Japan PMI manufacturing ticked up to 54.6, services tumbled to 46.6

    Japan PMI Manufacturing ticked up from 54.3 to 54.6 in January, below expectation of 55.0. PMI Services dropped sharply from 52.1 to 46.6. PMI Composite also dropped from 52.5 to 48.8.

    Usamah Bhatti, Economist at IHS Markit, said: “Flash PMI data indicated that activity at Japanese private sector businesses dipped into contraction territory for the first time in four months at the start of 2022. The pace of decline was modest, and led by the sharpest fall in services activity since August, while manufacturers commented on a slight quickening in output growth.”

    Full release here.

    Australia PMI composite dropped to 45.3, slipped from strong recovery to contraction

      Australia PMI Manufacturing dropped from 57.7 to 55.3 in January. PMI Services tumbled sharply from 55.1 to 45.0. PMI Composite also dropped from 54.9 to 45.3, first contraction follow three months of growth. All are at their 5-month low.

      Jingyi Pan, Economics Associate Director at IHS Markit, said: “The Australian economy had slipped from a state of strong recovery in end-2021 to being affected by the surge in COVID-19 infections at the start of 2022… Supply issues meanwhile remained prevalent… This had led to input price inflation worsening Employment levels were unchanged.”

      Full release here.

      ECB Rehn: Economic data to remain good despite Omicron

        ECB Governing Council member Olli Rehn said over the weekend, “personally, I expect the economic data to remain relatively good despite being affected by the Omicron variant.” He added that rate hikes in 2023 would be a logical step if there are no new economic shocks.

        He added upward pressure on inflation will subside over the course of the year. Inflation is expected to hover around ECB’s target of 2% in the next two years.

        Canada retail sales rose 0.7% mom in Nov, to drop -2.1% mom in Dec

          Canada retail sales rose 0.7% mom to CAD 58.1B in November, below expectation of 1.0% mom. The increase was led by higher sales at gasoline stations (+4.9%), building material and garden equipment and supplies dealers (+3.0%) and food and beverage stores (+1.0%).

          Sales increased in 6 of 11 subsectors, representing 63.8% of retail trade. Core retail sales—which exclude gasoline stations and motor vehicle and parts dealers—increased 0.5%.

          According to advance estimate, sales decreased -2.1% mom in December.

          Full release here.

          UK retail sales dropped -3.7% mom in Dec, well below expectations

            UK retail sales dropped sharply by -3.7% mom in December, much worse than expectation of -0.6% mom decline. Overall retail sales volume was still 2.6% higher than their pre-coronavirus February 2020 levels. For the year, sales volume dropped -0.9% yoy, below expectation of 4.2% yoy. Between 2020 and 2021, volume of retail sales rose by 5.1%, which is the strongest since 2004.

            Full release here.

            Bitcoin breaks 40k, Ethereum breaks 3k, as selloff resumes

              Bitcoin breaks down through 39636 temporary support today, after another rejection by 4 hour 55 EMA. Down trend from 68986 resumes and should now target 61.8% projection of 68986 to 41908 from 52101 at 35366. For now, such decline is seen as part of a long term range pattern between 29261 and 68986 only. Hence, momentum to start to diminish below 35366, and a bottom should be formed above 29261 low. Nevertheless, break of 44448 resistance is needed to indicate bottoming, or risk will stay heavily on the downside.

               

              Ethereum also resumes recent fall from 4863.75 by breaking through 2927.20 today. Next target is 100% projection of 4863.75 to 3439.00 from 4126.20 at 2701.45, which is close to 2647.30 support. Downside momentum should start to diminish below this level. The question is where between 1715.62/2647.30 would ethereum forms a bottom. But in any case, break of 3411.05 is needed to indicate bottoming first, or risk will stay heavily on the downside. The fall from 4863.75 could eventually extend to 161.8% projection at 1820.95, which is close at 1715.62 low, become finishing.

               

              Japan CPI core unchanged at 0.5% yoy in Dec

                Japan CPI core (all item ex-food) was unchanged at 0.5% yoy in December, below expectation of 0.6% yoy. But that’s still the second increase in a row, and the fastest pace in nearly two years. All item CPI accelerated from 0.6% yoy to 0.8% yoy. All item ex-food, ex-energy CPI dropped from -0.6% yoy to -0.7% yoy.

                In the minutes of December BoJ meeting, a board member said, “we’re seeing signs of change in the price-setting behavior of Japanese firms, which had been said to be cautious about raising prices for fear of seeing sales volume fall,.”

                Another member noted, “it’s unlikely Japan will see wages rise as sharply as in the United States. But there’s a significant chance both economic growth and inflation could overshoot expectations,”

                Earlier this week, BoJ raised 2022 and 2023 core CPI projection. But it also indicated there is no rush to change the ultra-loose monetary policy.

