Fri, Nov 15, 2019 @ 08:30 GMT

Eurozone Sentix investor confidence dropped sharply to 9.3 as expectation collasped

    Eurozone Sentix Investor confidence dropped sharply to 9.3 in June, down from 19.2 and well below expectation of 18.6. And, for the fifth time in a row, overall index for GErmany dropped to its lowest level since July 2016. Expectation “collapsed” to -13.3, hitting the lowest level since August 2012.

    Quote from the release:

    “Now they are here, the American punitive tariffs. So far, this has done less harm than one might think to global economic expectations. It appears that investors still hope that the world’s trade dispute with the US will not get out of control. Investors, on the other hand, are far less lenient with developments within the euro zone. The new government in Rome is very sceptical. This is so strong that economic expectations in the euro zone are downright tilting.”

    Full release here.

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    Australia job growth driven by part time jobs, participation rate fell

      Australia job market grew 21.6k in December, above expectation of 18.1k. Full-time jobs, however, dropped -3k. Part-time jobs rose 24.6k. Unemployment rate dropped -0.1% to 5.0%, better than expectation of 5.0%. That equals the lowest level in more than 6 years, as touched back in September and October. However, participation rate dropped by -0.1% to 65.6%.

      Full release here.

      While the set of data was solid, it isn’t too encouraging and paints no sign of tightening in the Australian job market. AUD/USD dips through 0.7116 minor support, which suggests completion of rebound form flash crash low at 0.6722. Further downside would be seen in the pair.

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      CBI: UK retail sales fell for fifth month in September, but at slower pace

        According to UK CBI Distributive Trades Survey, retail sales volume in year to September contracted for the fifth consecutive month at -16%. But that was already a notably improvement from -49% in August, and beat expectation of -26%. Also retailers are expecting sales volume to drop at an even slow pace at -5% next month.

        Rain Newton-Smith, CBI Chief Economist, said: “Five successive months of falling volumes tells its own story about the tough conditions retailers are having to operate in. Add to this the pressures of Sterling depreciation and the need to plan for potential tariffs and supply issues in the event of a no-deal Brexit and you get a gloomy picture for the sector.

        “Retailers are also grappling with ongoing challenges such as digital disruption and the cumulative burden of government policies. Reforming an outdated business rates system and a more flexible apprenticeship levy which delivers better value for money could really help to alleviate the pressure on retailers during these difficult times.”

        Full release here.

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        BoJ Kuroda to maintain ultra loose policy until inflation hits target

          BoJ Governor Haruhiko Kuroda said at a quarterly meeting of regional branch managers that the central bank would maintain its ultra-loose monetary policy until inflation hits 2% target. He added that the economy is expanding moderately and is expected to continue with it. Consumer inflation, however, is moving between 0.5% to 1.0%.

          BoJ will continue to pursue current policy under the yield curve control framework for as long as needed. The monetary policy will be adjusted when necessary to maintain economic momentum.

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          Japan MoF to monitor FX closely after flash crash, BoJ may downgrade inflation outlook

            After yesterday’s spike in Yen, Masatsugu Asakawa, Japan’s Vice Finance Minister for International Affairs, said the ministry will “monitor the situation for speculative moves in the foreign exchange market.” He noted that “volatility remains quite high high during Sydney trading.” And, “currency markets are trading in extremely thin liquidity, exacerbating price movements.” For for now, the MoF is not considering to call a meeting with the BoJ on the issue yet.

            Talking about the BoJ, Nikkei Asian review reported that BoJ board is considering to lower inflation outlook again due to lower oil prices. For fiscal 2019, core inflation forecast could be lowered to 1%, down from October projection of 1.4%. For fiscal 2020, however, there might be just slight revision to current forecast of 1.5%.

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            US consumer confidence dropped to 120.1 on temporary shock

              US Conference Board Consumer Confidence dropped to 120.2 in January, down from 128.1 and missed expectation of 125.0.

