US retail sales rose 0.0% mom to USD 682.8B in July, below expectation of 0.2% mom. Ex-auto sales rose 0.4% mom, above expectation of 0.1% mom. Ex-gasoline sales rose 0.2% mom. Ex-auto, gasoline sales rose 0.7% mom.
Also total sales were up 10.3% yoy comparing with July 2021. Total sales for the May through July 2022 period were up 9.2% from the same period a year ago.
Crypto markets firmed after US President Donald Trump signed an executive order aimed at broadening investment options in retirement accounts. The policy change clears a path for cryptocurrencies, private equity, and real estate to be included in 401(k) plans, potentially diverting large-scale institutional capital into the digital asset space.
The USD 12 trillion defined contribution market has largely avoided exposure to alternative assets. Trump’s order seeks to reverse that by reducing litigation exposure and regulatory complexity for fund managers. “My Administration will relieve the regulatory burdens and litigation risk that impede American workers’ retirement accounts from achieving competitive returns,” Trump stated. Industry participants see this as a long-awaited greenlight to diversify away from traditional stocks and bonds.
Bitcoin bounces this week but stays well below 123,231 resistance. Near term consolidations could extend. But outlook remains bearish so far with a confluence of support intact, including 112,013 resistance turned support, 55 D EMA, and near term rising channel. Current up trend is expected to resume to 61.8% projection of 98,148 to 123,231 from 111,889 at 127,390 next.
Ethereum’s breach of 3,940.08 resistance suggests that recent rally from 1,382.55 is resuming. Next target is 4,108.15 key resistance. Firm break there will target 61.8% projection of 2,110.58 to 3,940.08 from 3,353.16 at 4,483.19 next. In case of retreat, outlook will stay bullish as long as 3,353.16 support holds.
ECB Governing Council member Klaas Knot urged that risk must be reduced before the Eurozone banking union is shared more widely among member states. The measures under the union include bank deposit insurance scheme and streamlining liquidity provision for banks under resolution. Knot argued that “these elements all imply more public risk-sharing in (the European Monetary Union) as liability for bank failures in other countries is shared at the European level.” And he emphasized that ” risk-sharing should be preceded by sufficient risk-reduction.”
Separately, another Governing Council member Vitas Vasiliauskas reiterated the call for an “EU-wide banking union”. And he said that “allow for a centralized supervisory approach for all of the EU’s largest systemically important banks, regardless of host-country membership in the monetary union.” Also, he added that “we need to do a better job at convincing decision-makers in non-euro area countries to enter into the “close cooperation” regime (with the ECB).”
San Francisco Fed Bank President Mary Daly urged patience in assess the economic development before acting on interest rates. “Reacting in response to things that aren’t likely to last will move us farther from — not closer to — our goals,” she said.
“Over the next several quarters, as tapering occurs, we will watch how the economy does and see whether inflation eases and workers come back.”
“As we get a clearer signal, we will be ready to act accordingly, continuing to provide or remove support as needed to ensure the economy settles at a sustainable place.”
Dollar tries to extend post FOMC rally today but there is little success so far. Firstly, the greenback is overshadowed by Yen and Swiss Franc. Yen is clearly lifted by risk aversion. Meanwhile, Swiss Franc trades higher on some mild weakness in emerging market currencies like Rand and Lira. Secondly, there is no technical breakthrough in Dollar pairs today. USD/HF is limited below 1.0094 resistance. EUR/USD is held well above 1.1300 key support. And even GBP/USD and AUD/USD are held well above 1.2951 and 0.7182 minor support levels respectively.
Sterling is trading as the weakest one even though Q3 GDP grew 0.6% as expected. But September’s monthly GDP miss raises some doubt over the outlook ahead. And there is never-ending Brexit negotiation, without any progress on Irish border backstop. Canadian Dollar follows as the second weakest, and the Australian Dollar.
In European markets, all major indices are down at the time of writing.
Asian indices also closed broadly down
Is SSE’s corrective rebound from 2449.19 completed ahead of 55 day EMA? Probably.
US PMI manufacturing dropped to 50.0 in July, down from 50.6, missed expectation of 51.0. That’s the lowest level in 118 months. PMI services, however, rose to 52.2, up from 51.5, beat expectation of 51.8. PMI composite rose to 51.6, up from 51.5, a 3-month high.
Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
“The survey data indicated that the economy started the third quarter on a disappointingly soft footing. The PMIs for manufacturing and services collectively point to annualized GDP growth of just 1.6%, up only very marginally from a lacklustre 1.5% indicated by the survey in the second quarter.
