Sun, Jan 19, 2020 @ 07:11 GMT

US housing starts has strongest gain since 2016, industrial production dropped -0.3%

    US housing starts jumped 16.9% mom to 1.61m annualized rate in December, well above expectation of 1.38m. That’s the largest percentage gain since October 2016. Building permits dropped -3.9% mom to 1.42m, below expectation of 1.47m.

    Industrial production dropped -0.3% mom in December, below expectation of 0.0% mom. Capacity utilization dropped to 77.0%, below expectation of 77.2%.

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    Fed Bullard could wait and see through 2020 on interest rates

      St. Louis Fed President James Bullard indicated he’s comfortable to wait for the impacts of the three rate cuts last year before deciding the next month on interest rates. He told Reuters, “we eased substantially in 2019” and, “we will see how much impact we have in the first half of 2020 and probably all the way through 2020, and then we will see where we are.”

      He also noted that 2019 was “a year where we really came to grips with the idea that we were not going to go to 1990s or 2000 level interest rates in the United States.” “Not only did we quit trying…but we turned around and went the other way.”

      For 2020, Bullard believes there could be positive surprise. If trade uncertainty lifts, US “might grow faster than 2019, and it is that kind of dynamic that would lead us back to a better expected inflation environment”.

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      Eurozone CPI finalized at 1.3% in Dec, services inflation led

        Eurozone CPI was finalized at 1.3% yoy in December, up from November’s 1.0% yoy. the highest contribution to the annual euro area inflation rate came from services (+0.80%), followed by food, alcohol & tobacco (+0.38%), non-energy industrial goods (+0.12%) and energy (+0.02%).

        EU inflation was at 1.6%, up from 1.3% yoy a month ago. The lowest annual rates were registered in Portugal (0.4%), Italy (0.5%) and Cyprus (0.7%). The highest annual rates were recorded in Hungary (4.1%), Romania (4.0%), Czechia and Slovakia (both 3.2%). Compared with November, annual inflation fell in two Member States, remained stable in three and rose in twenty-three.

        Full release here.

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        UK retail sales dropped -0.8%, ex-fuel sales dropped -0.6%

          UK retail sales contracted sharply in December. Headline sales dropped -0.8% mom versus expectation of 0.8% rise. Ex-fuel sales dropped -0.6% mom versus expectation of 0.5% rise. “Anecdotal evidence from a number of stores stated that goods did not sell as well as expected,” the ONS said.

          In the three months to December, both the amount spent and quantity bought decline, by -0.9% and -1.0% respectively. More importantly, from three-month to three-month respectively, sales hasn’t grown since October.

          Full release here.

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          EU Chapuis: Managed trade, quantitative targets, bilateral deals are not what a global world needs

            Nicolas Chapuis, EU ambassador to China, said “the fact that trade tensions may be reduced, thanks to the U.S.-China deal is good news”. China’s promises on intellectual property issues will benefit other trading partner as well.

            However, he warned that “managed trade, quantitative targets, bilateral deals” are “not what a global world needs.” “We do not like bilateral arrangements in globalization. Of course, the U.S. is entitled to any deal it wishes with China. But if it is not WTO compatible, then we have an issue”, he added.

            Also, EU is taking a “different approach” than the US with China. Chapuis said “we think that policy of engagement, clarity, the possibility to strike smart deals, to take stock of China’s innovation policies and formidable economy of this country is of interest to us and engagement rather confrontation is the right path.”

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            China GDP grew 6.0% in Q4, 6.1% in 2019 overall

              China’s GDP grew 6.0% yoy in Q4, matched market expectations. Overall growth in 2019 was at 6.1%, slowed from 2018’s 6.6%. That’s the slowest annual growth since 1990. In December, industrial production grew 6.9% yoy, above expectation of 6.2% yoy, strongest pace in nine months. Retail sales rose 8.0% yoy, above expectation of 7.9% yoy. Fixed asset investment rose 5.4% ytd yoy, above expectation of 5.2%.

              The set of data suggests stabilization in the Chinese economy. Yet, there is question regarding the sustainability, not to mention the chance of a rebound. US-China trade deal phase one should provide some short-term support. But uncertainties lie in the medium to long term we core issues to be resolved with the US in phase two negotiations. At the same time, large chunk of the tariffs remains in place.

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              New Zealand BusinessNZ manufacturing index dropped to 49.3

                New Zealand BusinessNZ Manufacturing Index dropped to 49.3 in December, down from 51.2. That’s the second consecutive decrease and the lowest reading since September. NZ Senior Economist, Craig Ebert said that “the December result was disappointing.  After a couple of months flirting with positivity, the PMI dipped back just below the breakeven line again”.

