Thu, Oct 01, 2020 @ 01:55 GMT
Live Comments

Live Comments

US oil inventories dropped -2m barrels, WTI ready to reclaim 40

    US commercial crude oil inventories dropped -2m barrels in the week ending September 25. At 492.4m barrels, oil inventories are about 13% above the give year average for this time of year. Gasoline inventories rose 0.7m barrels. Distillate dropped -3.2m barrels. Propane/propylene rose 4.1m barrels. Commercial petroleum dropped -0.6m barrels.

    WTI rebounds notably in early US session, more helped by surge in overall risk sentiment than the inventory data. Current development suggest that fall from 41.43 is merely a three wave corrective move. And rebound from 35.98 is possibly ready to resume. Break of 40.62 resistance would likely send WTI through 41.43.

    However, we’d maintain the view that such rise from 35.98 is only the second leg of the medium term consolidation pattern from 43.50. Hence, we wouldn’t expect a firm break of 43.50 even in case of strong rally. Instead, range trading should continue.

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    Canada GDP grew 3% mom in Jul, still -6% below pre-pandemic level

      Canada GDP grew 3.0% mom in July, slightly above expectation of 2.9% mom. That’s the three consecutive monthly gain, offsetting some of the steep drops in March and April. But overall economic activity was still about -6% below February’s pre-pandemic level.

      All 20 industrial sectors posted increases in July as the agriculture, utilities, finance and insurance as well as real estate rental and leasing sectors surpassed their February pre-pandemic levels, joining retail trade which did so in June.

      Full release here.

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      US ADP jobs grew 749k, but smaller businesses demonstrate slower growth

        US ADP report showed 749k growth in private sector jobs in September, above expectation of 650k. By company size, small businesses added 192k, medium businesses 259k, large businesses 297k. By sector, goods-producing jobs added 196k, service-providing jobs 552k.

        “The labor market continues to recover gradually,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “In September, the majority of sectors and company sizes experienced gains with trade, transportation and utilities; and manufacturing leading the way. However, small businesses continued to demonstrate slower growth.”

        Full release here.

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        BoE Haldane: None of the conditions of negative rates satisfied

          BoE Chief Economist Andy Haldane said in a speech that the MPC minutes “contained no such signal” as it’s introducing negative rates in the near-term. The operational feasibility assessment of negative rates is “likely to take a number of months”. Then, judgement on negative rates will depend on the economic outlook. The decision would then depend on the balance of costs and benefits, , with comparison to other monetary tools.

          “All three of these conditions would need to be satisfied before negative rates became a reality. At present, none of those conditions is in my view satisfied,” he added.

          Haldane also urged that “encouraging news about the present needs not to be drowned out by fears for the future. Now is not the time for the economics of Chicken Licken”

          “This is human nature at times of stress. But it can also make for an overly-pessimistic popular narrative, which fosters fear, fatalism and excess caution. This is unhealthy in itself but, if left unaddressed, also risks becoming self-fulfilling.”

          Full speech here.

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          ECB Lagarde: Inflation make-up strategies could be examined

            ECB President Christine Lagarde said in a speech that a”wider discussion today” among central banks is whether they should “commit to explicitly make up for inflation misses when they have spent quite some time below their inflation goals.”

            “If credible, such a strategy can strengthen the capacity of monetary policy to stabilise the economy when faced with the lower bound,” she said. “Promise of inflation overshooting raises inflation expectations and therefore lowers real interest rates.”

            “While make-up strategies may be less successful when people are not perfectly rational in their decisions – which is probably a good approximation of the reality we face – the usefulness of such an approach could be examined,” she added.

            Full speech here.

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            Swiss KOF rose to 113.8, economy taking a V-shaped course

              Swiss KOF Economic Barometer rose to 113.8 in September, up from 110.2, beat expectation of 106. That’s the four rise in a row after a historic drop earlier this year. KOF said, “at present, the economy is taking a V-​shaped course, so that a recovery of the Swiss economy can be expected for the time being. However, a second wave of COVID-​19 cases could lead to a sharp revision of this assessment.”