              Conference board noted in the release that “Shock events such as government shutdowns (i.e. 2013) tend to have sharp, but temporary, impacts on consumer confidence. Thus, it appears that this month’s decline is more the result of a temporary shock than a precursor to a significant slowdown in the coming months.”

              Full release here.

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              RBA minutes reiterated no strong case for near term rate move

                The minutes of September 4 RBA meeting provided practically no surprise at all. most importantly, RBA reiterated that “the next move in the cash rate would more likely be an increase than a decrease.” However, “there was no strong case for a near-term adjustment in monetary policy.”

                RBA also noted that a few global central banks including the Fed were expected to continuing rate hikes. This had been reflected in the markets, “most notably a broad-based appreciation of the US dollar” that “raised risks” for some, especially for “fragile emerging” markets. However, “the modest depreciation of the Australian dollar was helpful for domestic economic growth.”

                The central bank also noted that there were “still significant tensions around global trade policy” that represented a “material risk” to the global outlook.

                Full minutes here.

                Also from Australia, house price index dropped -0.7% qoq in Q2, matched expectations.

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                Italy to target budget deficit at 2.4% of GDP for the next three years

                  Euro wasn’t too bothered after Italian government confirmed raising budget deficit, which would put them at odds with the EU. After the highly anticipated cabinet meeting, they decided to target budget deficit at 2.4% of GDP for the next three years. That is, Economy Minister Giovanni Tria, an unaffiliated technocrat, conceded his push for lowering deficit to just 1.6% of GDP, and then 2.0% in 2019.

                  “There is an accord within the whole government for 2.4 percent, we are satisfied, this is a budget for change,” 5-Star Movement leader Luigi Di Maio and League leader Matteo Salvini, both Deputy Prime Ministers, said in a joint statement after meetings with Tria.

                  Prime Minister Giuseppe Conte said the budget goals were “considered, reasonable and courageous” and would “ensure more robust economic growth and significant social progress for our country.” He added the budget plan included “the biggest program of public investments ever carried out in Italy.”

                  While the 2.4% deficit target remains below EU rule of 3.0%, EU might find a lack of commitment on Italy’s side to cut its massive debt.

                  Euro is trading mixed for the day and the week.

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                  UK Raab stubbornly optimistic on a Brexit deal

                    UK Brexit Minister Dominic Raab and EU chief negotiator Michel Barnier are going to have a marathon six-hour session today. Raab said that he was “stubbornly optimistic” to reach a deal with the EU. He added that “valuable progress” was made but there is clearly “more work to do. And, he is “confident, if not more confident, now that a Brexit deal can be reached”.

                    Barnier, on the other hand, emphasized that with “no backstop” no the Irish border, “there’s no deal”. And he urged that “operational backstop is a matter of some urgency”. He also reiterated the upbeat comment that the future partnership with the UK is “unprecedented”. And he’s optimistic that a deal could be reached by October.

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                    Atlanta Fed Bostic: Some overshoot in inflation is fine

                      Altlanta Fed President Raphael Bostic said in an interview:

                      • “We have seen some upward pressure” on inflation.
                      • “We don’t have the ability to stop trends on a dime. Some overshoot is fine,”
                      • If current trends continue, “we are going to see wages start to go up because we will truly have a scarcity of labor,”
                      • “I am not sure there is a big signal” in that on inflation.
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                      US PMIs improved, but point to subdued 1.5% annualized Q3 GDP growth

                        US PMI Manufacturing rose to 51.0 in September, up from 50.3, beat expectation of 50.3. PMI Services also rose to 50.9, up from 50.7, but missed expectation of 51.5. PMI Composite rose to 51.0, up from 50.7.

