US initial jobless claims rose 14k to 202k in the week ending March 26, slightly above expectation of 200k. Four-week moving average of initial claims dropped -3.6k to 208.5k.
Continuing claims dropped -35k to 1307k in the week ending March 19. That’s the lowest level since December 27, 1969, when it was 1304k. Four-week moving average of continuing claims dropped -41k to 1389k, lowest since February 7, 1970.
Canada GDP grew 0.2% mom in January, a below expectation of 0.4% mom. But that’s still the eight month of increase in a row. Goods-producing industries grew 0.8% mom. Services-producing industries rose 0.0% mom. Overall, 9 of 20 industrial sectors increased in January.
Statistics Canada said advance information indicates an approximate 0.8% expansion in real GDP in February. Notable increases were observed in the manufacturing sector as well as in mining, quarrying, and oil and gas extraction, accommodation and food services, and construction.
Eurozone unemployment rate dropped from 6.9% to 6.8% in February, above expectation of 6.7%. EU unemployment rate also dropped from 6.3% to 6.2%.
Eurostat estimates that 13.267 million men and women in the EU, of whom 11.155 million in the euro area, were unemployed in February 2022. Compared with January 2022, the number of persons unemployed decreased by 221 000 in the EU and by 181 000 in the euro area.
ECB Chief Economist Philip Lane said in a speech, “the Governing Council sees it as increasingly likely that inflation will stabilise at our two per cent target over the medium term”. Under this pathway, ‘the degree of monetary policy stimulus put in place to address the pre-pandemic challenge of persistent below-target inflation can be normalised in a gradual fashion towards a more neutral setting.”
“In current conditions, it is especially important to remain data-dependent and for optionality to be two-sided,” he said. “On the one side, we should ensure that our policy settings are adjusted if de-anchored inflation expectations, an intensification in catch-up wage dynamics or a persistent deterioration in supply capacity threaten to keep inflation above target in the medium term.”
“On the other side, we should also be fully prepared to appropriately revise our monetary policy settings if the energy price shock and the Russia-Ukraine war were to result in a significant deterioration in macroeconomic prospects and thereby weaken the medium-term inflation outlook.”
China official PMI manufacturing dropped from 50.2 to 49.5 in March, below expectation of 50.0. PMI non-manufacturing dropped from 51.6 to 48.4, below expectation of 50.7. Both indexes were below 50 level together for the first time since the start of the pandemic in February 2020.
“Recently, clusters of epidemic outbreaks have occurred in many places in China, and coupled with a significant increase in global geopolitical instability, production and operation of Chinese enterprises have been affected,” said Zhao Qinghe, senior NBS statistician.
Japan industrial production rose 0.1% mom in February, below expectation of 0.5% mom. That’s nonetheless the first rise in three months. index of production stood at 95.8, against the 2015 base of 100.
Auto production rose 10.9% mom, after plunging -17.3% mom in January. Output of transport equipment rose 7.9% mom. Chemical products dropped -9.6%.
Looking ahead, the Ministry of Economy, Trade and Industry expects output to keep expanding, up 3.6 percent in March and 9.6 percent in April, respectively, based on a poll of manufacturers.
Kansas City Fed President Esther George said yesterday, “it is clear that removing accommodation is required. How much and how aggressively accommodation should be removed is far more uncertain.”
“Given the state of the economy, with inflation at a 40-year high and the unemployment rate near record lows, moving expeditiously to a neutral stance of policy is appropriate,” she added.
“At the same time, the factors I noted earlier, including monitoring risks, the responsiveness of activity to interest rate changes, and yield curve developments will be important guides to that pace in my view.”
On the topic of yield curve inversion, George said, “An inverted curve has implications for financial stability with incentives for reach-for-yield behavior. An inverted yield curve also pressures traditional bank lending models that rely on net interest margins, or the spread between borrowing short and lending long. Community banks in particular rely on net interest margins to maintain their profitability.”