              Also released, Credit Suisse Economic Expectations dropped to 26.2 in September, down form 45.6.

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              Uk Q2 GDP contraction revised to -19.8%, down -21.5% over the year

                UK Q2 GDP contraction was finalized at -19.8% qoq, revised from -20.4% qoq. That’s still the largest quarterly contraction in the economy since quarterly records began in 1955. It’s also the second straight quarter of decline after -2.5% qoq contraction in Q1. Annually, GDP contracted -21.5% yoy. By sector, services output contracted by -19.2%. Production output dropped -16.3%. Construction output dropped -35.7%.

                Full release here.

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                China PMI manufacturing rose slightly to 51.5, Caixin PMI edged down to 53.0

                  China’s NBS PMI Manufacturing rose slightly to 51.5 in September, up from 51.0, above expectation of 51.2. NBS PMI Non-Manufacturing rose to 55.9, up from 55.2, above expectation of 54.6. “Although overall manufacturing demand has improved, the industry has recovered unevenly,” said Zhao Qinghe, an NBS official. “In addition, the global epidemic has not yet been fully and effectively controlled, and there are still uncertain factors in China’s imports and exports.”

                  Caixin PMI Manufacturing dropped slightly by -0.1 pts to 53.0, missed expectation of 53.1. Output growth eases but remains marked. There is sharper increase in total new work as export sales rebound. Staffing levels stabilize, ending at eight-month period decline.

                  Wang Zhe, Senior Economist at Caixin Insight Group said: “The sharp rise in overseas demand has complemented the domestic market… The strength of the manufacturing sector will take some of the pressure off policymakers going forward. However, the job market remains worrisome, as the improvement in employment relies on a longer-term economic recovery and a more stable external environment.”

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                  Japan industrial production rose 1.7% mom, retail sales dropped -1.9% yoy

                    Japan industrial production rose 1.7% mom in August, above expectation of 1.5% mom. That’s also the third straight month of growth, as boosted by automobiles and car parts, as well ass iron, steel and non-ferrous metals. Shipments rose 2.1% mom. Inventories dropped -1.4%. Inventory ratio dropped -2.5%. Over the year, production was down -13.3% yoy.

                    On the other hand, retail sales dropped -1.9% yoy in August, better than expectation of -3.5% yoy. But that’s still the sixth consecutive month of decline, highlighting the weak recovery in consumer demand.

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                    New Zealand ANZ business confidence rose to -28.5, AUD/NZD staying in down channel

                      New Zealand ANZ Business Confidence rose to -28.5 in September, up from August’s -41.8, but revised down from preliminary reading of -26.0. All sectors stayed negative with Agriculture at -72.2 and services at -31.7. Own Activity Outlook improved to -5.4, up from August’s -17.5, revised up from preliminary reading of -9.9. Agriculture activity was positive at 13.6 and contraction at 10.8. Services activity was worse at -12.1.

                      ANZ said business “appear relatively optimism”. But “as a reality check, though, the levels of most activity indicators remain very subdued relative to pre-COVID days, and are still at levels regrettably reminiscent of 2009.”

                      Also released from down under, New Zealand building permits rose 0.3% mom in August, versus expectation of -1.4% mom. Australia building permits dropped -1.6% mom, versus expectation of 0.1% mom in August. Australia private sector credit rose 0.0% mom in August, versus expectation of 0.2% mom.

                      AUD/NZD is still channelling well downwards. Fall from is seen as a corrective move for now, as also suggested by the structure. Deeper decline is expected as long as 1.0850 resistance holds, to 38.2% retracement of 0.9994 to 1.1043 at 1.0642. We’d expect strong support from there to contain downside to complete the pull back.

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                      Fed Williams: It’s a matter of fiscal policy that tilts the economic trajectory

                        New York Fed President John Williams said the economy is on a “pretty good trajectory”. And, “it’s really a matter of if there’s more or less fiscal policy that maybe tilts that trajectory”. He expects the economy to be back close to full employment in “about three years time”, but “there’s clearly a lot of unknowns”.

