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China lowers tariffs on 859 imports types to below MFN rates

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    China’s Ministry of Finance announced to cut import tariffs for range of products starting January 1. A total of 859 product types will enjoy provisional import tariffs lower than the Most-Favored-Nation (MFN) rates charged in 2020. The move aimed at meeting specific domestic demands but not totally related to US-China trade deal. The MOF also said that Goods from New Zealand, Peru, Costa Rica, Switzerland, Iceland, Singapore, Australia, South Korea, Georgia, Chile and Pakistan will have even lower levies under the re-negotiated free trade agreements with China.

    In particular, tariffs for frozen pork will be lowered from the MFN rate of 12% to 8%. Also, rate for frozen avocado will be lowered from MFN rate from 30% to 7%. Tariffs for some asthma and diabetes medications will be set at zero. Import tariffs on multi-component semiconductors will be cut to zero.

    Trump: Signing of giant China trade deal being arranged

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      US President Donald Trump said late Friday that he “had a very good talk with President Xi of China concerning our giant Trade Deal.” He noted that China has already started “large scale purchases” of US farm products. Formal signing of the agreement is “being arranged”. Both presidents also discussed the issues of North Korea and Hong Kong.

      While Trump is due to travel to Switzerland for the annual World Economic Forum in Davos at the end of January, Xi is not expected to be there. Hence, it’s an unlikely location for the signing. According to comments from US Trade Representative Robert Lighthizer, the 86-page trade agreement would be signed by him and Chinese Vice Premier Liu He in early January in Washington. The agreement is expected to come into effect 30 days afterwards.

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      UK Johnson’s Brexit deal passed second reading with 358-234 votes

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        UK Prime Minister Boris Johnson finally won the approval for his Brexit Withdrawal Agreement in the Commons. MPS voted 358-234 to pass the second reading of the bill. The final stage of ratification will take place after Christmas. The Commons are expected to approve the legislation by January 9, then pass the the Lords, and then for Royal Assent.

        “This is the time when we move on and discard the old labels of ‘leave’ and ‘remain’ … now is the time to act together as one reinvigorated nation, one United Kingdom,” Johnson told parliament before the vote.

        “Now is the moment to come together and write a new and exciting chapter in our national story, to forge a new partnership with our European friends, to stand tall in the world, to begin the healing for which the whole people of this country yearn.”

        US Q3 GDP growth finalized at 2.1%, core PCE at 2.1%

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          US Q3 GDP growth was finalized at 2.1% annual rate, unrevised, slightly up from Q2’s 2.0%. Current-dollar GDP grew 3.8% annualized. PCE price index was finalized at 1.5% yoy, core PCE at 2.1%.

          Full release here.

          Canada retail sales dropped -1.2%, ex-auto sales dropped -0.5%

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            Canada retail sales dropped -1.2% mom to 50.9B in October, well below expectation of 0.1% mom rise. Ex-auto sales dropped -0.5% mom, also missed expectation of 0.2% mom. Lower sales were reported in 8 of 11 subsectors, representing 81% of retail trade. Also, sales were down in six provinces. Retail sales dropped -2.0% in Ontario, -1.7% in Quebec, -0.9% in British Columbia.

            Full release here.

            Former BoE Deputy Governor Bailey named to replace Carney

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              The UK Government named Andrew Bailey as the next BoE Governor, taking over from Mark Carney starting March 16. Bailey is currently the CEO of the Financial Conduct Authority. He worked at the BoE for 30 years, last serving as Deputy Governor from April 2013 to July 2016. On the appointment, he said he’s honored to take over “particularly at such a critical time for the nation as we leave the European Union.”

              Finance Minister Sajid Javid said Bailey would serve an eight-year term. He added, “Andrew was the stand-out candidate in a competitive field. He is the right person to lead the Bank as we forge a new future outside the EU and level-up opportunity across the country.”

              UK Q3 GDP finalized at 0.4%, upward revisions to all three main industries

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                UK Q3 GDP growth was finalized at 0.4% qoq, revised up from 0.3% qoq. There were upward revisions to the output of all three main industries. Services grew 0.37%. Production grew a mere 0.01%. Construction grew 0.07%. Agriculture, forestry and fishing were flat. Also from UK, current account deficit narrowed to GBP -15.9B in Q3. Public sector net borrowing dropped to GBP 4.9B in November.

