.

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                    China insists on tariff rollbacks as condition for US trade deal

                      China insists on tariff rollbacks if a trade deal with US is to be reached. Ministry of Commerce spokesman Gao Feng said today that both side are maintaining close communications. But he emphasized “the Chinese side believes that if the two sides reach a phase one deal, tariffs should be lowered accordingly.” For now, he added there is no detail to be released.

                      The “natural deadline” for phase one US-China trade agreement is just 10 days away on December 15. On the US sides, the message conveyed was clear. If nothing happens between now and then, the scheduled tariffs will take effect. Two core issues are holding up the negotiations for now, China’s agricultural purchases and tariff rollbacks.

                      It’s believed that Chinese President Xi Jinping is in a tough political position after US passed the Hong Kong Human Rights and Democracy Act and the Uighur Act of 2019. There is tremendous domestic pressure on Xi that he couldn’t sign a trade deal without some concessions from the US for him to claim victory.

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                      BoJ Harada: Raising interest rates would just throw us back

                        Bank of Japan board member Yutaka Harada, a known dove, said in a speech that, the “current low interest rates are partly attributable to the deflationary monetary policies pursued in the past.” “The only way out is to maintain the current accommodative monetary policy in order to achieve sustained expansion of economic activity until we see increases in prices and interest rates.”

                        He also said, “banks’ low profitability is caused by the structural problem that they are accumulating more deposits than they can lend and the banking sector as a whole therefore will not be able to maintain its current size”. And, “raising interest rates would not solve the problem.”

                        Instead, “raising interest rates would lead to the following: an appreciation of the yen; falling stock prices; declines in exports, investment, consumption and employment; and the reemergence of the employment ice age.” That would “just throw us back”.

                        His full speech here.

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                        Australia retail sales stagnate in Oct, trade surplus shrank

                          Australia retail sales rose 0.0% mom in October, much worse than expectation of 0.3% mom. There were falls for clothing, footwear and personal accessory retailing (-0.8%), department stores (-0.8%) and household goods (-0.2%). They were were offset by rises in cafes, restaurants and takeaway food services (0.4%) and food retailing (0.1%). Other retailing was relatively unchanged (0.0%).

                          Across the states, Victoria (-0.4%), New South Wales (-0.2%), and South Australia (-0.5%) fell, while Queensland (0.4%), Tasmania (1.4%), the Northern Territory (2.3%), Western Australia (0.2%), and the Australian Capital Territory (0.3 per cent) rose in seasonally adjusted terms in October 2019.

                          Also in October, exports of goods and services dropped AUD -2.2B to AUD 40.8B. Imports rose AUD 0.1B to AUD 36.2B. Trade surplus narrowed to AUD 4.5B, below expectation of AUD 6.5B.

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                          US oil inventory dropped -4.9m, WTI staying is corrective rise from 50.86

                            US commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) dropped -4.9m barrels in the week ending November 29, larger than expectation of -1.6m barrels decline. At 447.1m barrels, U.S. crude oil inventories are about 3% above the five year average for this time of year.

                            WTI crude oil’s choppy rise from 50.86 is still in progress. With 54.77 support defended, WTI could still spiral higher. However, upside momentum is not convincing as seen in daily MACD. The structure of the rise is also clearly corrective, thus, strong resistance should be seen below 63.04 to bring reversal to extend medium term sideway trading. on the downside, firm break of 54.77 support would target 50.86 support instead.

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                            US ISM non-manufacturing dropped to 53.9, sharp fall in production

                              US ISM Non-Manufacturing Composite dropped to 53.9 in November, down from 54.7, missed expectation of 54.5. Looking at some details, production dropped sharply by -5.4 to just 51.6. However, new orders rose 1.5 to 57.1. Employment also rose 1.8 to 55.5.

                              ISM’s Anthony Nieves said: “The non-manufacturing sector had a slight pullback in November. The respondents hope for a resolution on tariffs and continue to be hampered by constraints in labor resources.”

                              Full release here.

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                              BoC stands pat, statement much more upbeat

                                BoC kept overnight rate unchanged at 1.75% as widely expected. Canadian Dollar jumps as the central bank sounds more upbeat than in October. Most notably, in the accompanying statement, the language regarding resilience of Canada’s economy being tested was removed. Also, the monitoring of global slowdown spreading beyond investment was omitted.

                                Instead, BoC concluded today by saying “Based on developments since October, Governing Council judges it appropriate to maintain the current level of the overnight rate target. Future interest rate decisions will be guided by the Bank’s continuing assessment of the adverse impact of trade conflicts against the sources of resilience in the Canadian economy – notably consumer spending and housing activity. Fiscal policy developments will also figure into the Bank’s updated outlook in January..”

                                Back in October, BoC said, “All things considered, Governing Council judges it appropriate to maintain the current level of the overnight rate target. Governing Council is mindful that the resilience of Canada’s economy will be increasingly tested as trade conflicts and uncertainty persist. In considering the appropriate path for monetary policy, the Bank will be monitoring the extent to which the global slowdown spreads beyond manufacturing and investment. In this context, it will pay close attention to the sources of resilience in the Canadian economy – notably consumer spending and housing activity – as well as to fiscal policy developments.”

                                Full statement here.


