Swiss CPI rose 0.4% mom, 1.0% yoy in May, above expectation of 0.0% mom, 0.8% yoy.
Core CPI rose 0.1% mom, 0.4% yoy. Domestic products CPI rose 0.2% mom, 0.4% yoy. Imported products CPI rose 0.8% mom, 2.7% yoy.
US initial jobless claims dropped to 250k, below expectations
US initial jobless claims dropped -2k to 250k in the week ending August 13, below expectation of 261k. Four-week moving average of initial claims dropped -2750 to 247k.
Continuing claims rose 7k to 1437k in the week ending August 6. Four-week moving average of continuing claims rose 13k to 1413.
UK claimant counts rose 10.1k in Mar, unemployment rate dropped to 4.9% in Apr
UK Claimant Count rose 0.4% mom, or 10.1k to 2.7million in march. The level was still 114.3%, or 1.4m, above March 2020. Though, it has been relatively stable since May 2020.
Unemployment rate dropped to 4.9% in the three months to February, down from 5.0%, better than expectation of a rise to 5.2%. Average earnings excluding bonus rose 4.4% 3moy versus expectation of 4.2%. Average earnings including bonus rose 4.5% 3moy, below expectation of 4.8%.
HSI gapped down on risk aversion, but selling eased
Risk aversion continues in Asian session today with Hong Kong HSI gapped down and hit as long as 23895.03. But the index then recovered as selling eased somewhat, down -1.3% only after morning session. Prior rebound to 25303.77 was a surprise to us but the overall view isn’t changed. Price actions from 21139.26 are seen as a corrective pattern. The question now is whether such correction has completed. Focus will be on 22519.73 support for the next week or two. Firm break there would pave the way to 21139.26 and below, as larger down trend resumes.
Eurozone retail sales falls -1.2% mom in Aug, EU down -0.9% mom
Eurozone retail sales fell -1.2% mom in August, well below expectation of -0.5% mom. Volume of retail trade decreased by -3.0% for automotive fuels, by -1.2% for food, drinks and tobacco and by -0.9% for non-food products.
EU retail sales was down -0.9% mom. Among Member States for which data are available, the largest monthly decreases in the total retail trade volume were registered in the Portugal (-3.0%), France (-2.8%) and Belgium (-1.5%). The highest increases were observed in Luxembourg (+1.9%), Poland (+1.7%) and Denmark (+1.6%).
US ISM services rose to 61.9 in Sep, corresponds to 4.5% annualized GDP growth
US ISM Services PMI rose slightly from 61.7 to 61.9 in September, above expectation of 59.8. Looking at some details, business activity/production rose 2.2 to 62.3. New orders rose 0.3 to 63.5. Employment dropped -0.7 to 53.0. Prices rose 2.1 to 77.5.
ISM said: “The past relationship between the Services PMI® and the overall economy indicates that the Services PMI® for September (61.9 percent) corresponds to a 4.5-percent increase in real gross domestic product (GDP) on an annualized basis.”
UK GDP grew just 1.8% mom in May, economy still a quarter below Feb level
UK GDP grew notably by 1.8% mom in May but the rebound was somewhat disappointing and missed expectation of 5.0% mom. Production jumped sharply by 6.0% mom, with manufacturing up 8.4%. Services rose 0.9% mom while construction rose 8.2% mom. But all were insufficient to recover the contraction in April (production -20.2% mom, manufacturing -24.4% mom, services -18.9% mom, construction -40.2% mom. Agriculture continued contraction by -6.2% mom.
For the three months to May, GDP dropped by -19.1% 3mo3m. Production dropped -15.5% 3mo3m. Manufacturing dropped -18.0% 3mo3m. Service dropped -18.9% 3mo3m. Construction dropped -29.8% 3mo3m. Agriculture dropped -6.3% 3mo3m.
Jonathan Athow, Deputy National Statistician for Economic Statistics, said: “Manufacturing and house building showed signs of recovery as some businesses saw staff return to work. Despite this, the economy was still a quarter smaller in May than in February, before the full effects of the pandemic struck. In the important services sector, we saw some pickup in retail, which saw record online sales. However, with lockdown restrictions remaining in place, many other services remained in the doldrums, with a number of areas seeing further declines.”
RBA Lowe: Outlook improvement widened range of plausible cash rate scenarios
In a post meeting speech, RBA Governor Philip Lowe said “the situation today is quite different from that in March last year,” when the 3-year yield target was introduced. “We are no longer looking over a cliff but instead transitioning from recovery to expansion,” he added. “This improvement has widened the range of plausible scenarios for the cash rate.” The central scenario is still that condition for rate hike “will not be met until 2024″. But he added, ” there are alternative plausible scenarios as well”.
