Sun, Aug 09, 2020 @ 01:47 GMT

Japan PMI manufacturing finalized at 45.2, consumer goods stabilized, capital goods worst performing

    Japan PMI Manufacturing was finalized at 45.2 in July, up form June’s 40.1. That’s the highest reading since February. while it still stayed below neutral 50, it’s already notably better than the 11-year low of 38.4 reached in April. Markit also said down turn in output eases sharply in comparison in Q2. New orders decline to the smallest extent in five months. Business expectations also continue to rebound.

    Tim Moore, Director at IHS Markit, said: “Japan’s manufacturing sector remained severely impacted by the COVID-19 pandemic and subsequent downturn in worldwide economic conditions. However, the headline PMI recovered some of the ground lost in the second quarter, helped by the smallest declines in output and new orders for five months during July.

    “Production of consumer goods was close to stabilisation in July, despite a headwind from weaker orders from abroad… Capital goods was the worst-performing segment for export sales, highlighting that reduced global investment spending and constrained trade flows are holding back the Japanese manufacturing sector.”

    Also released, Q1 GDP contraction was finalized at -0.6% qoq, unchanged from prior estimate. Annualized, GDP contracted -2.2%. Looking at some details, capital expenditure rose 1.7% qoq. External demand dropped -0.2% qoq. Private consumption dropped -0.8% qoq. GDP price index rose 0.9% yoy.

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    Fed Kashkari: 4-6 weeks hard lockdown or no real robust recovery

      Minneapolis Fed President Neel Kashkari told CBS that the only way to have a “real robust economic recovery” is through “clamping back down” the coronavirus cases to keep things under control, or “getting a vaccine or a robust therapy”. Otherwise, “we’re going to have flare ups, lockdowns and a very halting recovery with many more job losses and many more bankruptcies for an extended period of time unfortunately. ”

      “If we were to lockdown hard for a month or six weeks, we could get the case count down so that our testing and our contact tracing was actually enough to control it,” Kashkari added. “If we don’t do that, and we just have this raging virus spread throughout the country with flare-ups and local lockdowns for the next year or two, which is entirely possible, we’re going to see many, many more business bankruptcies.”

      Transcript of Kashkari’s CBS interview.

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      US personal income dropped -1.1% in June, spending rose 5.6%

        US personal income dropped -1.1% mom or USD 222.8B in June, worse than expectation of -0.8% mom. Spending, on the other hand, rose 5.6% mom or USD 737.7B, above expectation of 5.0% mom.

        Headline PCE price index rebounded to 0.8% yoy, up from 0.5% yoy, above expectation of 0.5% yoy. Core PCE price index slipped to 0.9% yoy, down from 1.0% yoy, missed expectation of 1.0% yoy.

        Full release here.

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        Canada GDP grew 4.5% in May, could growth another 4% in Jun

          Canada GDP grew 4.5% mom in May, better than expectation of 3.1% mom. Both goods-producing (8.0%) and services-producing industries (3.4%) were up, as 17 of 20 industrial sectors posted increases.

          StatCan also said based on preliminary information, real GDP would grow 5% in June. Output across several industrial sectors, including manufacturing, retail and wholesale trade, construction, transportation, accommodation and food services, and the public sector, increased. For Q2, flash estimates points to an approximate -12% decline.

          Full release here.

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          Eurozone CPI rose back to 0.4% yoy, core CPI up to 1.2% yoy

            Eurozone CPI rose back to 0.4% yoy in July, up from 0.3% yoy, above expectation of 0.2% yoy. CPI core also jumped to 1.2% yoy, up from 0.8% yoy, above expectation of 0.7% yoy. Look at the main components, food, alcohol & tobacco rose 2.0% yoy. Non-energy industrial goods rose 1.7% yoy. Services rose 0.9% yoy. Energy dropped -8.3% yoy.

            Full release here.

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            Eurozone GDP contracted record -12.1% in Q2, EU shrank -11.9%

              Eurozone GDP contracted -12.1% qoq in Q2, slightly worse than expectation of -12.0% qoq. Over the year, GDP contracted -15.0% yoy. EU GDP contracted -11.9% qoq, -14.4% yoy. These are all the worst decline since the time series started back in 1995.

              Among the Member States, for which data are available for the second quarter 2020, Spain (-18.5%) recorded the highest decline compared to the previous quarter, followed by Portugal (-14.1%) and France (-13.8%). Lithuania (-5.1%) recorded the lowest decline.

              Full release here.

