Cooper-Letwin bill to avert no-deal Brexit passed

    The UK House of Lords finally passed the cross-party bill devised by Labour’s Yvette Cooper and the Conservative Oliver Letwin to block no-deal Brexit, on Monday night. Despite filibustering by some MPs, it’s an historic swift passage which took three sitting days to complete.

    Cooper said the bill “helps avoid the worst outcome on Friday”, the April 12 cliff edge. But the prime minister still needs to build consensus around a workable way forward.” Under the new Act, Prime Minister Theresa May is requested to table her Brexit delay plan in form of an amendable motion. The plan to extend Article 50 till June 30 will now be debated in the House on Tuesday.

    Meanwhile, May will head to Berlin and Paris today, meeting German Chancellor Angela Merkel and French President Emmanuel Macron, to secure her short Brexit delay plan. There will also be an emergency EU summit in Brussels on Wednesday

    Separately, there is no conclusion of cross-party talks between May and Labour leader Jeremy Corbyn. Labour spokesman just said ministerial and shadow ministerial negotiating teams will meet tomorrow to attempt to secure a Brexit compromise.

    EU chief negotiator Michel Barnier warned that the bloc would refuse to open trade talks with the UK after a no-deal Brexit unless the backstop issue was addressed. But he’s happy to offer the UK a customs union.

    EU Tusk: No optimism on tomorrow’s summit on Brexit

      European Council President Donald Tusk said that the reports from chief Brexit negotiator Michel Barnier “give me no grounds for optimism before tomorrow’s European Council on Brexit.” And he said, on Wednesday, he’s “going to ask Prime Minister May whether she has concrete proposals on how to break the impasse. Only such proposals can determine if a breakthrough is possible.” Tusk also added that the unscheduled Brexit summit in November only makes sense if there negotiation is really close to a breakthrough.

      Separately, it’s reported that German Chancellor Angela Merkel described the effort on Brexit negotiation as “squaring the circle”. And she emphasized that the EU is aiming to avoid a “hard” Irish border. And, it’s clear the the border between Ireland and Northern Ireland would not disappear completely.

      US initial jobless claims rose back to 742k, continuing claims dropped to 6.37m

        US initial jobless claims rose 31k to 742k in the week ending November 14, above expectation of 707k. Four-week moving average of initial claims dropped -14k to 742k.

        Continuing claims dropped -429k to 6372k in the week ending November 7. Four-week moving average of continuing claims dropped -525k to 7055k.

        Full release here.

        Fed Kashkari: Threshold for rate hike could be met with Apr 2022 inflation data

          Minneapolis Fed President Neel Kashkari said in an essay that he supported Fed’s decision to increase the speed of tapering back in December FOMC meeting. Also, it brought forward two rate hikes into 2022 because “inflation has been higher and more persistent than I had expected.”

          Kashkari added, he’d prefer the forward guidance to commit to keeping federal funds rate at effective lower bound “until 12-month core PCE had exceeded 2 percent for 12 months.” Based on this criteria, “the test that I preferred will likely be met when the April 2022 data are released the following month”. The “threshold” (not trigger) for lift off would then be met.

          Full essay here.

          US CPI ticked up to 1.4% yoy in Sep, core CPI unchanged at 1.7% yoy

            US CPI rose 0.2% mom in September, matched expectation. Core CPI rose 0.2%, also matched expectations. Annually, headline CPI accelerated to 1.4% yoy, up from 1.3% yoy, matched expectations. CPI core was unchanged at 1.7% yoy, matched expectations.

            Full release here.

            Trump asks Ross to see EU elimination on “Tariffs and Barries” agains the US

              Trump just tweeted regarding tariffs and trade with E: –

              “Secretary of Commerce Wilbur Ross will be speaking with representatives of the European Union about eliminating the large Tariffs and Barriers they use against the U.S.A. Not fair to our farmers and manufacturers.”

              Fed Kashkari: I don’t see how we can stop if underlying inflation doesn’t flatten out

                Minneapolis Fed President Neel Kashkari said yesterday, “I’ve said publicly that I could easily see us getting into the mid-4%s early next year.”

                “But if we don’t see progress in underlying inflation or core inflation, I don’t see why I would advocate stopping at 4.5%, or 4.75% or something like that,” he added. “We need to see actual progress in core inflation and services inflation and we are not seeing it yet.”

                “That number that I offered is predicated on a flattening out of that underlying inflation,” Kashkari said. “If that doesn’t happen, then I don’t see how we can stop.”

                EU Hogan: UK not approaching Brexit negotiations with a plan to succeed

                  EU Trade Commission Phil Hogan slammed UK’s Brexit negotiation approach as he talked to Irish national broadcaster RTE today. He said, “despite the urgency and enormity of the negotiating challenge, I am afraid we are only making very slow progress in the Brexit negotiations.”