On extending asset purchases to AUD 4B a week until just November, Lowe said it “strikes the right balance”. ” It allows the possibility of a timely recalibration of the Bank’s bond purchases in either direction…” and, “we are not locked into any particular path and bond purchases could be scaled up again if economic conditions warrant.”
Eurozone economic sentiment rose slgihtly to 67.5, employment expectations jumped
Eurozone Economic Sentiment Indicator rose slightly to 67.5 in May, up from 64.9, but missed expectations of 70.5. Employment Expectations Indicator led the way, jumped to 70.2, up from 58.9. Industrial Confidence rose to -27.5, up from -32.5. Consumer Confidence rose to -18.8, up from -22.0. Retail Trade Confidence rose slightly to -29.7, up from -30.1. On the other hand, Services Confidence dropped to -43.6, down from -38.6. Construction Confidence dropped to -17.4, down from -16.1. Business Climate dropped to -2.43, down from -18.1.
Eurozone PMI manufacturing finalized at 49.6 in Aug, downturn likely to intensify potentially markedly
Eurozone PMI Manufacturing was finalized at 49.6 in August, down slightly from July’s 49.8. But that’s still a 26-month low. Readings for the Netherlands at 52.6 (22-month low), Ireland at 51.1 (22-month low), France at 50.6 (2-month high) were in expansion. Readings for Spain at 49.9 (2-month high), Germany at 49.1 (26-month low), Austria at 48.8 (20-month low), Greece at 48.8 (20-month low), Italy at 48.0 (26-month low) were in contraction.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “The euro area’s beleaguered manufacturers reported a further steep drop in production in August, meaning output has now fallen for three successive months to add to the likelihood of GDP falling in the third quarter. Forward-looking indicators suggest that the downturn is likely to intensify – potentially markedly – in coming months, meaning recession risks have risen.
Chinese VP Wang confidence the economy will achieve sustainable growth
In the World Economic Forum in Davos Switzerland, Chinese Vice President Wang Qishan said “There will be a lot of uncertainties in 2019, but China’s economy will continue to achieve sustainable growth”.
He added that “Speed does matter. But what really matters is the quality and efficiency of our economic development.”
Wang also urged all countries to defend multilateralism and do whatever they can to ensure global imbalances do not worsen.
Sterling pressured as Brexit rebels gather at alternative conference against May’s Chequers plan
Sterling is pressured on report that while UK Prime Minister Theresa May is trying to unite her party at the Conservatives annual conference, Brexit rebels are gathering a few streets away on an “alternative Brexit Advance Coalition Conference”. May’s Chequer’s plan was brutally criticized by the Brexiteers as “failing to deliver the referendum mandate”. And the rebels threatened to vote down the deal even if May could agree to one with the EU. In the meeting, it’s reported that 96% of those attended opposed to the Chequer’s plan.
Perhaps words from Andrea Jenkyns, a former parliamentary private secretary, best described the situation. “Our party members don’t want it, the public doesn’t want it, the opposition aren’t going to vote for it, the EU doesn’t want it, so we must chuck Chequers,” she said.
GBP/JPY resumes rally after drawing support from 4 hour 55 EMA
GBP/JPY rises after BoE Governor Andrew Bailey said there are a lot of issues with negative interest rates. Solid support was seen in 4 hour 55 EMA, indicating near term bullishness. Further rise is now expected as long as 140.31 support holds. Choppy rise from 133.03 has resumed for a test on 142.71 high. At this point, upside momentum doesn’t warrant a firm break there yet. Thus, we’ll be cautious on topping signals as it approaches 142.71.
ECB’s Villeroy foresees 2024 rate cut possibility, dismisses immediate action
ECB Governing Council member Francois Villeroy de Galhau indicated that the central bank will not pursue further interest rate hikes. In an interview with the French newspaper La Depeche du Midi, Villeroy stated, “Our decisions to increase interest rates are fully playing their role as a remedy against the disease that is inflation.”
He added, “This is why, barring any shock, there will be no further increase in our rates — the question of a reduction may arise in 2024, but not now.”
Villeroy expressed confidence in the progress made in the fight against inflation, noting that “we are well on our way… even if we are not yet finished.” He urged patience with the duration of these measures, reiterating the ECB’s commitment to bringing inflation back toward 2% by 2025 at the latest.
Furthermore, he pointed out that disinflation is occurring faster than anticipated due to two main factors: slowdown in energy prices, unaffected by conflicts in the Middle East, and deceleration of other prices, including services and manufactured products, as a result of ECB’s monetary policy.
Fed’s Goolsbee sees surging inflation expectations as a red flag
Chicago Fed President Austan Goolsbee warned that a shift in market-based long-run inflation expectations toward the elevated levels seen in consumer surveys, such as the University of Michigan’s, would be a “major red flag” demanding immediate Fed attention.