                German Gfk consumer confidence dropped to -0.1, economic expectations tumbled

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                  German Gfk consumer confidence dropped -0.1 to 9.6 in January. Economic expectations dropped sharply to -4.4, down from 1.7. Gfk said that ” impression among consumers that the German economy will weaken significantly has been reinforced.”. Also, “The trade conflicts between the US and China, on the one hand, and the US and the EU, on the other, continue to smolder, hanging like a sword of Damocles over Germany, a nation highly dependent on exports”.

                  Full release here.

                  UK Gfk consumer confidence rose to -11, robust increase in economic confidence

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                    UK Gfk Consumer Confidence rose to -11 in December, up from -14. In particular, index for General Economic Situation over the last 12 months improved 3 pts to -31. Index for General Economic Situation over the next 12 months improved 7 pts to -27.

                    Joe Staton, Client Strategy Director at GfK, said: “We haven’t seen such a robust increase in confidence about our economic future since the summer of 2016. Despite official warning signs about the flat-lining of Britain’s economy, we know that record high employment and below target levels of inflation are helping to boost consumers’ expectations for the year ahead.

                    Full release here.

                    Japan national CPI core ticked up to 0.5%

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                      Japan national CPI core (ex-fresh food), accelerated to 0.5% yoy in November, ticked up from 0.4% yoy. However, taking away the effect of sales tax hike, started in October, core inflation came in at just 0.2% yoy. All item CPI rose from 0.2% yoy to 0.5% yoy. CPI core-core (ex-fresh food and energy) rose from 0.7% yoy to 0.8% yoy.

                      While it’s the 35th straight month of core price increases, it remained well below BoJ’s 2% target. An official from the Ministry of Internal Affairs and Communications said, “although at a slower pace, the index continues to rise, so there is no change in our view that the prices are rising moderately.”

                      Japan cabinet approved record budget for next fiscal year

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                        ActionForex.com
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                        Japanese Primes Minister Shinzo Abe’s cabinet approved a record JPY 102.7T general account budget today, for the fiscal year beginning April 2020. That marks a 1.2% rise from the current fiscal year. There will be JPY 61.7T in general spending, with JPY 36T on social security. JPY 23.4T will be used for debt servicing. JPY 15.8T will be transferred to regional and local governments.

                        Meanwhile, the government projected to have JPY 63.5T in tax revenue, JPY 32.6T in revenue from bond issuance, and JPY 6.6T income from others sources. Also, the government doesn’t project a balanced budget until fiscal 2027.

                        US House passed USMCA by 385-41 votes

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                          ActionForex.com
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                          In the US, House passed the legislation to implement the USMCA by 385-41 votes yesterday, with 38 Democrats, two Republicans and one independent lawmakers voted no. At this point, it’s unsure when Senate will take it up. Senate Republican leader Mitch McConnell said before that a USMCA vote would likely follow the impeachment trial on President Donald Trump, possibly in January.

                          Mexican Foreign Minister Marcelo Ebrard said “We’re going forward. Good news” after the passage. He added that the new will start new phase of investment and growth for Mexico, ending a period of uncertainty. Canadian Prime Minister Justin Trudeau said Canada’s Parliament would approve USMCA “as quickly as we can.” But Parliament is not scheduled to return to Ottawa before Jan. 27.

                          Philadelphia Fed manufacturing outlook dropped sharply to 0.3

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                            Philadelphia Fed Manufacturing Outlook dropped sharply to 0.3 in December, down from 10.4, and missed expectation of 8.5. It’s also the worst reading in six months. The result indicated “essentially flat growth” in the region’s manufacturing sector. Looking at some details, employment index dropped -4pts to 17.8. Prices paid index rose 11 pts to 19.0.

                            Full release here.

                            US initial jobless claims dropped to 234k, but above expectation

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                              US initial jobless claims dropped -18k to 234k in the week ending December 14, but was higher than expectation of 225k. Four-week moving average of initial claims rose 1.5k to 225.5k.

                              Continuing claims rose 51k to 1.722m in the week ending December 7. Four-week moving average of continuing claims rose 6.25k to 1.684m.

                              Full release here.

                              BoE kept rate unchanged at 0.75%, Haskel and Saunders dissented again

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                                ActionForex.com
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                                BoE left monetary policy unchanged as widely expected. Bank Rate was held at 0.75% with 7-2 vote. Jonathan Haskel and Michael Saunders dissented and voted for -25bps rate cut again. Asset purchase target was kept at GBP 435B on unanimous vote.