                  “There is no real sign that our British friends are approaching the negotiations with a plan to succeed. I hope I am wrong, but I don’t think so,” he added. “I think that the United Kingdom politicians and government have certainly decided that COVID is going to be blamed for all the fallout from Brexit and my perception of it is they don’t want to drag the negotiations out into 2021 because they can effectively blame COVID for everything.”

                  RBA minutes: Further decline in house prices could result in lower GDP, higher unemployment and lower inflation

                    RBA reiterated its rate views in the February meeting minutes but sounded more cautious regarding the downturn in housing markets. The central bank maintained that “given that further progress in reducing unemployment and lifting inflation was a reasonable expectation, members agreed that there was not a strong case for a near-term adjustment in monetary policy.”

                    And, the minutes echoed Governor Philip Lowe’s comments too. That is, “there were significant uncertainties around the forecasts, with scenarios where an increase in the cash rate would be appropriate at some point and other scenarios where a decrease in the cash rate would be appropriate.” Most importantly, “the probabilities around these scenarios were now more evenly balanced than they had been over the preceding year, when an eventual increase in the cash rate had appeared more likely.”

                    RBA tied the subdued consumption growth in Q4 to the possibility of being influenced by “lower housing prices and reduced housing market activity”. On housing, RBA admitted that “dwelling investment was also expected to decline more sharply than previously expected, consistent with the decline in residential building approvals and the fall in housing prices”.

                    And, “members observed that if prices were to fall much further, consumption could be weaker than forecast, which would result in lower GDP growth, higher unemployment and lower inflation than forecast.”

                    Full minutes here.

                    IMF Lagarde and WTO Azevedo defend multilateralism

                      IMF managing director Christine Lagarde said yesterday that “the clouds on the horizon that we have signaled about six months ago are getting darker by the day, and I was going to say by the weekend”, referring to what Trump did to the G7. She added that the biggest and darkest cloud that we see is the deterioration in confidence that is prompted by (an) attempt to challenge the way in which trade has been conducted, in which relationships have been handled and in which multilateral organizations have been operating.”

                      WTO Director-General Roberto Azevedo also criticized the that “the US has been focusing much more on bilateral — unilateral even sometimes — measures, which is not something that is support of the rules-based trading system.” And, “they have been complaining about the system, they say that they want to improve the system, but we would expect a more constructive approach on their part.”

                      Fed Daly: Might need to start crafting a plan on rate hike

                        San Francisco Fed President Mary Daly said, “if we didn’t have higher inflation readings, you might let the economy go a little bit more to see if we can get through COVID and have those individuals come back.”

                        However, “right now, we’re dealing with inflation that’s above our target and inconsistent in its current readings with our longer run views on price stability,” she added. “We have to deal with that.”

                        Fed might need to start dialing down some of the extra policy accommodation and “start crafting a plan to, at least, you know, think about raising the interest rate,” she said.

                        UK CPI steady at 2% in Jun, core CPI unchanged at 3.5%

                          UK CPI was unchanged at 2.0% yoy in June, matched expectations. CPI core (excluding energy, food, alcohol and tobacco) was unchanged at 3.5% yoy, above expectation of 3.4% yoy. CPI goods annual rate fell from -1.3% yoy to 1.4% yoy. CPI services annual rate was unchanged at 5.7% yoy.

                          For the month, CPI rose 0.1% mom , matched expectations.

                          Full UK CPI release here.

                          ECB Mersch: Economy giving goods signs of stabilization

                            ECB Executive Board Member Yves Mersch said that the economy is “certainly giving good signs of stabilization”, and “the same goes a little bit for inflation.” Current development could prompt reassessment on whether growth risks are still skewed to the downside.

                            However, he noted, “it will be premature to give you an answer, but we are certainly moving in the right direction, and for us central bankers, it means that we were proven right to have very accommodative monetary.”

                            BoJ opinions: Swift decisive actions needed should downside risks materialize

                              BoJ released summary of opinions of January 22/23 monetary policy meeting today. It’s noted there that “hard data suggest that the trend in Japan’s economy has been firm”. However, “some market participants hold excessively pessimistic views.” And, risks to overseas economies have been “increasingly tilted to the downside” and there are concerns that some “may materialize”.

                              BoJ also noted that recent fall in stocks prices “to a certain extent indicates the anticipation of a global decline in the real economic growth rate.” And, “this is clear from developments in exports and imports, rather than GDP, which is declining marginally.”

                              The central bank also reiterated the stance to maintain current monetary easing. And more importantly, if downside risks materialize, BoJ “should be prepared to make policy responses”. It’s added that “Since achieving the price stability target has been delayed, it is not desirable to adopt a stance of not taking actions until a serious crisis occurs. Rather, a stance of taking swift, flexible, and decisive actions, including additional easing, in response to changes in the situation is desirable.”

                              Full summary here.

