Eurozone economic sentiment rose to 117.8, employment expectation rose to 113.6

    Eurozone Economic Sentiment Indicator rose slightly from 117.6 to 117.8 in September, above expectation of 116.9. Employment Expectation Indicator rose 0.8 pts to 113.6, highest since 2018. Industrial confidence rose from 13.8 to 14.1. Services confidence dropped from 16.8 to 15.1. Consumer confidence rose from -5.3 to -4.0. Retail trade confidence dropped from 4.6 to 1.3. Construction confidence rose from 5.5 to 7.5.

    EU ESI was unchanged at 116.6 while EEI rose 1 pt to 113.6 (highest since 2018). Amongst the largest EU economies, the ESI rose in Spain (+1.7), Germany (+0.8), the Netherlands and Poland (both +0.6), while it worsened in France (-1.3) and Italy (-0.9).

    Full release here.

    ECB Mersch: Recalibration could be rectification or more targeted and focused

      ECB Executive Board member Yves Mersch said in an interview that the second coronavirus lockdown in European has been “much less growth-damaging and much more targeted “. Still there is an “increase in fragmentation”, with divergence between services and manufacturing sectors. Some countries are more exposed to the pandemic consequences.

      Overall, it’s “difficult to maintain positive growth going into the fourth quarter”. Germany might achieve it but others not. But it’s “premature to conclude that will last into next year with consecutive quarters of negative growth.

      On ECB’s policies, Mersch said recalibration could be rectification, “simply an extension “on the time axis” or “of the volume or the intensity”. A second approach is “more targeted, or more focused, or on the contrary consider now untested instruments, a theoretical possibility in an all encompassing discussion.”

      Full interview here.

      Gold losing upside momentum, corrective recovery ending soon

        Gold’s recovery from 1280.85 lost momentum after hitting 1324.49 and retreats notably today. The structure of the recovery suggests that it’s merely a corrective move. And it could be ending soon.

        Hence, even in case of another rise through 1324.49, upside should be limited below 1346.71 high to bring another decline. On the downside break of 1303.25 minor support will bring deeper fall to retest 1280.85 support.

        In the bigger picture, it’s getting more likely that 1346.71 is a medium term bottom on bearish divergence in daily MACD. Channel support will likely be taken out on next decline, which will put 1276.76 cluster support (38.1% retracement of 1160.17 to 1346.17 at 1275.45) back into focus.

        Decisive break of 1275.45/1276.76 should confirm completion of whole rise from 1160.17. In that case, gold should have started another falling leg inside the long term range pattern. Deeper fall should then be seen back towards 61.8% retracement at 1234.42 and below.

        But still, as mentioned above, break of 1303.25 support is needed to indicate near term reversal first.

        Australia employment grew 115.2k in May, unemployment drop to pre-pandemic 5.1%

          Australia employment rose 115.2k in May, above expectation of 30.0k. Full time jobs grew 97.5k. Part-time jobs rose 17.7k. Unemployment rate dropped to 5.1%, down from 5.5%, much better than expectation of of 5.5%. Participation rate also rose 0.3% to 66.2%.

          Bjorn Jarvis, head of labour statistics at the ABS, said May was the seventh consecutive monthly fall in the unemployment rate. “The unemployment rate fell to 5.1 per cent, which was below March 2020 (5.3 per cent) and back to the level in February 2020 (5.1 per cent). The declining unemployment rate continues to align with the strong increases in job vacancies”.

          Full release here.

          Germany Gfk consumer climate dropped to 2.7, lowest since 2009

            Germany Gfk consumer climate for April dropped to 2.7, down from March’s 8.3. The index is at its lowest level since May 2009, when consumer climate was at 2.6 during the global financial crisis. Economic expectations dropped by -20.4pts to -19.2, lowest since August 2012. Income expectations dropped -13.4 pts to 27.8, lowest in 7 years.

            “In light of the current development, we are withdrawing our consumer forecast of one percent growth for 2020. Retailers, manufacturers and service providers must prepare for a recession,” explains Rolf BĂĽrkl, GfK Consumer Expert. “How severe this recession will be will ultimately depend on when the economy finds its way back to normality. A reliable forecast regarding consumption can only be made once we can predict how long the protective measures to combat corona will remain in place.”

            Full release here.