“The overall picture of modest growth conceals a two-speed economy, with steady service sector growth masking a deepening downturn in the manufacturing sector. The survey’s gauge of factory production has slumped to its lowest since August 2009, and indicates that manufacturing output is falling at a quarterly rate of over 1%, led by an increasing rate of loss of export sales.
“The survey’s employment gauge has meanwhile fallen to a level consistent with 130,000 jobs being added in July, down from an average of 200,000, in the first quarter and 150,000 in the second quarter, as firm became increasingly cautious in relation to hiring. Manufacturers are shedding workers at the fastest rate since 2009 and service sector job creation is now down to its lowest since April 2017.
“Future prospects have also darkened to the gloomiest since comparable data were first available in 2012, suggesting that companies may look to tighten their belts further in coming months, dampening spending, investment and jobs growth. Geopolitical worries, trade wars and increasingly widespread expectations of slower economic growth at home and internationally have all pulled business optimism lower.”
Australia employment contracted -227.7k in May, nearly double of expectation of -125.0k. After the decline, 12.2m people were employment. Full-time jobs dropped -89.1k to 8.54m. Part-time jobs dropped -138.6k to 3.62m. Unemployment rate rose 0.7% to 7.1%, worse than expectation of 7.0%. That’s also the highest level in 19 years since October 2001. Participation rate also dropped -0.7% to 62.9%.
“The ABS estimates that a combined group of around 2.3 million people – around 1 in 5 employed people – were affected by either job loss between April and May or had less hours than usual for economic reasons in May,” Bjorn Jarvis, head of labour statistics at the ABS said.
ECB Governing Council member Peter Kazimir has asserted that the recent events in financial markets have not altered his stance on the necessity of continuing with monetary tightening. The Slovak central bank governor acknowledged the delicate nature of the current situation but emphasized that the end goal has not yet been reached.
Kazimir said, “even the current events on the financial markets do not change my view that we need to continue,” with monetary tightening.
“I am very well aware of the delicacy of the situation … but we are not yet at the finish line,” he added.
He said underlying inflation is “stubbornly sticky”. “There are risks to inflation on both sides, but in my view, upward risks are much greater.”
Nevertheless, he also noted it was useless to speculate what ECB could do at next meeting on May 4. ECB raised interest rate by 50bps yesterday, but omitted tightening reference in the accompanying statement.
BoJ Deputy Governor Masayoshi Amamiya said Japan is having “steady progress” towards 2% inflation even though that could take time. And he emphasized that “instead of trying to change public perceptions with a shock blow, we should guide inflation toward our target through steady improvements in the output gap and inflation expectations.”
He added that BoJ will “scrutinise factors that are preventing inflation from accelerating” and “look very carefully into what is happening.” He doesn’t rule out fine-tuning of the ultra-loose monetary policy and “an adjustment could happen if that’s necessary to stably achieve our price target.
German GDP contracted -0.1% qoq in Q2, matched expectations. There were positive contributions from domestic demand, with growth in household final consumption and government final consumption. However, gross fixed capital formation in construction declined. Additionally, development of foreign trade slowed down economic growth because exports recorded a stronger quarter-on-quarter decrease than imports.
German 10-year yield drops to new record low at -0.623 and remains weak for now.
New Zealand government is preparing for the budget for May 14 that puts a lot of focuses on supporting post coronavirus economic recovery. Finance Minister Grant Robertson emphasized “we need to be thinking about when stimulus would have its best effect”. “When consumers are feeling gun shy and restricted in what they actually can do and buy, that’s probably not the best time”, he added “we’ll continue to look at our options for that.” But any further government support “will be substantial”.
Regarding public finances, the country’s level of debt is kept relatively in check despite the fiscal stimulus measures. “One of the reasons we’ve kept it low is because we have tended to be susceptible to global economic shocks and also natural disasters,” he said. “We do this so we’re ready for a rainy day, and it’s pouring outside. We’ll continue to be careful with our spending, but as most countries around the world have done we’ve put in substantial support packages already and there will be more to come.”
ECB Governing Council member Fabio Panetta indicated today that the central has entered entering a phase of monetary easing following the rate cut in June. Speaking at an event, Panetta remarked, “The end of monetary restriction has already begun,” adding that discussions are ongoing regarding the ECB’s next steps in September.
While Panetta refrained from sharing his specific views on the upcoming decision, he suggested that ECB is likely to continue easing monetary conditions.
“I believe it is reasonable to expect that from now on, we will move towards a phase of easing of monetary conditions,” he noted, pointing to falling inflation and a slowing global economy as key factors driving this shift.