                        Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit, said:

                        “The survey indicates that businesses continue to struggle against the headwinds of trade worries and elevated uncertainty about the outlook. Although picking up slightly, the overall rate of growth in September remained among the weakest since 2016, commensurate with GDP rising in the third quarter at a subdued annualized rate of approximately 1.5%. Prospects also look gloomy, with inflows of new business down to the lowest since 2009 and firms’ expectations of growth over the coming year stuck at one of the most subdued levels since 2012.

                        “Jobs are now also being cut across the surveyed companies for the first time since January 2010, as firms have become more risk averse and increasingly eager to cut costs. At current levels, the survey employment index is indicative of non-farm payroll growth falling below 100,000.

                        “Price pressures have meanwhile also eased, with both input costs and average selling prices for goods and services dropping again in September, painting a picture of the weakest corporate inflationary pressures for a decade.

                        “Key to the recent deterioration has been a further spill-over of the trade-led slowdown in manufacturing to the service sector. Inflows of new service sector business almost stalled in September to register the smallest rise since the survey began in 2009. A ray of light comes from manufacturing reporting some easing of headwinds, though factory conditions likewise remained among the toughest since 2009 to underscore the broad-based nature of the current lassitude.”

                        Full release here.

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                        Bundesbank: Downturn forces prevalent in Germany industry, may intensify somewhat

                          Germany’s Bundesbank said in the monthly report that the rebound in Q1 was largely due to one-off factors. Underlying momentum in the economy remained weak and growth might not sustain.

                          It noted that “these effects, which had largely driven growth after the turn of the year, are expected to lapse or even reverse… Moreover, downturn forces continue to be prevalent in industry, and they may even intensify somewhat.”

                          In addition, automakers were facing weaker external demand. Global car sales were expected to contract further in 2019, extending the drop in 2018.

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                          US jobless claims dropped to 228k, trade deficit at USD -50B

                            US initial jobless claims dropped -2k to 228k in the week ending May 4, above expectation of 220k. Four-week moving average of initial claims rose 7.75k to 220.25k.

                            Continuing claims rose 13k to 1.684M in the week ending April 27. Four-week moving average of continuing claims dropped -8k to 1.666M.

                            PPI rose 0.2% mom, 2.2% yoy in April, versus expectation of 0.2% mom, 2.3% yoy. PPI core rose 0.1% mom, 2.4% yoy, versus expectation of 0.2% mom, 2.5% yoy.

                            Trade deficit rose 1.5% to USD 50.0B in March, better than expectation of USD -51.4B. Exports rose 1.0% to USD 212.0B. Imports rose 1.1% to USD 262.0B.

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                            Bullard: Fed should wait and see before next move, not respond to each tit-for-tat

                              Yesterday, St. Louis Fed President James Bullard, one of the most dovish policymaker, said Fed shouldn’t response to every move in trade war. He said that Fed’s shift since the beginning of the year had made monetary policy “considerably” looser already. And, he added, “I don’t think it is realistic for the Fed to respond to each threat and counter threat in a tit-for-tat trade war”.

                              Bullard also said the economy is still adjusting to the looser stance. And it was appropriate to “wait and see” how upcoming economic data “roll in” before deciding the next move. He noted that “while additional policy action may be desirable, the long and variable lags in the effects of monetary policy suggest that the effects of previous actions are only now beginning to impact macroeconomic outcomes”.

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                              Irish Coveney said Brexit text 90% done, outstanding issues predominantly Ireland related

                                Irish Foreign Minister Simon Coveney the Brexit withdrawal treaty is “already about 90% agreed in terms of text”. And, “the issues that haven’t been signed off on yet relate predominantly to Ireland and what’s needed now is the two negotiating teams to lock themselves in a room for the next 10 days.”

                                European Commission President Jean-Claude Juncker said earlier in the weekend that “the rapprochement potential between both sides has increased in recent days”. He added, it’s unsure whether the work will be finished in October, but “If not, we’ll do it in November.” And he emphasized EU’s “will is unbroken to reach agreement”

                                European Council President Donald Tusk also said “We will try for it in October… and I think there is a chance to have an accord by the end of the year.”