            EU-US statement on trade well received, but scepticism remains

              The joint statement of Juncker and Trump is well received by both sides in general. .The Alliance of Automobile manufacturers said the announcement “demonstrates that bilateral negotiations are a more effective approach to resolving trade barriers, not increasing tariffs.” German Economy Minister Peter Altmaier tweeted that “breakthrough achieved that can avoid trade war and save millions of jobs! Great for global economy.”

              But Eric Schweitzer, president of the German Chambers of Industry and Commerce appeared to be a bit skeptical. He said “the proposed solutions move in the right direction, but a significant portion of scepticism remains.” He emphasized that “only united as Europeans do we have sufficient economic and political weight to effectively represent our interests.” And Schweitzer warned that “without strong European answers, there is a danger that only we will make concessions and in response face new unreasonable demands from the USA.”

              Eurozone Sentix investor confidence dropped to -5.8, lowest since 2014, Germany even worse

                Eurozone Sentix Economic Index dropped to -5.8 in June, down from -3.3 and missed expectation of 0.2. It’s also the lowest level since November 2014. Current Situation Index dropped from 6.0 to 1.8, lowest since February 2015. Expectations Index also dropped from -12.3 to -13.0, lowest since February 2019.

                Sentix noted that after the supposed de-escalation signals in US-China trade war at G20, there was “great hope that the downward trend in the economy could be stopped”. But, investors are “not blinded by the rising share prices” as expectations show no upward reaction to the news. It warned, “without resilient negotiation results, it will be difficult for investors worldwide to develop a different perspective.”

                For Germany, Overall Economic Index dropped from -0.7 to -4.8, lowest since November 2009. Current Situation Index dropped from 13.5 to 7.0, lowest since April 2010. Expectations Index dropped from -14.0 to -16.0, lowest since February 2019.

                Sentix said “things are even worse for the German economy”. “The high dependence on exports and the Chinese sales market is increasingly becoming a burden and the customs dispute hovers like a sword of Damocles over the former model boy of the Euro region.” Also, the automotive industry is “simply not emerging from the crisis”.

                Full release here.

                US oil inventories dropped -2.1m barrels, WTI extending consolidation

                  US commercial crude oil inventories dropped -2.1m barrels in the week ending November 12, versus expectation of 1m rise. At 433.0m barrels, oil inventories are about -7% below the five year average for this time of year.

                  Gasoline inventories dropped -0.7m barrels. Distillate inventories dropped -0.8m barrels. Propane/propylene dropped -0.2m barrels. Total commercial petroleum inventories dropped -8.9m barrels.

                  WTI crude oil has little reaction to the data. It’s still extending the consolidation pattern from 85.92 short term top. For now, we’d continue to expect strong support from 78.54 to contain downside to bring rebound. This level is slightly above 55 day EMA at 78.47.

                  Medium term up trend should resume sooner or later and the real test is from 61.8% projection of 33.50 to 77.16 from 61.90 at 88.88. However, firm break of 78.54 will turn near term outlook bearish for deeper pull back into 61.90/77.16 support zone.

                  Fed Bullard: US is moving into expansion phase of business cycle

                    St. Louis Fed President James Bullard said in a presentation that the US economy is “poised to surpass the previous peak” in the current quarter. The US is “moving into the expansion phase of the business cycle”.

                    “Market-based inflation expectations have recovered from the lows reached during March 2020,” he added, likely encouraged by Fed’s new policy framework.

                    “TIPS-based breakeven inflation, based on CPI inflation measures, could move higher and still be consistent with a PCE inflation outcome modestly above the 2% target,” he said. “This would be a welcome development for the FOMC, as inflation has generally been below target for many years.”

                    Full presentation here.

                    EUR/CAD weak in tight range after BoC, down trend intact

                      Canadian Dollar stays firm in general after BoC left monetary policy unchanged yesterday, and delivered and slightly more upbeat outlook. While interest rate will remain on hold until into 2023, the central bank is ready to taper asset purchases if board members “gain confidence in the strength of the recovery”.

                      Suggested readings on BoC:

                      EUR/CAD turned into consolidation after hitting as low as 1.4984 earlier this week. Some sideway trading could be seen but upside of recovery should be limited below 1.5208 support turned resistance to bring down trend resumption. Current down trend should target 161.8% projection of 1.5978 to 1.5313 from 1.5783 at 1.4707 on next fall.