ECB Governing Council member Robert Holzmann expressed concerns over the inflationary environment, stating, “We’re not yet in the clear when it comes to inflation.” He accentuated the need for continued rate increases, suggesting that barring unforeseen circumstances, there could be a compelling case to “push on with rate increases without taking a pause” come September.
Holzmann emphasized the advantages of achieving the peak rate swiftly, noting, “It’s better to achieve a peak rate faster, which also means we can eventually start going lower earlier.” He highlighted the challenges for markets in navigating a sporadic “stop-and-go rate path.”
Furthermore, Holzmann acknowledged that the ECB has been “somewhat behind the curve” in its endeavors to combat inflation. When quizzed on the possibility of continued rate hikes beyond September, he remarked that once rates reach the 4% threshold, the matter would be up for discussion again.
On the topic of Eurozone’s economic health, Holzmann offered a measured perspective. While conceding that the economy isn’t performing at the anticipated level, he was quick to dismiss fears of an impending recession. He characterized the current economic landscape as one of stagnation, stating, “We’re looking at a stagnating economy.”
US personal income rose 0.7% mom to USD 155.3B in October, above expectation of 0.4% mom. Personal spending rose 0.8% mom to USD 147.9B, matched expectations.
For the month, PCE price index rose 0.3% mom, below expectation of 0.5% mom. PCE core (excluding food and energy) rose 0.2% mom, below expectation of 0.4% mom.
From the same month ago, PCE price index slowed from 6.3% yoy to 6.0% yoy, below expectation of 6.0% yoy. PCE core price index slowed from 5.2% yoy to 5.0% yoy, matched expectations. Prices for goods rose 7.2% yoy and prices for services rose 5.4% yoy. Food prices rose 11.6% yoy and energy prices rose 18.4% yoy.
Eurozone retail sales rose 0.4% mom in February, well above expectation of 0.1% mom. Though, it’s still notably lower than January’s growth of 0.9% mom. In EU 28, retail sales also rose 0.4%.
In response to new tariff intention of the US, EU warned in a statement that “it creates uncertainty for companies and inflicts unnecessary economic damage on both sides of the Atlantic.”
“By potentially targeting new products, the US is increasing this damaging impact due to the cost of new disruptions to supply chains for the products potentially subject to new duties.” “This is particularly the case as companies are now trying to overcome the economic difficulties in the aftermath of the Covid-19 crisis.”
USTR announced earlier this week a list of 30 product lines that could be subjected to new tariffs. The news items, equivalent to around USD 3.1B of imports from EU annually, could be hit will tariffs of as much as 100%.
US unemployment rate dropped to 3.7% in September, down from 3.9% and beat expectation of 3.8%. That’s the lowest level in 49 years. Participation rate was unchanged 62.7%. Headline non-farm payrolls number missed expectation and grew only 134k versus consensus of 188k. But prior month’s upward revisions, from 201k to 270k, was more than enough to cover. Average hourly earnings rose 0.3% mom, matched expectations. Also from US, trade deficit widened to USD -53.2B in August.
From Canada, employment grew another impressive 63.3k in September, nearly double of expectation of 32.5k. Unemployment rate dropped to 5.9%, down fro 6.0% and matched expectations. Trade balance showed CAD 0.5B surplus versus expectation of CAD -1.4B deficit.
US ISM Services PMI dropped from 64.1 to 61.7 in August, slightly above expectation of 61.3. Looking at some details, business activity/production dropped from 67.0 to 60.1. New orders dropped from 63.7 to 63.2. Employment dropped slightly from 53.8 to 53.7. Prices dropped from 82.3 to 75.4.
ISM said: “The past relationship between the Services PMI and the overall economy indicates that the Services PMI for August (61.7 percent) corresponds to a 4.4-percent increase in real gross domestic product (GDP) on an annualized basis.”
Canada CPI surged to 3.4% yoy in April, up from March’s 2.2% yoy, above expectation of 3.2% yoy. Statistics Canada said that “a significant proportion of this increase was attributable to a steep decline in prices in April 2020, as the monthly CPI rose 0.5% in April 2021”. Excluding energy, CPI rose 1.6% yoy, up from 1.1% yoy.
CPI common rose to 1.7% yoy, up from 1.5% yoy, matched expectations. CPI median rose to 2.3% yoy, up from 2.1% yoy, above expectation of 2.1% yoy. CPI trimmed rose to 2.3% yoy, up from 2.2% yoy, matched expectations.
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German retail sales rose 0.5%, below expectations
German retail sales rose 0.5% mom in August, below expectation of 0.6% mom. Over the year, retail sales rose 3.2% yoy. Unemployment dropped -10k in September versus expectation of 5k. Unemployment rate was unchanged at 5.0% in September, matched expectations.