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                                Corbyn tells May to move red lines and give big offer on Brexit

                                  UK opposition Labour Jeremy Corbyn said there is no big offers from Prime Minister Theresa May on Brexit yet. An he urged May to move her red lines.

                                  Corbyn said “So far in those talks there’s been no big offer and the red lines are still in place.” “Its actually quite difficult negotiating with a disintegrating government, with cabinet ministers jockeying for succession rather than working for an agreement.”

                                  “Quite honestly, the government has to move its red lines. We cannot go on having MV1, MV2, MV3 and then coming on for possibly MV4 or a bill we have yet to actually see” he added.

                                  May’s spokesperson said there are significant work to do to reach a unified way forward to break a parliamentary impasse over Brexit. And the government is working hard to introduce the Brexit Withdrawal Agreement bill as soon as possible.

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                                  UK Hammond: Full scale trade war a disaster for everyone, not least for US

                                    UK Chancellor of Exchequer Philip Hammond said today that “I very much hope that we can avoid a full scale trade war (because) that would be a disaster for everyone, not least for the United States”. He added that “but what I can say is this: whatever happens the UK will remain an outspoken proponent of open markets and free trade, low tariff barriers and low non-tariff barriers.”

                                    Also Hammond said that “we live in uncertain times because the old certainty for many decades has been that the United States was completely wedded to open markets and free trade.”

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                                    UK Johnson said EU position on Irish backstop needs to change before Brexit talks

                                      UK Prime Minister Boris Johnson’s spokesman said today that John is ready for Brexit talks, only when EU is willing to change its position.

                                      The spokesman said “the PM has been setting out to European leaders the position … that the Withdrawal Agreement with the backstop has not been able to pass parliament on the three occasions it was put in front of parliament. Therefore it needs to change”.

                                      And, “the prime minister would be happy to sit down when that position changes. But he is making it clear to everybody he speaks to that that needs to happen.”

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                                      US non-farm payroll grew 164k, unemployment rate unchanged at 3.7%, wage growth accelerated

                                        US non-farm payroll grew 164k in July, slightly below expectation of 169k. That was still in-line with the average growth in the first six months of the year, but notably below 2018 average of 223k per month. Prior month’s figure was revised down from 224k to 193k.

                                        Unemployment rate was unchanged at 3.7%, matched expectation. Participation rate was unchanged at 63.0%. The upside surprise comes from wage growth. Average hourly earnings rose 0.3% mom in July, above expectation of 0.2% mom.

                                        Also released, US trade deficit narrowed slightly to USD -55.2B in June. Canada trade surplus came in smaller than expected at CAD 0.1B.

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                                        US PMIs dropped slightly, enjoying sustained robust economic growth in Q4

                                          US PMI manufacturing dropped to 55.4 in November, down fro 55.7, missed expectation of 55.8. PMI services dropped to 54.4, down from 54.8, missed expectation of 55.0. PMI composite dropped to 54.4, down from 54.9.

                                          Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

                                          “Solid flash PMI numbers for November add to evidence that the US is enjoying sustained robust economic growth in the fourth quarter. The surveys are broadly consistent with the economy growing at an annualized rate of 2.5%, building further on the country’s best growth spell since 2014 seen in the second and third quarters.

                                          “The November survey does raise some warning flags to suggest growth could slow in coming months. In particular, growth of hiring has waned as companies grew somewhat less optimistic about the outlook. Goods exports also appear to also be coming under increasing pressure, often linked to trade wars having dampened demand. However, it should also be remembered that some pull back in growth was to be expected after October’s numbers were boosted by a post-hurricane rebound, especially given the historically high levels of production, order books and employment.

                                          “With growth remaining reassuringly robust and price pressures elevated, policymakers will be encouraged that the economy has so far withstood both the headwinds of trade war worries and the steady progress made to date towards normalising interest rates.”

                                          Full release here.

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