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              France GDP contracted -13.8% qoq in Q2

                France GDP contracted -13.8% qoq in Q2, better than expectation of -15.2% qoq. Over the year, it’s -19.0% yoy lower than in Q2 2019. INSEE said the negative developments in first half of the year is linked to the shut down of “non-essential”activities between mid-March and beginning of May. “The gradual ending of restrictions led to a gradual recovery of economic activity in May and June, after the low point reached in April. ”

                Looking at some details, household consumption expenditure dropped -11.0% qoq, total gross fixed capital formation dropped -17.8% qoq, general government expenditure dropped -8.0% qoq. Exports dropped -25.5% qoq while Imports dropped -17.5% qoq.

                Also released, CPI rose 0.4% mom 0.9% yoy in July, above expectation of 0.0% mom, 0.2% yoy.

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                WTI crude oil defending 38.45 support for now, but looks vulnerable

                  WTI crude oil drops sharply to as low as 38.58 overnight, but recovery ahead of 38.45 support. Though there is no following buying for further recovery above 40 handle. 38.45 support now looks rather vulnerable. Sustained break of 38.45 should confirm rejection by 42.05 key resistance. Deeper fall should then be seen back towards structure support level at 31.23, to correct the rebound from April’s spike low.

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                  Australia private sector credit dropped -0.2% in June, AUD/NZD retreats

                    Australia private sector credit dropped -0.2% mom in June, wore than expectation of 0.2% mom. Housing credits rose 0.2% mom. But personal credits dropped -0.6% mom while business credits dropped even more by -0.8% mom. PPI dropped -1.2% qoq in Q2, much worse than expectation of 0.3% qoq. Annually, PPI turned negative to -0.4% yoy versus expectation of 1.3% yoy.

                    Australian Dollar is mixed in Asian session. AUD/NZD dropped notably after hitting 1.0800 yesterday, but it’s quickly recovering. At this point, rise from 1.0565 is still in favor to extend higher as long as 1.0669 support holds. Break of 1.0800 will target 1.0880 high next. However, based on current momentum, we’re not expecting a break there on first attempt. Meanwhile, break of 1.0669 will extend the pattern from 1.0880 with another fall back towards 1.0565 support.

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                    Japan industrial production rose 2.7% in June, unemployment rate dropped to 2.8%

                      Japan industrial production rose 2.7% mom in June, above expectation of 1.2% mom. Annually, production dropped -17.7% yoy. Looking at some details, shipment rose 5.2% mom, inventories dropped -2.4% mom, inventory ratio dropped -7.0%. The data showed slight improvement after production hit its decade low in May. The METI also said manufacturers are expecting further rebound in production by 11.3% mom in July and 3.4% in August.

                      Also released, unemployment rate dropped to 2.8% in June, down from 3-year high of 2.9% in May, better than expectation of 3.1%.

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                      China PMI manufacturing edged higher to 51.1, USD/CNH staying in near term decline

                        China’s official PMI Manufacturing rose to 51.1 in July, up from 50.9, slightly above expectation of 51.0. That’s the highest reading since March too. Looking at some details, production rose 0.1 to 54.0. New orders also improved by 0.3 to 51.7. New export orders rose notably by 5.8 to 48.4, but stayed in contraction. PMI Non-Manufacturing retreated mildly to 52.3, down from 54.4, but beat expectation of 51.2. Overall, the set of data suggests that recovery in on track, but it will remain a long road back to pre-pandemic levels.

                        USD/CNH drops mildly in Asian session today, following general weakness in Dollar. Prior recovery from 0.6933 was limited at 7.0298, below 7.0396 support turned resistance. The development suggests that fall from 7.1961 is still in progress. It’s seen as the third leg of the pattern from 7.1953 and break of 0.6933 would pave the way back to 6.8452 support.

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                        US initial jobless claims rose to 1.43m, continuing claims rose back to 17m

                          US initial jobless claims rose 12k to 1434k in the week ending July 25, slightly below expectation of 1450k. But that’s still the second straight week of increase in the figure. Four-week moving average of initial claims rose 6.5k to 1369k.

                          Continuing claims rose 867k to 17018k in the week ending July 18. Four-week moving average of continuing claims rose 436k to 17058k.

                          Full release here.

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                          US GDP dropped -32.9% annualized in Q2, largest on record since 1947

                            US GDP contracted -32.9% annualized in Q2, slightly less than expectation of -35.0%. That’s nevertheless the sharpest annualized decline in quarterly records dating back to 1947.

                            “The decline in second quarter GDP reflected the response to Covid-19, as `stay-at-home’ orders issued in March and April were partially lifted in some areas of the country in May and June, and government pandemic assistance payments were distributed to households and businesses,” BEA said in the release.

                            Full release here.

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                            Eurozone economic sentiment jumped sharply to 82.3

                              Eurozone Economic Sentiment Indicator registered a sharp increase of 6.5 in July to 82.3, up from June’s 75.8. Improvements are seen in industry (from -21.6 to -16.2), services (from -35.5 to -26.1), retail trade (from -19.4 to -15.3). Consumer confidence (-14.5 to -15.0) and construction (-11.6 to -12.6) dropped slightly. Employment Expectations Indicator rose for the third month a a row (by 4.0 to 87.0). Eurozone Business Climate rose from -2.25 to -1.80.