                Looking at some details, production dropped from 49.4 to 48.2. Employment rose from 49.1 to 49.9 but stayed below 50. New orders dropped from 54.0 to 51.0. Finished stocks jumped from 49.2 to 52.0. Delivers dropped from 52.6 to 50.7.

                Full release here.

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                US Senate passed USMCA, Canada next

                  US Senate approved the US-Mexico-Canada Agreement yesterday with 89-10 vote. House already passed the legislation on December 19. The USMCA will now be sent to President Donald Trump for signing into law.

                  Treasury Secretary Steven Mnuchin hailed, “this historic agreement not only modernizes and rebalances our trade relationship with Canada and Mexico, but it promotes economic growth, creates jobs, and provides crucial certainty for farmers, workers and manufacturers.”

                  Canada is the only country which hasn’t ratified the agreement yet. The parliament does not return to session until January 27 and, for now, the schedule remains unclear. But little resistance is expected as both Liberal and Conservatives should back it.

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                  Philly Fed manufacturing business outlook jumped to 17

                    Philadelphia Fed Manufacturing Business Outlook jumped to 17.0 in January, up from revised 2.4 in December, beat expectation of 3.7. The percentage of the firms reporting increases (39 percent) was greater than the percentage reporting decreases (22 percent).

                    All of the survey’s broad indicators remained positive and increased from their readings in December. The survey’s future indexes indicate that respondents continue to expect growth over the next six months.

                    Full release here.

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                    US initial jobless claims dropped 10k to 204k

                      US initial jobless claims dropped -10k to 204k in the week ending January 11, better than expectation of 220k. Four-week moving average of initial claims dropped -7.75k to 216.25k.

                      Continuing claims dropped -37k to 1.767m in the week ending January 4. Four-week moving average of continuing claims rose 10.5k to 1.756m.

                      Full release here.

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                      US retail sales rose 0.3%, ex-auto sales up 0.7%

                        US retail sales rose 0.3% to USD 529.6B in December, matched expectations. Total sales for the 12 months of 2019 were up 3.6% from 2018. Ex-auto sales rose 0.7% mom versus expectation of 0.5% mom. Ex-gasoline sales rose 0.1% mom. Ex-auto and gasoline sales rose 0.5% mom.

                        Full release here.

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                        EU Hogan warned devil is in the detail in US-China trade deal

                          EU Trade Commissioner Phil Hogan sounded skeptical regarding US-China trade deal as he spoke in a press conference. he noted that “the devil is in the detail”, and “we will have to assess whether it is WTO compliant”.

                          Meanwhile, Hogan also sounded harsh against China as he complained that the EU is “very open” while China is not opening as promised. He added that China is looking for dominance, influence geopolitically through trade and investment. Also, EU cannot let Chinese dominance put EU companies out of business based on unfair subsidies.

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                          ECB minutes: Policy rates not yet reached reversal rate

                            In the December 11-12 monetary policy accounts, ECB said incoming data since October pointed to “continued weakness” in Eurozone growth dynamics, but there were “some initial signs of stabilisation”. Inflation development remained “subdued overall” while there were “some indications of a slight increase in measures of underlying inflation in line with previous expectations.”

                            Policy makers were confidence that current monetary policy would “provide the necessary monetary stimulus” to support stabilization of growth. “Perceptions of receding uncertainties” regarding US-China trade dispute also supported positive market sentiments and equity prices.

                            There was “broad agreement” on the need to carefully monitor incoming data and evolution of risks. Some members highlighted the need to be “attentive to the possible side effects” of current policy measures. But “confidence was expressed that policy rates had not yet reached the so-called reversal rate”.

                            Full accounts here.

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                            German BDI projects growth to slow to 0.5% in 2020

                              Germany’s BDI association expected growth to slow further in 2020 to 0.5%. After calendar adjustment, growth could be as low as 0.1%. President Dieter Kempf said “industry remains stuck in recession, there are no signs for the sector bottoming out.”

                              He called for the government to lower corporate taxes to push averaged burden from the current 31% to 24%. He also urged massive public infrastructure investment over the next 10 years to boost the economy.

                              Released earlier, Germany CPI was finalized at 0.5% mom, 1.5% yoy in December.

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                              Chinese VP Liu: Correct choice for US to remove China as currency manipulator

                                Chinese Vice Premier Liu He said after signing the trade deal that “cooperation is the only correct option, especially in this new era… We don’t think tariffs are a good solution. Both sides need to solve problems through negotiation.” “China and the U.S. will make positive impacts on the whole world.”

