Thu, Oct 01, 2020 @ 01:51 GMT

Australia retail sales rose 2.7% in June, dropped -3.4% in the quarter

    Australia retail sales rose 2.7% mom in June, above expectation of 2.4% mom. Over the June quarter, however, retail volumes stilled dropped -3.4% qoq. That’s the largest seasonally adjusted quarterly decline since the introduction of the GST in 2000.

    Exports of goods and services rose 3% mom to AUD 26.2B while imports rose 1% mom to AUD 28.0B. Trade surplus widened slightly to AUD 8.2B, but missed expectation of AUD 8.8B.

    - advertisement -

    France PMI manufacturing dropped but services improved

      France PMI Manufacturing dropped to 50.3 in December, down from 51.7, and missed expectation of 51.4. PMI Services rose to 52.4, up from 52.2, and beat expectation of 51.8. PMI Composite dropped slightly to 52.0, down from 52.1.

      Commenting on the Flash PMI data, Eliot Kerr, Economist at IHS Markit said:

      “The latest PMI data pointed to further activity growth in the French private sector, but revealed disappointing results for the manufacturing sector.”

      “Following some green shoots in October and November, manufacturing production stagnated and new orders returned to contraction territory. Moreover, employment and outstanding business stuttered to somewhat quell hopes of sustained industrial recovery.”

      “On the other hand, service sector growth remained broadly in line with trend and continued to provide support to the economy. Taking into account other data, our Nowcast model points to a healthy growth rate of around 0.4% in the fourth quarter.”

      Full release here.

      - advertisement -

      Stocks recovered as Mnuchin will travel to China for trade talks again soon

        US stocks recovered mildly overnight, partly due to a technical recovery, and partly cause Trump’s administration tried to tone down trade war with China. DOW ended up 0.82% or 207.06 pts at 25532.05 but was kept well below 55 day EMA at 25690.77. S&P 500 rose 0.80% while NASDAQ rose 1.14%. Both were also capped by 55 day EMA.

        Trump said “we’re having a squabble with” China only., and “we have a dialogue going. It will always continue.” Treasury spokesman also indicated that Steven Mnuchin will plan for another meeting with China, without details. The spokesman said: “As the secretary has indicated, the negotiations will continue. We do anticipate, as the secretary indicated yesterday, that we will plan for a meeting in China at some point soon.” However, nothing is heard from Trade Representative Robert Lighthizer yet.

        - advertisement -

        UK DExEU Rycroft: No-deal Brexit plans in place, economic analysis of Chequers plan ongoing

          In UK, Philip Rycroft, Permanent Secretary at the Department for Exiting the European Union (DExEU) told the parliament that the plans for no-deal Brexit are “in place”. And, “they are at a level of detail which satisfies the team at DEXEU … we are constantly monitoring those plans to make sure they are kept up to date.”

          Also Rycroft said there were studies on the economic impact of Prime Minister Theresa May’s Chequers plan and “the work is ongoing”.

          - advertisement -

          Oil price jumps as Trump said Saudi and Russia will cut production, pressing key resistance

            Both oil price and stocks rebound strongly after US President Donald Trump said Saudi Arabia and Russia will be “cutting back approimately 10 Million Barrels” of oil production to ease pressure on price.

            WTI crude oil hit as high as 28.66 but retreated back quickly, gyrating around 26 handle. Technically, we’d maintain that firm breka of 28.39 resistance is needed to confirm short term bottoming at 20.40. in that case, stronger rebound would be seen back to 55 day EMA (now at 39.26) which is inside prior gap. Failing to sustain above 28.39 will bring down trend resumption through 20.40 sooner rather than later.

            - advertisement -

            US Mnuchin: We have $6 trillion to put in the economy

              US Treasury Secretary Steven Mnuchin said “there’s extraordinary demand,” on the small business coronavirus loan program. Overall 3000 lenders have already participated in the USD 349B program. If small businesses cant get the loan today or tomorrow, “don’t worry, there will be money”, he said.