                      Fed Kaplan: Economy to have substantial contraction in Q2, unemployment to jump to mid-teens

                        Dallas Fed President Robert Kaplan said his forecast is for the US economy to have substantial contraction in Q2, in the 20% range on an annualized basis. Unemployment rate could rise to mid teens before falling back to 7-8% by year end.

                        He added, “we are working furiously here at the Fed to have this in place and work out the details” of the new Main Street lending program. However, small and medium companies are worried about survival even with loan assistance.

                        IMF hailed France made impressive progress in reforms

                          IMF hailed in a report that France has made “”impressive progress” in policies that focuses on “addressing long-term challenges and building up resilience to shocks.” Additionally, it’s reform agenda ahead is “equally ambitious”.

                          Regarding the economy, IMF noted that France is benefitting from a “broad-based recovery”. Outlook is “positive” even though risks are “tilted to the downside”. 2018 and 2019 growth is expected to “remain robust” even though less buoyant than 2017.

                          But there are domestic risks “if the pace of reforms slows” or “if reforms prove less effective than expected”.

                          Externally, “increasing trade tensions, geopolitical uncertainty, or an erosion of confidence in the European project could negatively affect exports and growth”. Faster than expected interest rate normalization could also weigh on public and private balance sheets.

                          Here is the full report.

                          Eurozone Sentix Investor Confidence rose to -8.7, negative momentum weakening

                            Eurozone Sentix Investor Confidence increased from -11.1 to -8.7 in April, surpassing the expected -14.0. The Current Situation index experienced its sixth consecutive rise, moving from -9.3 to -4.3, reaching its highest level since March 2022. The Expectations index, however, remained unchanged at -13.0.

                            Sentix commented on the data, stating, “There is no doubt that the Eurozone economy has come through the winter months better than many feared in the autumn.” However, when considering the future, investors are less optimistic, citing “still considerable uncertainty about the further course of the Ukraine war, concerns about a lasting burden on the energy-intensive industrial sector, and – new – question marks about the state of the US economy.”

                            Despite these concerns, the Sentix Theme Barometer indicates that negative expectations regarding inflation and central bank policy have noticeably decreased. While not an all-clear signal, the negative momentum seems to be weakening.

                            Full Eurozone Sentix release here.

                            Germany GDP dropped -1.7% qoq in Q1, worse than expected

                              Germany GDP contracted -1.7% qoq in Q1, worse than expectation of -1.5% qoq. Comparing to Q1 2020, GDP was down a price-adjusted -3.3%, and a price-and-calendar-adjusted -3.0%. Comparing to pre-pandemic Q4 2019, GDP was down -4.9%.

                              Destatis said, “the coronavirus crisis caused another decline in economic performance at the beginning of 2021”. And, “this affected household consumption in particular, while exports of goods supported the economy.”

                              Full release here.

                              Australia Birmingham: China is a significant coal market, but not our largest

                                In response to news that China has blocked Australian coal imports, Trade Minister Simon Birmingham said he has not ruled out taking China to the WTO. Though, he emphasized, “we do have to make sure that we have the facts behind us when it comes to undertaking WTO challenges.”

                                “In terms of coal exports, it is important to recognise that although China is a significant market, it is not our largest market,” he added. “We do have significant markets in Japan … with India, strong growth recently in relation to Vietnam.” “We continue to work in a range of other markets where our government has secured trade agreements to develop trade ties to make sure that all of those exporters can have as many choices available to them as possible.”

                                Trade tensions between the two countries escalated in the past few months as China has recently increased tariffs on Australian wine and barley and blocked imports on lamb, beef, lobsters and other goods.
                                Just two weeks a ago, the Inter-Parliamentary Alliance on China, an international cross-party group of legislators working to reform the approach of democratic countries to China, called on a global campaign to drink Australian wines in December in support for the country.

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                                Eurozone CPI finalized at 2.0%, Core CPI at 1.0%

                                  Eurozone CPI was finalized at 2.0% in August, down from 2.1% in July. That was still notably higher than 1.5% back in August 2017. Core CPI was finalized at 1.0% yoy. EU CPI was finalized at 2.1%, down from July’s 2.2%.

                                  Highest contribution to Eurozone CPI was from energy (0.87%), followed by services (0.59%), food, alcohol & tobacco (0.48%) and non-energy industrial goods (0.09%).

                                  Full release here.