                New Zealand BusinessNZ PMI rose to 53.7, return to growth

                  New Zealand BusinessNZ Performance of Manufacturing Index rose from 51.2 to 53.7 in December. Looking at some details, Production rose from 53.0 to 56.3. Employment rose from 48.5 to 52.0. New orders rose from 55.4 to 57.5. Finished stocks rose from 48.7 to 52.0. Deliveries rose from 43.9 to 50.0.

                  BNZ Senior Economist, Doug Steel stated that “in the final quarter of 2021 the PMI averaged 53.2, indicating a return to positive manufacturing GDP growth after a sharp negative in the prior quarter.”

                  Full release here.

                  US jobless claims rose sharply by 55k to 286k

                    US initial jobless claims rose sharply by 55k to 286k in the week ending January 15, well above expectation of 215k. Four-week moving average of initial claims rose 20k to 231k.

                    Continuing claims rose 84k to 1635k in the week ending January 8. Four-week moving average of continuing claims dropped -55k to 1664k, lowest since April 27, 2019.

                    Full release here.

                    ECB accounts: Higher for longer inflation scenario cannot be ruled out

                      In the accounts of ECB’s December 15-16 meeting, Governing Council members concurred that the “recent and projected near-term increase in inflation was driven largely by temporary factors that were expected to ease in the course of 2022. ” However, it was also “cautioned” that a “‘higher for longer’ inflation scenario could not be ruled out.”

                      Thus, ECB should “communicate clearly that it was ready to act if price pressures proved to be more persistent and inflation failed to fall below the target as quickly as the baseline projections foresaw.” On the other hand, concerns were also expressed about “premature scaling back of monetary stimulus and asset purchases.”

                      A “large majority” of members agreed with the policy changes, including scaling back the pace of PEPP purchases in Q1, extend the PEPP reinvestment horizon until at changes end of 2024, increase APP net purchases temporarily.

                      But some couldn’t support the overall package on some reservations on “recalibration of APP purchases and the extension of the minimum PEPP reinvestment period, as well as the statement about flexibility in future asset purchases beyond the confines of the specific circumstances of the present pandemic.”

                      Full meeting accounts here.

                      Eurozone CPI finalized at 5% yoy in Dec, EU at 5.3% yoy

                        Eurozone CPI was finalized at record 5.0% yoy in December, up from November’s 4.0%. Core CPI was finalized at 2.6% yoy. The highest contribution to came from energy (+2.46%), followed by services (+1.02%), non-energy industrial goods (+0.78%) and food, alcohol & tobacco (+0.71%).

                        EU CPI was finalized at 5.3% yoy, up from November’s 5.2% yoy. The lowest annual rates were registered in Malta (2.6%), Portugal (2.8%) and Finland (3.2%). The highest annual rates were recorded in Estonia (12.0%), Lithuania (10.7%) and Poland (8.0%). Compared with November, annual inflation fell in seven Member States, remained stable in two and rose in eighteen.

                        Full release here.

                        ECB Lagarde: We have every reason not to act like Fed on inflation

                          ECB President Christine Lagarde told France Inter radio inflation will “stabilize” and “ease gradually in the course of 2022. “.

                          “The cycle of the economic recovery in the U.S. is ahead of that in Europe. We thus have every reason not to act as rapidly and as brutally that one can imagine the Fed would do,” she said.

                          Nevertheless, she added, “we have started to react and we obviously are standing ready, to react by monetary policy measures if the figures, the data, the facts demand it.”

                          Japan export rose 17.5% yoy in Dec, imports rose 41.1% yoy

                            Japan’s export rose 17.5% yoy to record JPY 7881B in December, slowing from November’s 20.5% yoy, but beat expectation of 15.9% yoy. Exports to China grew 10.8% yoy while shipments to US rose 22.1% yoy.

                            Imports rose 41.1% yoy to record JPY 8463B, the second month with rate above 40% following November’s 43.8% yoy, but missed expectation of 42.8% yoy. Trade deficit came in at JPY -582B.

                            In seasonally adjusted term, exports dropped -0.2% mom to JPY 7363B while imports dropped -0.7% mom to JPY 7799B. Trade deficit narrowed to JPY -435B.

                            HK HSI jumps after PBoC rate cut, heading back to 26k

                              China’s PBoC cut the one year loan prime rate by 10 bps to 3.70%. The second rate cut since April 2020 following December’s. Five-year loan prime rate was lowered by 5bps to 4.60%, first cut since April 2020. Along with the rate cuts, PBoC also injected more liquidity to the markets by offering CNY 700B of one-year loans, exceeding the CNY 500B maturing.