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                                US ADP jobs grew only 67k, goods producers still struggled

                                  US ADP report showed 67k job growth in private sector only, well below expectation of 138k. Looking at some details, small businesses added 11k jobs. Medium businesses added 29k. Large businesses added 27k. By sector, goods-producing jobs contacted -18k. Service-providing jobs rose 85k.

                                  “In November, the labor market showed signs of slowing,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “The goods producers still struggled; whereas, the service providers remained in positive territory driven by healthcare and professional services. Job creation slowed across all company sizes; however, the pattern remained largely the same, as small companies continued to face more pressure than their larger competitors.”

                                  Mark Zandi, chief economist of Moody’s Analytics, said, “The job market is losing its shine. Manufacturers, commodity producers, and retailers are shedding jobs. Job openings are declining and if job growth slows any further unemployment will increase.”

                                  Full release here.

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                                  China blasts US Uighur Act, set no timeline for trade deal

                                    In expected fashion, China blasted US House passage of the Uighur Act of 2019 with fierce reaction. Foreign Ministry Spokeswoman Hua Chung Ying criticized US lawmakers as “too ignorant, too shameless and too hypocritical”. And, “any wrong words and deeds must pay the due price.” She added that China will not set any timeline or deadline for a trade deal with the US. And it would take “decisive”countermeasures to defend its interests against US protectionism.

                                    On the other hand, Bloomberg reported, quoting unnamed source, that a phase-one trade deal is still expected before December 15 natural deadline by US negotiators. The known issues of guarantee on China’s purchase of US farm goods, and tariff rollbacks, are the only outstanding issues.

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                                    UK PMI services finalized at 49.3, all PMIs suggest -0.1% GDP contraction

                                      UK PMI Services was finalized at 49.3 in November, down from October’s 50.0. PMI Composite was finalized at 49.3, down from 50.0. Markit noted marginal fall in business activity. New work decreased at the fastest pace since July 2016. Input cost inflation also eased to the lowest level for over three years.

                                      Tim Moore, Economics Associate Director at IHS Markit, which compiles the survey:

                                      “November’s PMI surveys collectively suggest that the UK economy is staggering through the final quarter of 2019, with service sector output falling back into decline after a brief period of stabilisation.

                                      “Lacklustre demand remains centred on business-to-business spending. Service providers have attributed the recent soft patch to delayed decision-making on new projects until greater clarity emerges in relation to the domestic political landscape. Sales to export markets were hard-hit in November, as signalled by the steepest fall in new work from abroad for more than five years.

                                      “Service providers reported concerns that consumer appetite for big-ticket purchases has begun to falter, while those reliant on consumer footfall and discretionary spending noted the negative impact of unusually wet weather in November.

                                      “Lower manufacturing production alongside an absence of growth in the service economy means that the IHS Markit/ CIPS Composite Output Index is consistent with UK GDP declining at a quarterly rate of around 0.1%.”

                                      Full release here.

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                                      Eurozone PMI composite finalized at 50.6, suggests just 0.1% GDP growth in Q4

                                        Eurozone PMI Services was finalized at 51.9 in November, down from October’s 52.2. PMI Composite was finalized at 50.6, unchanged from last month’s reading. Looking at some member states, Germany PMI Composite was finalized at 49.4, hitting a 2-month high but stayed below 50. Italy PMI Composite dropped to 49.6, 7-month low. France PMI Composite dipped to 2-month low of 52.1 but stayed comfortably above 50.

                                        Chris Williamson, Chief Business Economist at IHS Markit said:

                                        “The final eurozone PMI for November came in slightly ahead of the earlier flash estimate but still indicates a near-stagnant economy. The survey data are indicating GDP growth of just 0.1% in the fourth quarter, with manufacturing continuing to act as a major drag. Worryingly, the service sector is also on course for its weakest quarterly expansion for five years, hinting strongly that the slowdown continues to spread.

                                        “New orders have not shown any growth since August, underscoring the recent weakness of demand, with sharply declining orders for manufactured goods accompanied by substantially weaker gains of new business into the service sector. Expectations are also among the lowest since the tail end of the sovereign debt crisis in 2013, as firms worry about trade wars, Brexit and slowing economic growth both at home and globally.

                                        “The near-stalling of the economy has been accompanied by some of the weakest price pressures we’ve seen in recent years, which threatens to keep inflation well below the ECB’s target in coming months and adds to the likelihood of further policy stimulus early next year.”

                                        Full release here.

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                                        China Caixin PMI composite hits 21-month high, domestic and foreign demand improved

                                          China Caixin PMI Services rose to 53.5 in November, up from 51.1, beat expectation of 51.2. PMI Composite rose to 53.2, up from 52.0, highest in 21 months. Markit said that both manufacturers and services providers see solid increases in output. Overall inflationary pressures remain weak.

                                          Commenting on the China General Services PMI™ data, Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group said: “China’s economy continued to recover in November, as domestic and foreign demand both improved. But business confidence remained subdued, reflecting the impact from uncertainties generated by the China-U.S. trade conflicts. That will restrain a recovery in economic growth. The trade dispute is the major reason behind the slowing economic growth this year, and will become a key factor affecting the stabilization and recovery of China’s economy next year.”

                                          Full release here.

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