US initial jobless claims rose 21k to 211k in the week ending March 4, above expectation of 195k. Four-week moving average of initial claims rose 4k to 197k.
Continuing claims rose 69k to 1718k in the week ending February 25. Four-week moving average of continuing claims rose 10k to 1680k.
Eurozone PMI Services was finalized at 55.8 in February, up from January’s 51.1. PMI Composite was finalized at 55.5, up from January’s 52.3. That’s also the strongest reading since last September.
Looking at some member states, Ireland PMI Composite rose to 59.1, 3-month high. Spain rose to 56.5, 3-month high. Germany rose to 55.6, 6-month high. France rose to 55.5 while Italy rose to 53.6.
Chris Williamson, Chief Business Economist at IHS Markit said: “The survey data for February depict a eurozone economy that was regaining robust growth momentum ahead of the invasion of Ukraine. Business activity accelerated to a pace commensurate with GDP growth in excess of 0.6%, buoyed by a relaxation of virus restrictions…
“Though it remains early days to be assessing the impact of the war, growth prospects are also likely to have been hit by heightened risk aversion and new sanctions, dampening the rebound from the pandemic. With inflation risks rising and growth prospects waning, the Ukraine conflict adds to business and household headwinds for the coming months, and exacerbates the difficult juggling act of the ECB in controlling inflation while sustaining a robust economic recovery.”
While Gold’s rally stalled after hitting new record high last week, Silver is picking up momentum. Given that Silver has been clearly lagging Gold this year, there is room for Silver to catch up and outperform in Q2.
Fundamentally, both Gold and Silver as precious metal would benefit from policy loosening of major global central banks. But as additionally as an industrial metal, Silver could be benefited more with global growth and industrial demands pick up.
Yet, technically, Silver has to overcome key resistance level around 26 first. For now, near term outlook will stay bullish as long as 23.99 support holds. It’s possible that consolidation pattern from 26.12 has completed with three waves to 21.92 already.
Decisive break of 26.12 will confirm resumption of whole rise from 17.54 (2022 low). In this case, the near medium term target will be 61.8% projection of 17.54 to 26.12 from 21.92 at 27.22. Firm break there will pave the way for new record high above 30 later in the year.
Nevertheless, rejection by 25.91/26.12 resistance zone, or break of 23.99 support, will delay the bullish case and extend the consolidation from 26.12 with another falling leg instead.
Australia monthly CPI slowed notably from 6.8% yoy to 5.6% yoy in May, below expectation of 6.1% yoy. That’s also the lowest reading in more than a year since April 2022. Excluding volatile items and travel, CPI also ticked down from 6.5% yoy to 6.4% yoy.
The most significant contributors to the annual increase in the monthly CPI indicator in May were Housing (+8.4 per cent), Food and non-alcoholic beverages (+7.9 per cent), and Furniture, household equipment and services (+6.0 per cent). Partly offsetting the rise was a fall in Automotive fuel (-8.0 per cent).
US stocks surge in initial trading, with S&P 500 and NASDAQ extending recent record run. The moves seem to have exhausted their momentum. No follow through buying is seen after S&P 500 hit 2903.77 and NASDAQ hit 8046.31. Both indices have indeed turned red at the time of writing and DOW is up only 0.06%.
In the currency markets, Canadian Dollar is now the strongest one, followed by Swiss Franc and then Euro. The US seems to be optimistic in the trade negotiations with Canada. Treasury Secretary Mnuchin said today that “the U.S. market and the Canadian markets are very intertwined.” And, ‘it’s important for them to get this deal and it’s important for us to get this deal.” He said the agreement could be concluded within this week.
On the other hand, Sterling suffers fresh selling in US session, in particular against Euro and Swiss Franc. Yen follows as the second weakest. Dollar is the third weakest even though data showed consumer confidence rose to highest since October 2000.
One development to note is the strong rally in treasury yields. It’s believed to have started from Germany as 10 year bund yield jumps 0.10 to 0.38. The move is on the back on news that Germany is considering to extend financial aid to Turkey, to prevent knock-on effect from deterioration in the latter’s economy. But the WSJ report also noted that the discussions are in very early stage, and the talk could eventually fall apart.