He emphasized that if investor sentiment converges with households’ expectations, now at the highest since 1993, Fed would have little choice but to respond.
Goolsbee noted that Fed has moved into “a different chapter” marked by heightened uncertainty, contrasting with the “golden path” of 2023 and 2024, when inflation eased without damaging growth or jobs.
While he still sees interest rates being “a fair bit lower” in the next 12–18 months, he acknowledged that economic unpredictability, particularly surrounding trade policy, may delay Fed’s next move. His stance: “wait and see is the correct approach,” though not without costs.
In conversations with business leaders, Goolsbee said April 2—the date of expected US tariff announcements—has become a key flashpoint of anxiety. This uncertainty, he said, is fueling a broad hesitancy in investment and hiring decisions across the Fed district.
Into US session: Sterling selloff intensifies as Scottish Sturgeon talks no-deal Brexit
Entering US session, Sterling is trading as the weakest one today and selling has indeed intensified. Canadian Dollar follows Sterling as the second weakest for today. Japanese Yen surges broadly in early European and is trading as the strongest one for today so far. Euro pares back some gains today but it’s still the strongest one for the week.
Now, it seems a no-deal Brexit is an acceptable fact. It started last week when BoE Governor Mark Carney said risk of no-deal Brexit is “uncomfortably high”. Then Trade Minister Liam Fox assigned a 60-40 chance of it. Scotland’s First Minister Nicola Sturgeon also jumps in, blasting Prime Minister Theresa May’s handling of Brexit negotiation. Sturgeon said that “with every day that passes, the prospect of a no deal Brexit or a Brexit with very, very little information about the future relationship seems to become more and more likely.” She added that “both of those outcomes would be completely unacceptable, absolutely disastrous for our economy, so I hope she (Theresa May) can reassure me that neither of those things are going to happen.” “But if she can’t, then I hope she will outline her plan B, because we cannot simply take a step off that Brexit cliff-edge next March without knowing what comes next.”
BoJ Suzuki: Very difficult to achieve price stability once financial system destabilizes
BoJ board member Hitoshi Suzuki said while there are risks from heightening overseas uncertainties, there was no sign of recession yet. He emphasized that “if the BOJ were to consider and implement specific monetary easing measures, it will take action deemed appropriate at the time while weighing the benefits and demerits of each step.”
He further pointed out, “if bank deposit rates effectively turn negative, it could hurt the economy by cooling consumer sentiment”. And excessively low interest rates could also discourage lending and lower the impact of monetary easing. He added, “once the financial system destabilizes, it will become very difficult to achieve price stability.”
DOW hits new record, but Nvidia’s earnings could be the decider
DOW managed to break into new intraday record overnight before pulling back slightly, but it was enough to secure a fresh record close. The excitement around the index’s performance is palpable, yet the overall market sentiment might hinge on Nvidia’s upcoming earnings report on Wednesday. Investors are keen to see the second-quarter results to assess the ongoing strength of the AI trade, which has been a significant driver of market gains.
Technically, doubts persist regarding the Dow’s ability to sustain its record-breaking momentum. Firm break below 40584.47 support would indicate that a short term top was formed, and set up deeper pull back to 55 D EMA (now at 39893.83), or around 40k psychological level, before DOW decides on its next move.
Eurozone Sentix investor confidence improved to -41.8, current situation hit all time low
Eurozone Sentix Investor confidence improved slightly from -42.9 to -41.8 in May. But Current Situation Index tumbled further form -66.0 to -73.0, hitting a record low. That’s also the fourth decline in a row. Expectations index, on the other hand, improved from -15.8 to -3.0.
Sentix said the Eurozone economy has experienced a “breath-taking crash” in recent weeks that goes “far beyond the distortions caused by the financial crisis. Nevertheless “dawn comes in the guise of easing the hard restrictions on economic activity. Countries like Germany and Austria are in a position to gradually lift the often drastic measures.”
Very good advancement in bilateral US-Mexico NAFTA talk
Mexico’s Economy Minister Ildefonso Guajardo met with US Trade Representative Robert Lighthizer in a bilateral NAFTA meeting yesterday. Guajardo said after the meeting that there is “very good advancement” in at least 20 items. But they have yet to discuss the stickier issues like the “sunset clause”. The meeting will continue on in Washington today.
It’s believed that the differences between the US and Mexico have somewhat narrowed after leftist Andres Manuel Lopez Obrador’s victory in the presidential election on July 1. A large part of the convergence was in both sides’ push to raise wages for auto workers. There’s a change that both US and Mexico could agree on most of the items before letting Canada join in again to make it trilateral.