Richmond Fed President Thomas Barkin told Bloomberg TV yesterday he’s looking at both a 25bps and a 50bps rate hike at the May FOMC meeting.
“I think the question — and we will make this decision when we get to the meeting in May — is how strong does the economy still look in terms of its ability to take rate increases and how high is inflation persisting. I’m looking at both of those and we’ll make our call in May,” he said.
Barkin also said it might take interest rates above neural to bring down inflation. “I think there is a real chance that is true,” he said. “As we get closer to neutral we can make that call.”
ECB Governing Council member Gabriel Makhlouf said today, “as for the economic consequences of the war in Ukraine, it is too early to give a definitive view. It clearly represents a significant challenge to the outlook for inflation and growth and adds new uncertainty to what had started to become a less uncertain picture.”
“The war is likely to have a material impact on economic activity and inflation in the euro area. But in some countries, including Ireland, the effects will be more indirect than for others although that does not mean they will be insignificant,” he added.
US ADP private employment grew 455k in March, slightly above expectation of 450k. By company size, small businesses added 90k jobs, medium businesses added 188k, large businesses added 177k. By sector, goods-producing jobs grew 79k while service-providing jobs grew 377k.
“Job growth was broad-based across sectors in March, contributing to the nearly 1.5 million jobs added for the first quarter in 2022,” said Nela Richardson, chief economist, ADP. “Businesses are hiring, specifically among the service providers which had the most ground to make up due to early pandemic losses. However, a tight labor supply remains an obstacle for continued growth in consumer-facing industries.”
Eurozone Economic Sentiment Indicator dropped from 113.9 to 108.5 in March. Industry confidence dropped from 14.1 to 10.4. Services confidence rose from 12.9 to 14.4. Consumer confidence dropped from -8.8 to -18.7. Retail trade confidence dropped from 5.5 to 0.2. Construction confidence ticked down from 9.9 to 9.8. Employment Expectation Indicator dropped from 116.4 to 115.5.
EU Economic Sentiment dropped from 112.8 to 107.5. Amongst the largest EU economies, the ESI fell sharply in France (-7.1), Spain (-6.5), Germany (-4.3) and, to a lesser extent, in Poland (-3.0) and Italy (-2.6), while it brightened slightly in the Netherlands (+0.5).
ECB President Christine Lagarde said in a speech the economic impact of Ukraine war is a “supply shock” that ” simultaneously pushes up inflation and reduces growth.” Three main favors are likely to take inflation higher, including energy, food, and manufacturing bottlenecks.
The war also posses “significant risks” to growth, implying a loss of EUR 150B in the economy in one year. The conflict also “drain confidence” through at least two channels. Firstly, households become more pessimistic and cut back on spending. Secondly, business investment is likely to be affected.
As for ECB, Lagarde said the best way to navigate this uncertainty is to emphasize the “principles of optionality, gradualism and flexibility.” Optionality means if incoming data support that medium term inflation will not weaken after the end of net asset purchases, the APP will be concluded in Q3. But ECB also stand ready to revise the schedule for net asset purchases in terms of size and/or duration. Gradualism means the adjustments to interest rate will take place “some time” after end of net purchases and will be gradual. Flexibility means ECB will use the its toolkit to ensure policy is transmitted evenly across all parts of Eurozone.
Swiss KOF Economic Barometer dropped from 105 to 99.7 in March, worse than expectation of 101.0. The index is now slightly below its long-term average.
KOF said: “The recovery from the economic consequences of the pandemic is now overshadowed by the war in Ukraine. Overall, a moderate development of the Swiss economy can be expected for the near future.”
“The decline is primarily due to indicators from the manufacturing sector, followed by those for private consumption. The other indicators included in the barometer show hardly any changes.”
S&P 500 rose 1.23% to close at 4631.60 overnight. The solid break of 4595.31 resistance should confirm that correction from 4818.62 has completed with three waves down to 4114.65. Further rise is now expected as long as 4455.61 support holds, for retesting 4818.62 record high.