Nevertheless, the over developments help lift 10 year US yield sharply higher. At the time of writing it’s up 0.27 at 2.875. The rebound also marks strong support from 2.811 and focus is back of 55 day EMA (now at 2.892). Break there will bring 3% handle back in radar.
In a relatively brief statement, the Chinese Ministry of Commerce said the trade talks with the US this week were extensive and laid down the foundation for resolving trade friction between the countries.
The MOFCOM statement said “The two sides actively implemented the important consensus of the two heads of state and conducted extensive, in-depth and meticulous exchanges on trade issues and structural issues of common concern, which enhanced mutual understanding and laid the foundation for resolving mutual concerns. Both parties agreed to continue to maintain close contact.”
BoJ Deputy Governor Masazumi Wakatabe said in a speech, “since rises in energy and food prices are mainly caused by cost-push factors from abroad, it is desirable to respond to them through measures other than monetary policy.”
“Possible options include fiscal policy and energy policy to reduce Japan’s dependence on petroleum and natural gas,” he added.
For monetary policy, “it is necessary to persistently continue with monetary easing and thereby continue to steadily support the virtuous cycle in the economy and maintain an environment in which wages rise,” he said.
“In addition, if downside risks to the economy materialize, the Bank should not rule out taking the necessary additional easing measures without hesitation.”
St. Louis Fed President James Bullard said he’d favor successive rate hikes at the upcoming March, May and June meetings, rather than a 50bps hike in March. “The point of this is to get better positioned right now and in coming months, and then we will be able to assess, at that point, whether we need to do more or not,” he said.
“We are going to be have to be more nimble, faster, better at reacting to inflation data and other developments as we go through this year,” Bullard said. “It’s going to be a more data-dependent environment.”
Bullard added he’d like to start the balance sheet runnoff in Q2, and “that the runoff can be faster than it was last time around.” “We are cognizant of the inflation issue, we’re moving on the policy rate, but we’re also going to move on the balance sheet so we’re not that far from reaching neutral if you are willing to consider both of those,” he said
US initial jobless claims rose 14k to 262k in the week ending August 6, slightly below expectation of 265k. Four-week moving average of initial claims rose 4.5k to 252k.
Continuing claims rose 8k to 1428k in the week ending July 30. Four-week moving average of continuing claims rose 24k to 1399k.
GBP/JPY rises after BoE Governor Andrew Bailey said there are a lot of issues with negative interest rates. Solid support was seen in 4 hour 55 EMA, indicating near term bullishness. Further rise is now expected as long as 140.31 support holds. Choppy rise from 133.03 has resumed for a test on 142.71 high. At this point, upside momentum doesn’t warrant a firm break there yet. Thus, we’ll be cautious on topping signals as it approaches 142.71.
Eurozone retail sales dropped -3.1% mom in April, worse than expectation of -0.9% mom. For the month, volume of retail trade decreased by -5.1% for non-food products and by -2.0% for food, drinks and tobacco, while it increased by 0.4% for automotive fuels.
EU retail sales dropped -3.1% mom too. Among Member States for which data are available, the largest monthly decreases in total retail trade were registered in Slovenia (-10.4%), Denmark (-8.6%) and France (-6.0%). The highest increases were observed in Portugal (+4.3%), Latvia (+3.8%) and Lithuania (+3.7%).
WTI crude oil reaches as high as 64.48 so far as recent rally resumes. At this point, we’d still be expecting strong resistance inside 63.04/66.49 to limit upside to bring reversal. We’re not expecting break out from established range between 50.64/66.49 yet. However, firm break of 66.49 will bring upside acceleration to 100% projection of 42.05 to 66.49 from 50.86 at 75.29.
Trump was briefed overnight about the Congressional deal to avert another government shutdown, with only USD 1.37B for border fencing. He apparently dislike it as he told reporters “I have to study it. I’m not happy about it.” Though, he added that “I don’t think you’re going to see another shutdown.”
He also kept on pressing for the border wall and signaled unilateral actions. He said “The bottom is on the wall: We’re building the wall”. And, “We’re supplementing things, and moving things around, and we’re doing things that are fantastic and taking, really, from far-less-important areas.”
US retail sales dropped -1.1% mom in July to USD 61.7B, worse than expectation of -0.2% mom. Ex-auto sales dropped -0.4% mom, below expectation of 0.1% mom. Ex-gasoline sales dropped -1.4% mom. Ex-auto, ex-gasoline sales dropped -0.7% mom. Comparing to July 2020, sales were up 15.8% yoy. Total sales for May through July period were up 20.6% from the same period a year ago.