              “We have $6 trillion to put in the economy, we’re meeting with all the advisers on the airlines this week, we’re working very quickly on that,” Mnuchin added. “So I can assure you, the president has instructed us to get this money into the economy fast.”

              White House economic adviser Larry Kudlow said he still believes “that in the next four to eight weeks we will be able to reopen the economy and that the power of the virus will be substantially reduced and we will be able to flatten the curve.”

              that when US return to normal, things are going to be different,” he said. “That’s going to be a new feature of American life. And I don’t know how quickly that gets up and going, but it’s going to be very, very important because we obviously want to prevent any recurrences.”

              - advertisement -

              ECB Rehn: Market expectations on first hike consistent with ECB statements

                ECB Governing Council member Olli Rehn said “financial market expectations concerning the timing of the first interest rate rise are consistent with the Governing Council’s statements.” That is, ECB said in forward guidance that interest rates will remain at present levels at least through summer of 2019.

                Meanwhile, he also added that “the need for extended forward guidance on monetary policy will also diminish, once inflation has reached sufficient progress towards the price stability objective.”

                Regarding a hot recent topic of Italy, Rehn said ECB’s Governing Council “primarily looks at the development of the whole euro zone, and firstly from the mid-term price stability target point of view”. And, “monetary policy will be done based on that, not looking at just one member state but the whole euro zone.”

                - advertisement -

                US CPI accelerated to 2.3%, core CPI unchanged at 2.3%

                  US CPI rose 0.2% mom in December, matched expectation. Core CPI rose 0.1% mom, slightly below expectation of 0.2% mom. Annually, CPI accelerated to 2.3% yoy, up from 2.1% yoy, matched expectation. Core CPI was unchanged at 2.3% yoy, matched expectation too.

                  Full release here.

                  - advertisement -

                  US Q2 GDP grew 2.0%, dragged by downturns in inventory investment, exports, and nonresidential fixed investment

                    According to the second estimate, US GDP grew 2.0% annualized in Q2, unrevised from first estimate, down from Q1’s 3.1%. The deceleration in real GDP in the Q2 primarily reflected downturns in inventory investment, exports, and nonresidential fixed investment. These downturns were partly offset by accelerations in PCE and federal government spending.

                    The PCE price index increased 2.3%, compared with Q1’s 0.4%. Excluding food and energy prices, the PCE price index increased 1.7%, Q1’s 1.1%.

                    - advertisement -

                    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.

                      - advertisement -

                      EU Juncker: Increasing urgency on Brexit negotiation

                        European Commission President Jean-Claude Juncker in European Parliament on Brexit:-

                        • “There is increasing urgency to negotiate this orderly withdrawal.”
                        • “As the clock counts down, with one year to go, it is now time to translate speeches into treaties, to turn commitments into agreements.”
                        • “It is obvious that we need further clarity from the UK if we are to reach an understanding on our future relationship.”
                        - advertisement -

                        BoE Ramsden: Significant headroom to do more QE

                          Deputy Governor Dave Ramsden said in a the Times interview that the BoE ” still got significant headroom to do more QE if we saw a much weaker recovery”. The pace of QE could accelerate is there are signs of market “dysfunction.

                          Ramsden is “confident” that there wouldn’t be more quarterly GDP contractions ahead. But “a key outcome is what happens to the labour market. Some companies are going to go under. Some jobs are going to be lost.”

                          - advertisement -

                          Gold gaps up as Middle East tension escalates, heading to 1625

                            Gold and oil prices surge as the week starts as Middle East tensions escalated further during the weekend. Iran quitted the nuclear deal and announced it’s no longer bounded by the agreement made in 2015. Iraq denounced US killing of the Iranian general in Baghdad as a violation of the nation’s sovereignty. Iraq’s parliament voted to expel US troops from the country. US President Donald Trump warned of strike to Iran “in a disproportionate manner” if the latter hits any US targets. He also threatened to sanction Iraq if US troops were forced to withdraw from the country.