                                  NZIER: Growth and NZD expectations lowered

                                    The NZ Institute of Economic Research downgraded growth forecast for the New Zealand economy. Weaker exports “drive much of this downward revision in near term”. But from 2019 onwards, “expectations of weaker growth in investment explain the softer growth outlook”. Though, NZIER noted that expectations for growth remain reasonably healthy through to 2021.

                                    Real GDP growth is projected to be 2.8% in 2017/18, 2.9% in 2018/19, 3.2% in 2019/20 and 2.9% in 2020/21. That compares to March survey result of 2.9% in 2017.19, 3.1% in 2018/19, 3.3% in 2019/20 and 2.9% in 2020.21. .

                                    NZD expectations were also revised lower. NZIER pointed to Fed’s rate hike in the coming year. Meanwhile, RBNZ is expected to keep OCR on hold “until at least the middle of next year”. And, “this should reduce the yield attractiveness of the NZD, and hence weigh on the currency.

                                    New Zealand Dollar TWI is projected to average at 75.5 in 2017/18, 72.6 in 2018/19, 72.3 in 2019/20 and 72.0 in 2020/21. That compares to March survey result of 75.2 in 2017/18, 73.1 in 2018/19, 73.1 in 2019/20 and 72.8 in 2020/21.

                                    NZIER also noted that RBNZ’s May MPS indicates that “interest rates were just as likely to go down as up.” Nonetheless ” the central bank’s forecasts indicate the OCR is likely to increase, although not till later in 2019. Consensus Forecasts for interest rates have been revised slightly lower from 2019.”

                                    Full release here.

                                    EU Barnier warns of cliff edge Brexit by year end

                                      EU chief Brexit negotiator Michel Barnier warned today that there is still risk of a cliff edge Brexit at the end of 2020. He said, negotiation with the UK on trade “is not usual because at the end of this year, the UK is leaving the single market, it is it’s choice, it is leaving the customs union”. “If we have no agreement, it will not be business as usual and the status quo, we have to face the risk of a cliff edge, in particular for trade.”

                                      Irish Prime Minister Leo Varadkar said the EU has an upper hand in the trade talks because of its size. He told BBC, “the European Union is a union of 27 member states. The UK is only one country. And we have a population and a market of 450 million people”. He also acknowledged that “it will be difficult” to complete the

                                      Eurozone Q1 GDP grew 0.4%, France steady, Spain strong, Italy rebounds

                                        Euro rebounds as Eurozone economy displayed larger then expected strength. Eurozone Q1 GDP grew 0.4% qoq, above expectation of 0.3%, and doubled Q4’s 0.2%. EU 28 GDP grew 0.4% qoq.

                                        Other GDP data released today are also positive. France GDP grew 0.3% qoq in Q1, same as Q4 and matched expectations. Italy GDP grew 0.2% qoq in Q1, much better than expectation of -0.1% qoq. Spain GDP grew 0.7% qoq, accelerated from Q4’s 0.6% and beat expectation of 0.6% qoq.

                                        Also from Eurozone, unemployment rate dropped to 7.7 in April, better than expectation of 7.8%. That’s also the lowest level since September 2008. German import price rose 0.0% mom in March, below expectation of 0.3% mom. German Gfk consumer sentiment for May was unchanged at 10.4, above expectation of 10.3. German unemployment dropped -12k in April, worse than expectation of -6k. German unemployment rate was unchanged at 4.9% in April.

                                        UK PMI composite dropped to 57.7, Delta variant overshadowed freedom day

                                          UK PMI Manufacturing dropped from 63.9 to 60.4, below expectation of 62.7. PMI Services dropped from 62.4 to 57.8, below expectation of 62.0. PMI Composite dropped from 62.2 to 57.7.

                                          Chris Williamson, Chief Business Economist at IHS Markit, said: “July saw the UK economy’s recent growth spurt stifled by the rising wave of virus infections, which subdued customer demand, disrupted supply chains and caused widespread staff shortages, and also cast a darkening shadow over the outlook.

                                          “Concerns over the Delta variant have meanwhile overshadowed the passing of “freedom day”, and were a key factor alongside Brexit and rising costs behind a sharp slide in business expectations for the year ahead, which slumped to the lowest since last October. The PMI indicates that GDP growth will likely have slowed in the third quarter, after having rebounded sharply in the second quarter.”

                                          Full release here.