                              US NFIB Small Business Optimism Index declined to 89.8 in Dec

                                US NFIB Small Business Optimism Index declined -2.1 pts to 89.8 in December, below expectation of 91.6. That’s also the 12th consecutive month the index was below 49-year average of 98.

                                “Overall, small business owners are not optimistic about 2023 as sales and business conditions are expected to deteriorate,” said NFIB Chief Economist Bill Dunkelberg. “Owners are managing several economic uncertainties and persistent inflation and they continue to make business and operational changes to compensate.”

                                Full release here.

                                Rees-Mogg could back May’s Brexit deal with reasonably effective time limit on Irish backstop.

                                  Jacob Rees-Mogg, a high profile Brexiteer Conservative, said that the could back Prime Minister Theresa May’s Brexit deal if there is a reasonably effective time limit on the Irish backstop.

                                  Rees-Mogg told BBC ratio that “I can live with the de facto removal of the backstop…. I mean that if there is a clear date that says the backstop ends, and that is in the text of the treaty or equivalent of the text of the treaty”.

                                  But he also insisted that the time limit should be “a short date, not a long date, then that would remove the backstop in the lifetime of parliament and that would have a reasonable effect from my point of view.”

                                  US ISM manufacturing rose to 49.0, highest since last Nov

                                    US ISM Manufacturing PMI exhibited an encouraging uptick in September, climbing to 49.0 from 47.6, surpassing the anticipated 47.9. Although the manufacturing sector is still in the grip of contraction, the pace has slackened, marking the sector’s finest performance since November 2022. September’s reading marks the 11th consecutive month of contraction, but also the third month showcasing an improvement.

                                    Diving into the particulars, several key indices within the PMI reported positive shifts. New orders swelled to 49.2 from 46.8, and production amplified its reach, moving from 50.0 to 52.5. Furthermore, the employment index turned the corner, ascending from 48.5 to 51.2, signalling an uplift in hiring within the sector. However, not all indices saw a rise. The prices index experienced a substantial dip, plummeting from 48.4 to 43.8, reflecting a significant reduction in input costs.

                                    When examining the historical correlation between the Manufacturing PMI and the broader economy, September’s 49.0 reading translates to a 0.1% increase in real gross domestic product on an annualized basis. It implies that, despite the continued contraction, the manufacturing sector’s decline is moderating, potentially heralding a turning point in upcoming months.

                                    Full ISM Manufacturing release here.

                                    EU downgrades 2022 Eurozone GDP forecasts to 2.6%, 2023 to 1.4%

                                      In the Summer 2022 Economic Forecast, European Commission downgraded both 2022 and 2023 Eurozone GDP growth projections. Meanwhile, HICP inflation projections were upgraded for Eurozone in both years. .

                                      Eurozone GDP growth forecasts:

                                      • 2022 at 2.6% (downgraded from 2.7%).
                                      • 2023 at 1.4% (downgraded from 2.3%).

                                      Eurozone HICP inflation forecasts:

                                      • 2022 at 7.6% (upgraded from 6.1%).
                                      • 2023 at 4.0% (upgraded from 2.7%).

                                      Valdis Dombrovskis, Executive Vice-President said: “Russia’s war against Ukraine continues to cast a long shadow over Europe and our economy. We are facing challenges on multiple fronts from rising energy and food prices to a highly uncertain global outlook.”

                                      Paolo Gentiloni, Commissioner for Economy said: “Russia’s unprovoked invasion of Ukraine continues to send shockwaves through the global economy. Moscow’s actions are disrupting energy and grain supplies, pushing up prices and weakening confidence…

                                      “In Europe, momentum from the reopening of our economies is set to prop up annual growth in 2022, but for 2023 we have markedly revised down our forecast. Record-high inflation is now expected to peak later this year and gradually decline in 2023…

                                      “With the course of the war and the reliability of gas supplies unknown, this forecast is subject to high uncertainty and downside risks. To navigate these troubled waters, Europe must show leadership, with three words defining our policies: solidarity, sustainability and security.”

                                       

                                      Full release here.

                                      Philly Fed manufacturing business outlook jumped to 17

                                        Philadelphia Fed Manufacturing Business Outlook jumped to 17.0 in January, up from revised 2.4 in December, beat expectation of 3.7. The percentage of the firms reporting increases (39 percent) was greater than the percentage reporting decreases (22 percent).

                                        All of the survey’s broad indicators remained positive and increased from their readings in December. The survey’s future indexes indicate that respondents continue to expect growth over the next six months.

                                        Full release here.

                                        Canada retail sales rose 0.4% in Oct, up in 6 of 11 subsectors

                                          Canada retail sales rose 0.4% mom to CAD 54.6B in October, above expectation of 0.1% mom. That’s the sixth consecutive monthly increase since the record decline in April. Retail sales increased in 6 of 11 subsectors, representing 50.9% of retail trade. Core retail sales, excluding gasoline stations and motor vehicle and parts dealers, edged up 0.3% mom.

                                          Full release here.