                            Gold gaps higher today and hits as high as 1587.92. Break of 1557.04 resistance confirms resumption of up trend from 1160.17. Further rise should be seen to 61.8% projection of 1266.26 to 1557.04 from 1445.59 at 1625.29. As noted before, rise form 1445.59 could be the fifth leg of the five-wave sequence from 1160.17. We’d look for topping signal around 1625.29. However, sustained break of 1625.29 will bring upside acceleration to 100% projection at 1736.37.

                            - advertisement -

                            ECB Mersch: Global risks are gaining prominence

                              ECB Executive Board member Yves Mersch said in Singapore that the Eurozone economy is experience broad based expansion. And risks to growth remain “broadly balanced”. Overall, Mersch expect the expansion to continue as a “pace slightly above potential in the period ahead.” Inflation is expected to continue its rise thanks to “quite some” degree of monetary stimulus.

                              However, Mersch also warned that risks related to global factors, including “the threat of increased protectionism, the finalization of the Brexit negotiations and vulnerabilities in emerging markets are gaining prominence.”

                              - advertisement -

                              G20: Abe and Xi agreed to promote free and fair trade

                                Japanese Prime Minister Shinzo Abe and Chinese President Xi Jinping held bilateral meeting today, ahead of G20 leaders summit that starts tomorrow. Both sides agreed to work together to promote “free and fair trade”. A wide range of topics were also discussed.

                                Xi said the G20 summit will be held “against the backdrop of an increasingly complicated world economic situation.” He added I strongly hope the summit will form shared views and send out a clear message to protect multilateralism and free trade.” Abe also said he welcomes the”new developments” in relationship with China that is based on the principles of “promoting free and fair trade.”

                                Deputy Chief Cabinet Secretary Yasutoshi Nishimura noted that Abe urged Xi to maintain the free and open society, one-country, two systems with Hong Kong. This is a response to highly controversial extradition bill that prompted a March of 2 millions Hongkongers against the bill. Also, a world wide newspaper ad campaign is launched by Hong Kong activities, urging G20 leaders to stand by them to defend Hong Kong’s freedoms and autonomy.

                                According to Nishimura, Abe also asked Xi to “exercise self-restraint over its activities” around the Japan-held Senkaku islets in the East China Sea and emphasized the importance of demilitarization of disputed islands in South China Sea.

                                - advertisement -

                                UK PMI composite rose to 7-yr high, recovery gained speed

                                  UK PMI Manufacturing rose to 55.3 in August, up from 53.3, beat expectation of 53.6. That’s the highest level in 30 months. PMI Services jumped to 60.1, up from 56.5, above expectation of 57.0, a 72-month high. PMI Composite rose to 60.3, up from 567.0, a 82-month high.

                                  Tim Moore, Economics Director at IHS Markit, said: “August’s data illustrates that the recovery has gained speed across both the manufacturing and service sectors since July. The combined expansion of UK private sector output was the fastest for almost seven years, following sharp improvements in business and consumer spending from the lows seen in April…. Positive signals for the recovery of course need to be considered in the context of UK GDP shrinking by around one-fifth during the second quarter of the year. Survey respondents often noted that it could take more than a year to return output to pre-pandemic levels and there were widespread concerns that the honeymoon period for growth may begin to fade through the autumn months.”

                                  Full release here.

                                  - advertisement -

                                  Minneapolis Fed Kashkari comfortable to move interest rate to neutral

                                    Minneapolis Fed President Neel Kashkari said he’s “comfortable” with interest rate moving back to a “neutral rate”. That is, a level that’s “not stimulating the economy, but not also constraining the economy”. After that, Kashkari would prefer to ” just wait and see how inflation evolves.” And, Fed could the observe whether wage growth, inflation data support moving to a contractionary policy. But so far, according to Kashkari, the data “does not” support moving into contractionary policy.