                                Liu also noted that the negotiations were “cultural talks, not just economics…or just trade” and “after two years of talks, we realize that this is a systematic process.” “We will use the results of the phase one deal to prove that our negotiations are working to improve the economy.”

                                On currency manipulation, he said “it is the correct choice for the U.S. to remove China from the currency manipulator list. A week after the U.S. labeled China as a currency manipulator, the IMF issued a report that China did not manipulate the exchange rate. The U.S. realized this fact, and we welcome the U.S. meeting China halfway on this.”

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                                US-China trade deal phase one signed to right the wrongs

                                  US President Donald Trump finally signed the trade deal phase one with Chinese Vice Premier Liu He yesterday. Trump hailed that both countries are “righting the wrongs of the past and delivering a future of economic justice and security for American workers, farmers and families.” And the deal has “total and full enforceability.” On further tariff relieves, he added, “I will agree to take those tariffs off if we’re able to do phase two, otherwise we don’t have any cards to negotiate with.” Chinese President Xi Jinping said in a letter that the deal is “good for China, for the U.S. and for the whole world”. And, “in the next step, the two sides need to implement the agreement in earnest.”

                                  Some core elements of the deal including an action plan for China to strengthen intellectual property protection within 30 days. The proposal would include “measures that China will take to implement its obligations” and “the date by which each measure will go into effect.” American companies will be ensured to work “without any force or pressure from the other Party to transfer their technology to persons of the other Party.” China will also increase purchases of US products by at least USD 200B over two years.

                                  Questions remain on implementation of the deal even though Trade Representative Robert Lighthizer insisted there is a strong enforcement mechanism “with real teeth”. Some criticized that the enforcement mechanism is too simplistic, as it’s ultimately just a decision of one party pulling out.

                                  Full US-China trade agreement phase one.

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                                  US oil inventories dropped -2.5m barrels, WTI ignores and extends decline

                                    US commercial crude oil inventories dropped -2.5m barrels in the weekending January 10, versus expectation of 0.4m barrels rise. At 428.5 million barrels, crude oil inventories are at the five year average for this time of year.

                                    WTI crude oil pays little attention the the data, however. WTI’s decline from 65.38 is in progress and reaches as low as 57.35 so far. Outlook is unchanged that such decline is a leg in the sideway pattern that started back at 66.49. As long as 60.34 resistance holds, we’d expect further fall towards 50.86 support.

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                                    Russian PM resigns to give way to Putin’s constitutional changes

                                      As reported by Russia’s Tass, Prime Minister Dmitry Medvedev submitted his resignation to President Vladimir Putin today. That’s seen as a move to make way for Putin’s changes in the constitution, to increase the powers of both the prime minster and the cabinet.

                                      The news came after Putin’s annual state of the nation address earlier, where he proposed constitutional amendments. He said, the changes would “increase the role and significance of the country’s parliament … of parliamentary parties, and the independence and responsibility of the prime minister.”

                                      The moves reignites speculations on Putin’s plan after his current presidential term ends in 2024. One possibility is that he would shift power to the parliament and assume an enhanced role as prime minister afterwards.

                                      Swiss Franc jumps broadly on the news, taking Euro higher.

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                                      US Empire State manufacturing rose to 4.8

                                        US Empire State Manufacturing general business conditions rose to 4.8 in January, up from 3.5, beat expectation of 4.1. Twenty-eight percent of respondents reported that conditions had improved over the month, while 23 percent reported that conditions had worsened. Business activity “edged somewhat higher”.

                                        PPI rose 0.1% mom, 1.3% yoy in December, versus expectation of 0.2% mom, 1.2% yoy. PPI core rose 0.1% mom, 1.1% yoy, versus expectation of 0.2% mom, 1.4% yoy.

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                                        US Mnuchin: China made very strong commitments to stop forced technology transfer

                                          US Treasury Secretary Steven Mnuchin told CNBC that the “first step” regarding trade deal with China is “really focusing on enforcement”. There will be additional tariff rollbacks in Phase 2. “This gives China a big incentive to get back to the table and agree to the additional issues that are still unresolved”.

                                          On the details, he added, “China has agreed to put together very significant laws to change rules and regulations and have made very strong commitments to our companies that there will not be forced technology going forward.”

                                          President Donald Trump and Chinese Vice Premier Liu He scheduled to sign the trade deal at a ceremony at the White House today, at 11:300am EST.

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