                        On Fed’s average inflation targeting, “we’re purposely overshooting that moderately for some time to get that balance,” he said. “To me, success is not some arithmetic or some formula but it’s really this notion of inflation expectations, how people think about what’s inflation going to be in the future.”

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                        BoE Bailey: No judgement on whether to use negative interest rates yet

                          BoE Governor Andrew Bailey said in a speech to Queen’s University Belfast that the economy has performed a bit stronger than expected. However, there are signs that recovery might not be as strong going forward. In Q3, economic activity was around -7% to -10% lower than pre-pandemic levels. Risks include COVID, Brexit talks, US-China relationship.

                          On monetary policy he emphasized it’s “critically important that the BoE’s can use all its tools to support the economy.” The central bank is “not out of ammunition on QE”, and it can also use “forward guidance”.

                          “Negative interest rates are in the BoE’s toolbox, have not reached judgement on whether or when to use them,” he added. “We do not rule out using negative interest rates but are realistic about challenges from banking retail deposits.”

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                          Fed Kaplan: Lack of addition fiscal relief would create a key downside risk

                            Dallas Fed President Robert Kaplan said in an essay that 2020 GDP is expected to show a contraction of approximately -3.0%. The economy would then growth by roughly 3.5% in 2021. But he emphasized the need of “additional” fiscal measures. ” Lack of additional fiscal relief would create a key downside risk to my economic forecast for 2020 and 2021.”

                            On recent FOMC statement, Kaplan explained his dissent again: “There is an important difference between remaining “accommodative” and keeping rates at zero. I believe, after we have fully weathered this crisis, we should be willing to be more accommodative than in the past in order to create a stronger and more inclusive labor market and make progress on achieving our 2 percent average inflation target. However, I am cognizant that as the economy approaches full employment and we are on track to reach our price stability objectives, the equilibrium nominal rate of interest (the federal funds rate at which monetary policy is neither restrictive nor accommodative—often referred to as R*) is likely to increase. This means that as we approach achievement of our dual-mandate objectives, the stance of monetary policy will actually become more accommodative if the fed funds rate were to remain at zero. I can understand why future Committees will want to remain accommodative at that point in order to ensure we achieve our goals, but will they want to be effectively increasing the level of accommodation by keeping the federal funds rate at zero? I would like future Committees to have the flexibility to make this judgment.”

                            Full essay here.

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                            Fed Harker: Employment won’t be back to pre-pandemic levels until 2023

                              Philadelphia Fed President Patrick Harker said in a speech that following Q2’s historic contraction, the economy has “rebounded faster than many of us had projected. The recovery is expected to continue, but “not fast enough” to have GDP reaching pre pandemic level by the end of the year. “Employment, unfortunately, probably won’t be back to pre-pandemic levels until 2023.”

                              On Fed’s new statement, Harker said “tolerating the risk of slightly higher inflation, in our view, is worth it if it helps us achieve our employment goals.”

                              Full speech here.

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                              US consumer confidence rose to 101.8, above expectations

                                Conference Board US Consumer Confidence rose to 101.8 in September, up from 86.3, beat expectation of 90.0. Present Situation Index rose form 85.8 to 98.5. Expectations Index rose from 86.6 to 104.0.

                                “Consumer Confidence increased sharply in September, after back-to-back monthly declines, but remains below pre-pandemic levels,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “A more favorable view of current business and labor market conditions, coupled with renewed optimism about the short-term outlook, helped spur this month’s rebound in confidence. Consumers also expressed greater optimism about their short-term financial prospects, which may help keep spending from slowing further in the months ahead.”

                                Full release here.

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                                US goods trade deficit widened to USD -82.9B in Aug

                                  US goods trade deficit widened to USD -82.9B in August, from July’s USD -80.1B. larger than expectation of USD -81.8B. Exports of goods rose USD 3.2B over July to USD 118.3B. Imports of goods rose USD 6.0B to USD 201.3B. Wholesale inventories rose 0.5% mom to USD 637.0B. Retail inventories rose 0.8% mom to USD 599.7B.