                              Hong Kong HSI responds positively to the news and it’s trading up 2.5% at the time of writing. Resumption of the rise from 22655.25 after notably support from 55 day EMA is a bullish sign, along with bullish convergence condition in daily MACD. Current rise should at least be correcting the down trend from 31183.35, with prospect of even reversing it. Further rally is now in favor back to 38.2% retracement of 31183.35 to 22665.25 at 25919.16, which is close to 26k handle.

                              AUD/NZD soars, setting up long term up trend?

                                AUD/NZD soars in response to much better than expected Australia job data, and heightened expectation of RBA rate hike this year. The strong break of 100% projection of 1.0278 to 1.0610 from 1.0314 at 1.0646 is seen as a sign of upside acceleration. Further rally is now expected as long as 1.0583 support holds. Next target is 161.8% projection at 1.0851.

                                The bigger question now is whether the medium term fall from 1.1042 has completed as a corrective pattern, with three waves down to 1.0278. Break above above mentioned 1.0851 resistance will add credence to this bullish case. That would also argue that rise from 1.2078 is developing into a long term up trend, resuming the move from 2019 low at 0.9992 through 1.1042.

                                Australia unemployment rate dropped to 4.2%, lowest since 2008

                                  Australia employment grew 64.8k in December to 13.242m, well above expectation of 30.0k. Full time jobs rose 41.5k while part-time jobs rose 23.3k. Unemployment rate dropped from 4.6% to 4.2%, better than expectation of 4.5%. That’s also the lowest rate since August 2008. Participation rate was unchanged at 66.1%. Hours worked rose 1.0% or 18.2m hours.

                                  Bjorn Jarvis, head of labour statistics at the ABS, said: “The latest data shows further recovery in employment following the large 366,000 increase in November. This provides an indication of the state of the labour market in the first two weeks of December, before the large increase in COVID cases later in the month.”

                                  “This is the lowest unemployment rate since August 2008, just before the start of the Global Financial Crisis and Lehman Brothers collapse, when it was 4.0 per cent. This is also close to the lowest unemployment rate in the monthly series – February 2008 – and for a rate below 4.0 we need to look back to the 1970’s when the survey was quarterly,” Javis added.

                                  Full release here.

                                  Gold resumes rebound, targeting 1861 next

                                    Lagging behind Silver a little bit, Gold also resumes rebound from 1752.32 by breaking through 1831.66 and hits as high as 1837.12 so far. Further rally should now be seen as long as 1805.59 support holds. Next target is 100% projection of 1752.32 to 1831.66 from 1782.48 at 1861.82.

                                    But the main question is whether it’s ready to break out from the medium term range set at 1676.65. We’ll monitor the reaction to 1861.82. Sustained break there could trigger upside acceleration through 1877.05 to 161.8% projection at 1910.85, and set the stage for breakout. However, rejection by 1861.82, or failure to even hit it, will keep medium term outlook neutral for more sideway trading.

                                    BoE Bailey: Higher inflation could restrain demand in the economy

                                      BoE Governor Andrew Bailey told the parliament’s Treasury Committee, that higher inflation could hit demand and employment, eventually bring prices down.

                                      “This a hard thing to say … but if you get pressure on cost of living, pressure on real earnings, that will tend to restrain demand in the economy… and that could lead to an output gap opening up, and it could eventually of course lead to higher unemployment and that would bring inflation down,” he said.

                                      “I don’t want to suggest that … were we to consider it necessary, we don’t have to take any action in terms of the Bank of England’s action on interest rates. We would obviously judge that ourselves. But there is another channel there which would weaken demand in the economy,” he added.

                                      Canada CPI rose to 4.8% yoy in Dec, highest since 1991

                                        Canada CPI ticked up from 4.7% yoy to 4.8% yoy in December above expectation of 4.7% yoy. That’s the highest level since September 1991. Excluding gasoline, CPI rose 4.0% yoy. On monthly basis, CPI dropped -0.1% mom, first decline since December 2020, in response to lower demand due to Omicron.

                                        CPI common rose from 2.0% yoy to 2.1% yoy matched expectations. CPI median rose from 2.8% yoy to 3.0% yoy, above expectation of 2.9% yoy. CPI trimmed jumped from 3.4% yoy to 3.7% yoy, above expectation of 3.4% yoy.

                                        Full release here.

                                        Silver resumes rebound from 21.39, targeting 23.90 first

                                          Silver’s rebound from 21.39 resumed by breaking through 23.42 and hitting as high as 23.63 so far. Further rise is now in favor as long as 22.79 support holds. Next target is 100% projection of 21.39 to 23.42 from 21.93 at 23.90.

                                          The main question is still on whether corrective pattern from 30.07 has completed as a five-wave descending triangle at 21.39. Break of 23.90 projection level will affirm the bullish case. Upside acceleration could then follow to 161.8% projection at 25.21, which is close to 25.39.

                                          However, rejection by 21.39 will keep the rebound from 21.39 corrective and maintain medium term bearishness.