In expected fashion, China blasted US House passage of the Uighur Act of 2019 with fierce reaction. Foreign Ministry Spokeswoman Hua Chung Ying criticized US lawmakers as “too ignorant, too shameless and too hypocritical”. And, “any wrong words and deeds must pay the due price.” She added that China will not set any timeline or deadline for a trade deal with the US. And it would take “decisive”countermeasures to defend its interests against US protectionism.
On the other hand, Bloomberg reported, quoting unnamed source, that a phase-one trade deal is still expected before December 15 natural deadline by US negotiators. The known issues of guarantee on China’s purchase of US farm goods, and tariff rollbacks, are the only outstanding issues.
UK PMI Manufacturing was finalized at 55.8 in April, up slightly from march’s 55.2. S&P Global said production growth improved slightly. New orders rose at slower pace as new export business retreated. Selling prices rose at record pace as cost inflation accelerated.
Rob Dobson, Director at S&P Global, said: “The improved expansion of output at manufacturers, while positive in itself, failed to mask the continued headwinds buffeting the sector… Manufacturers and their clients are struggling as lockdowns in China and the Ukraine war exacerbate stretched global supply chains, the inflationary picture worsens and geopolitical tensions rise. Specific to the UK, Brexit represents an additional headwind…
“Business optimism has fallen to a 16-month low as companies become more cautious about the future outlook… The inflationary situation is getting increasingly fraught. Input costs rose to the second-greatest extent in the 30-year survey history, leading to a record increase in factory gate selling prices.”
DOW spikes mildly higher to 27084.59 after Fed’s surprised -50bps cut but quickly settles back into earlier range. Investor confidence seems to be rather unsure for now. It remains to be seen if Fed’s rate cut could have a sustainable effect. For now, recovery from 24681.01 is still in favor to extend higher to 55 day EMA (now at 28241). However, break of 24681.01 will suggest that the corrective recovery has completed and bring retest of 24681.01 low.
BoJ Governor Haruhiko Kuroda reiterated the central bank’s pledge to take all necessary steps to support the economy. He said, “given the uncertainty over outlook on coronavirus pandemic, government and BO need to take all means available flexibly.”
On the financial markets, he stressed that “Hong Kong dollar’s peg to the US dollar holds key to Hong Kong’s economy.” The central bank is “watching carefully developments in Hong Kong, Asian financial markets.”
European Commission President Jean-Claude Juncker warned that UK will not be granted another short Article 50 extension unless the Brexit Withdrawal Agreement is ratified by the parliament. He told the European Parliament that “the 12th of April is the ultimate deadline for approval of the Withdrawal Agreement by the House of Commons.” And, “if it has not done so by then, no further short extension will be possible.”
He added: “A ‘no-deal’ at midnight on the 12th of April is now a very likely scenario. It is not the outcome I want. But it is an outcome for which I have made sure the EU is ready… UK will be affected more than EU because there is no such thing as a ‘managed’ or ‘negotiated no-deal’ and there is no such thing as a ‘no-deal transition’.”
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BoJ Kuroda – Same message, long way from hitting inflation target
BoJ Governor Haruhiko Kuroda repeated his rhetorics that Japan is still long way from meeting the 2% inflation target. Therefore, it’s too early to talk about stimulus exit. But he assured the parliament that the central bank has the tools to smoothly exit from the ultra-loose monetary policy when needed. Kuroda added that “by combining various tools, it’s possible to shrink the BoJ’s balance sheet at an appropriate pace while keeping markets stable.” Meanwhile, he also hailed that while keeping long term yield low with the policy, BoJ also managed to maintain markets’ trust in JGBs. He noted “If market trust over Japan’s debt is eroded, it will be difficult for us to keep interest rates low with our yield curve control policy.”
Release earlier, minutes of BoJ January meeting showed that some board members were concerned with the impact of the loose monetary policy, especially on banks. The minutes showed “some members said it was important to continue to monitor and assess the positive impacts and side-effects of the current monetary easing policy, including its effects on Japan’s banking system.” Some member suggested to raised the yield target as economy improves. But another member (obviously Goushi Kataoka), called for ramping up the stimulus.