                                  Full release here.

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                                  Eurozone economic sentiment rose to 91.1, improvements in all large economies

                                    Eurozone Economic Sentiment Indicator rose to 91.1 in September, up from 87.5, beat expectation of 89.4. EU ESI rose 3.4 pts to 90.2. The reading in both regions has so far recovered nearly 70% of the combined losses of March and April already. Employment Expectations Indicator also improved, up 2.3% to 91.8 in Eurozone, and up 2.4% to 91.8 in EU.

                                    Looking at some details for the Eurozone, industrial confidence rose from -12.8 to -11.1. Services confidence rose form -17.2 to -11.1 Consumer confidence rose from -14.7 to -13.9. Retail trade confidence rose from -10.5 to -8.7. Construction confidence rose from -11.8 to -9.6.

                                    From a country perspective, the ESI continued to recover in all the largest euro-area economies, namely in Italy (+8.4), France (+5.8), the Netherlands (+2.1), Spain (+1.6) and Germany (+1.2). All in all, in these countries, between 55 (Spain) and 80% (Germany) of confidence losses suffered during the lockdown were recovered.

                                    Full release here.

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                                    NASDAQ could have completed pull back with strong bounce

                                      The solid rebound in US stocks overnight raised the chance that this month’s correction is already over. All three major indices, DOW, S&P 500 and NASDAQ closed above 55 day EMA. Focus for NASDAQ is now on 11245.41 resistance. Firm break there should confirm completion of the pull back from 12074.06 at 10519.59. Stronger rebound should be seen to retest 12074.06.

                                      Nevertheless, in terms of time and depth, the whole corrective pattern shouldn’t be completed yet. Hence, we’re not expecting a firm break of 12074.06 with the next rise, if happens. Instead, there is prospect of at least one more fall to test 38.2% retracement of 6631.42 to 12074.06 at 9994.97, before completing the consolidation. But the good new is, the corrective pattern is eventually more likely a sideway pattern than a deep decline.

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                                      BoJ: Unlikely for Japan’s economy to rebound significantly

                                        In the Summary of Opinions at BoJ’s September 16-17 meeting, it’s noted that it’s “unlikely” for Japan’s economy to “rebound significantly”. Domestic demand, mainly in services consumption, will “likely remain at a low level” due to the pandemic. A “clear V-shaped recovery” has been seen in some sectors, but recovery in demand is “still no in sight in other sectors”.

                                        Year-on-year CPI is “likely to be negative for the time being”, is expected to “turn positive and then increase gradually with the economy improving”. Thus far, “deflationary price-setting behavior” for retaining customers “does not seem to have been widely observed”.

                                        As of monetary policy, it’s necessary to focus on supporting corporate financing and sustaining employment. “If the economic recovery is delayed, the potential growth rate of Japan’s economy could decline through rises in bankruptcies of firms and unemployment, and the functioning of financial intermediation also could deteriorate, reflecting the materialization of credit risk.”

                                        Full summary here.

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                                        Fed Mester: Still far from our goals for employment and inflation

                                          Cleveland Fed President Loretta Mester said yesterday that economic data showed the the economy is recovery but it’s still a “fragile recovery”. Fed is still “far from both of our goals” for both employment and inflation. She expects unemployment to end the year between 7% and 8%. Inflation could be above 1% but well below the 2% target.

                                          Outlook depends on the course of the coronavirus pandemic. “If things turn out that the virus remains under control and there is a vaccine that is able to be distributed, in the middle of the year, say, then we’ll see the recovery continuing and maybe broadening out a bit,” she said.

                                          Mester also urged actions to promote an inclusive economy, “one in which people have the chance to move themselves and their families out of poverty, one in which systemic racism does not limit opportunities and one in which all people can fully participate — the U.S. economy will not be able to live up to its full potential and the country will suffer.”

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