                              Full release here.

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                              Eurozone unemployment rate rose to 7.8%, EU at 7.1%

                                Eurozone unemployment rate rose to 7.8% in June, up from 7.7%, above expectation of 7.7%. EU unemployment rate rose to 7.1%, up from 7.0%. Eurostat estimates that 15.023 million people are unemployment the EU, with 12.685m in Eurozone.

                                Full release here.

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                                ECB: Uncertainty remains extremely elevated, very difficult to predict the extent and duration of recovery

                                  In its Monthly Bulletin, ECB said, “looking beyond the disruption stemming from the coronavirus pandemic, euro area growth is resuming with the gradual lifting of containment measures, supported by favourable financing conditions, the euro area fiscal stance and a resumption in global activity.” However, “uncertainty remains extremely elevated, making it very difficult to predict the likely extent and duration of the recovery.”

                                  On inflation, “over the review period (4 June to 15 July 2020), market-based indicators of longer-term inflation expectations have continued to increase slowly towards the levels prevailing as of late February, while survey-based indicators of inflation expectations declined slightly. ”

                                  ECB reiterated that it “continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry.”

                                  Full ECB Monthly Bulletin here.

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                                  German GDP contracted record -10.1% qoq in Q2

                                    Germany GDP contracted -10.1% qoq in Q2, worse than expectation of -9.0% qoq. That’s also the largest decline since the beginning of quarterly GDP calculations for Germany in 1970. The contraction was also more than double of that during the financial market and economic crisis back in Q1 2009 (-4.7% qoq).

                                    Full release here.

                                    Also released, Germany unemployment dropped -18k in July, versus expectation of 45k rise. Unemployment was unchanged at 6.4% versus expectation of 6.5%. Italy unemployment jumped to 8.8% in June, up from revised 8.3%, above expectation of 8.5%.

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                                    Swiss KOF rose to 85.7, strong rebound but still below long-term average

                                      Swiss KOF Economic Barometer rose strongly, for the second month, to 85.7 in July, up from 60.6. That’s also well above expectation of 72.5. Nevertheless, “despite this positive development, the value remains clearly below its long-​term average.”

                                      KOF also said, in the manufacturing sector, “the outlook is brightening in all segments”, particularly pronounced in the metal industry, the electrical industry, the wood, glass, stone and earths industry, mechanical engineering and the chemical, pharmaceutical and plastics industry.

                                      Full release here.

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                                      Australia Kennedy: Victoria coronavirus outbreak pulls us back

                                        Australia’s Victoria reported a record 723 daily coronavirus cases for the past 24 hours as situation in the second most populous state continued to worsen despite returning to lockdown. Australia Treasury Secretary Steven Kennedy said that the outbreak in Victoria “pulls us back” and together with new Queensland border restrictions, the national economy will be hurt more than forecast in last week’s federal budget update.

                                        Kennedy said, “further constraints, be they through movement or through the extension of the six-week measures that the Victorian government announced, will mean growth will be lower, employment will be lower and unemployment will be higher. Beyond that, of course, people can lose confidence and have concerns about what they’re seeing unfolding, even in other parts of the country.

                                        He added that 75% of Victorian firms currently receiving the JobKeeper wage subsidies were likely to remain on the scheme beyond the September renewal deadline. Meanwhile, Q2 GDP is expected to contract -7% and road to recovery will be long and unpredictable. New South Wales’ management of the virus would now be crucial for the economy.

                                        Also from Australia, import price index dropped -1.9% qoq in Q2 versus expectation of -2.5% qoq. Building permits dropped -4.9% mom in June versus expectation of 0.0% mom.

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                                        New Zealand ANZ business confidence: Bounces are fun but nearly run its course

                                          New Zealand ANZ Business Confidence rose to -31.8 in July, up from June’s -34.4, but down from prelim reading of -29.8. Confidence was worst in agriculture at -54.5 and beat in retail at -22.6 while all sector stayed negative. Own activity outlook rose to -8.9, up notably from June’s -25.9, but also revised down to -6.8. Activity was worst in agriculture again at -15.2 but best in services at -5.0.

                                          ANZ said “bounces are fun, but this one has probably nearly run its course.” It warned that “unfortunately, that blow is coming; it’s inevitable.” Border will remain closed for the rest of the year, which is “one of the few certainties in our economic forecasts at the moment”. That means “big hole in economic activity, centred on tourism and the foreign education sector.” Also, the blow “won’t be felt evenly” with the country “split into two economies – the tourism-dependent regions and the rest”.

                                          Full release here.

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