                                    A question that Fed policymakers are facing the the lack on acceleration in inflation even though unemployment rate dropped to as low as 3.8% last month. It’s commonly believed that inflation would surge to pull unemployment rate back up to the natural rate level. Kashkari pointed out that “in a recession, economists tend to raise the natural rate of unemployment”. However, during recovery, we’re so reluctant to then lower it, and we end up being late lowering it in recovery.” Nonetheless, Kashkari said he’s not ready to believe that natural unemployment rate to be as low as 3.5% as that’s a big departure from historical data.

                                    - advertisement -

                                    Japan and China agreed to improve tie after first high-level meeting in eight years

                                      The outcome of the first high-level economic talks in eight years between China and Japan appeared to be positive. Japanese Foreign Affairs Minister Taro Kono and Chinese State Councillor Wang Yi met in Tokyo on Sunday. Both agreed to work on strengthening the relationship with more high level visits ahead.

                                      Wang said that “I hope we can begin at a fresh starting point and discuss a new future, while promoting a new cooperative relationship. I want to have in-depth discussions on economic policies, cooperation on the belt and road initiative and further integration of East Asian countries.”

                                      Kono also said that “I hope to hold active discussions about regional and global economic issues. I would also like to take this opportunity to further strengthen economic relations between Japan and China.”

                                      Also more high-level visits were agreed, with Chinese Premier Li Keqiang go to Japan for a Japan-China-South Korea summit. And then Japan Prime Minister Shinzo Abe will visit China while Chinese President Xi Jinping will also visit Japan.

                                      Separately, Abe will meet with US President Donald Trump at the latter’s Mar-a Lago resort for two days this week starting Tuesday.

                                      - advertisement -

                                      BoC cut interest rate by -50bps to 1.25%, coronavirus a material negative shock

                                        BoC cut overnight rate target by -50bps to 1.25% and warned that “, the COVID-19 virus is a material negative shock to the Canadian and global outlooks, and monetary and fiscal authorities are responding.” The central bank “stands ready to adjust monetary policy further if required”.

                                        The central bank added, globally, the coronavirus is a “significant health threat” to people “in a growing number of countries”. Business activity in some regions has “fallen sharply” and supply chains have been “disrupted”. As the coronavirus spreads, ‘business and consumer confidence will deteriorate, further depressing activity.”

                                        For Canada, Q1 will be “weaker than the Bank had expected”. The drop in terms of trade will weigh on income growth. Business investment “does not appear to be recovering”. Rail line blockades, strikes by Ontario teachers and winter storms are also dampening activity.

                                        - advertisement -

                                        UK PMI manufacturing finalized at 53.3, started Q3 on firmer footing

                                          UK PMI Manufacturing was finalized at 53.3 in July, up from 50.1 in June. That’s also the highest level in 16 months. Markit noted that domestic new orders rise but new exports business falls. but business sentiment still rises to 28-month high.

                                          Rob Dobson, Director at IHS Markit: “The UK manufacturing sector started the third quarter on a much firmer footing, with output growth hitting a near three-year high and new orders rising for the first time in five months. The recovery strengthened as a loosening of lockdown restrictions allowed manufacturers to restart or raise production. July also saw signs of furloughed employees returning to work and customers resuming spending. Business optimism also rose to its highest for over two years as companies grew more hopeful that the future has brightened.

                                          “Despite the solid start to the recovery, the road left to travel remains long and precarious. An extended period of growth is still needed to fully recoup the ground lost in recent months. This is also the case for the labour market, where job losses are continuing despite businesses reopening. There is a significant risk of further redundancies and of furloughed workers not returning unless demand and confidence stage more substantial and long-lasting rebounds in the months ahead.”

                                          Full release here.

                                          - advertisement -
                                          - advertisement -