At the same time, NASDAQ has taken out corresponding resistance level at 14509.55. It’s time for DOW to break through 35824.28 resistance to align with the overall developments.
New Zealand ANZ business confidence rose from -51.8 to -41.9 in March. Own activity outlook rose from -2.2 to 3.3. Looking at some details, export intentions rose from 0.9 to 7.9. Investment intentions rose from 4.5 to 5.2. Employment intentions rose from 2.3 to 12.3. Pricing intentions rose from 74.1 to 80.5. Cost expectations rose from 92.0 to 95.9. Inflation expectations rose back from 5.29 to 5.51.
ANZ said: “With inflation pressures now so extreme, and the RBNZ’s inflation-targeting credibility on the line, it’s full steam ahead for rate hikes – we’re forecasting 50bp hikes in both April and May.
“It could well be a rough ride, but maintaining medium-term price stability is the best contribution monetary policy can make to New Zealand’s big-picture economic prospects from this very difficult starting point.”
BoJ announced to increase the size of its JGB purchases to defend it’s 10-year yield cap imposed under the yield curve control.
It increased the size of purchase of JGB with maturities of 3 to 10 years today, by a combined JPY 450B to JPY 1325B. It will additionally buy JPY 150B of JGB with maturities between 10 to 25 years, and JPY 100B with maturity more than 25 years.
“The BOJ will increase the number of auction dates and the amount of outright JGB purchases as needed, taking account of market conditions,” the BOJ said in a statement.
US Conference Board Consumer Confidence index rose from 105.7 to 107.2 in February, below expectation of 107.9. Present Situation Index rose from 143.0 to 153.0. Expectations Index, however, dropped from 80.8 to 76.6.
“Consumer confidence was up slightly in March after declines in February and January,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The Present Situation Index rose substantially, suggesting economic growth continued into late Q1. Expectations, on the other hand, weakened further with consumers citing rising prices, especially at the gas pump, and the war in Ukraine as factors. Meanwhile, purchasing intentions for big-ticket items like automobiles have softened somewhat over the past few months as expectations for interest rates have risen.”
“Nevertheless, consumer confidence continues to be supported by strong employment growth and thus has been holding up remarkably well despite geopolitical uncertainties and expectations for inflation over the next 12 months reaching 7.9 percent—an all-time high. However, these headwinds are expected to persist in the short term and may potentially dampen confidence as well as cool spending further in the months ahead.”
Gold dives sharply on some progress in the negotiation between Russia and Ukraine. It’s report that Ukrainian negotiators proposed a status under which it would not join alliances or host bases of foreign troops. Russia also promised to drastically scale down its military operations around Kyiv and the northern Ukrainian city of Chernihiv.
Gold’s break of 1894.77 support indicate resumption of the fall from 2070.06. Deeper decline should be seen to 61.8% projection of 2070.06 to 1894.77 from 1966.00 at 1857.67, and then 100% projection of 1790.71. Also, such fall is seen as the third leg of the correction pattern from 2074.84, and could head to 1682.60 support before completion.
WTI crude oil’s break of 109.03 support earlier this week argues that rebound from 93.98 has completed at 118.57 already. Fall from there is seen as the third leg of the corrective pattern from 131.82. Deeper decline would be seen back to 93.98, and possibly below. But still, firm break of 85.92 resistance turned support is needed to indicate trend reversal. Otherwise, medium term outlook is just neutral for range trading.
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US PCE inflation rose to 6.4% yoy, core PCE rose to 5.4% yoy
US personal income rose 0.5% mom or USD 101.5B in February, matched expectations. Spending rose 0.2% or USD 34.9B, below expectation of 0.6% mom.
The PCE price index for February increased 6.4% yoy, up from January’s 6.0% yoy, but missed expectation of 6.7% yoy. The increase reflected rise in both goods and services. Excluding food and energy, core PCE price index was at 5.4% yoy, up from January’s 5.2% yoy, slightly below expectation of 5.5% yoy. Energy prices rose 25.7% yoy while food prices rose 8.0% yoy.
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