                                In the accompanying statement, BoE said since the previous meeting “economic data have been broadly in line” with November forecasts. GDP is expected rise “only marginally” in Q4. Household consumption has continued to grow steadily, but business investment and export orders have remained weak. There were some signs of “loosening” in labor market, but it remains tight. Headline CPI is expected to fall to around 1.75% by spring, “owing to the temporary effects of falls in regulated energy and water prices.”

                                BoE also noted that “monetary policy could respond in either direction to changes in the economic outlook”. “monetary policy may need to reinforce the expected recovery in UK GDP growth and inflation” should Brexit uncertainties remain entrenched, or global growth fails to stabilize. However, if the risks do not materialize and economy recovers in line with latest projections, “some modest tightening of policy, at a gradual pace and to a limited extent, may be needed”.

                                UK retail sales dropped -0.6%, all sectors contracted

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                                  ActionForex.com
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                                  In November, UK retail sales came in at -0.6% mom, 1.0% yoy, well below expectation of 0.5% mom, 2.4% yoy. Retail sales ex-fuel came in at -0.6% mom, 0.8% yoy, also well below expectation of 0.3% mom, 1.6% yoy. Total retail sales for the three months to November dropped -0.4% over the previous three months.

                                  All sectors contributed negatively to the month-on-month figures. With fuel contributed -0.1%, non-store retailing -0.2%, non-food stores -0.1%, food stores -0.2%.

                                  Full release here.

                                  New Zealand GDP grew 0.7%, led by strong retail growth

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                                    ActionForex.com
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                                    New Zealand GDP grew 0.7% qoq in Q3, above expectation of 0.5% qoq. Q2’s growth rate was revised sharply lower from 0.5% qoq to 0.1% qoq. Looking at some details, primary industries grew 1.1%. Good-producing industries grew 0.5%. Services industries grew 0.4%.

                                    Services growth, which account for 2/3 of the GDP, was led by retail. The 2.4% growth in retail and accommodation was also the fastest in eight years, dominated by electronics.

                                    Also released, exports rose NZD 371m, or 7.6% yoy, to NZD 5.2B. Imports rose NZD 119m, or 2.0% yoy, to NZD 6.0B. Trade deficit came in at NZD 753m, slightly larger than expectation of NZD 700m.

                                    Australia added 39.9k jobs, driven by part-time jobs

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                                      Australia employment grew 39.9k in November, well above expectation of 14k. Full-time jobs rose 4.2k while part-time jobs grew 35.7k. Unemployment rate dropped -0.1% to 5.2%, below expectation of 5.3%. Participation rate was unchanged at 66.0%.

                                      Looking at some details, the largest increases in employment were recorded in Queensland (up 17.3k) and Victoria (up 13.7k). The only decrease was in New South Wales (down -2.8k). Unemployment rate increased by 0.1% in South Australia (6.3%), and by less than 0.1% in Western Australia (5.8%). Unemployment rate decreased by -0.2 pts in New South Wales (4.7%) and Victoria (4.6%), and by -0.1% in Queensland (6.3%)

                                      Overall, unemployment rate remains well above RBA’s estimated full employment of 4.5%. More policy easing is still needed.

                                      Full release here.

                                      BoJ stands pat, expect economy to continue moderate expanding trend

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                                        BoJ left monetary policy unchanged as widely expected. Short-term policy rate was held at -0.1%. Purchase of JGB will continue to keep 10-year yield at around 0%, with monetary base expanding at JPY 80T per annum. Y. Harada and G. Kataoka dissented as usual in 7-2 vote.

                                        The central bank said the economy is “likely to continue on a moderate expanding trend”. Impact of global slowdown is expected “to be limited”. Domestic demand is expected to “follow an uptrend” despite the impact of consumption tax hike. Exports are projected to “continue showing some weakness”, but are expected to be on “moderate increasing trend”. CPI is “likely to increase gradually toward 2 percent”.

                                        Full statement here.

                                        Fed Evans: It’s important that we overshoot inflation

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                                          ActionForex.com
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                                          Chicago Fed President Charles Evans said yesterday that the US economy is doing “remarkably well”. And he expected “the economy to continue to growth, labor markets to continue to be strong.” He echoed comments of many other Fed officials and said monetary policy is in “a good place”. He emphasized that ” inflation would have to go above 2% by some meaningful amount for me to really think that we need something more restrictive.” And it’s “extremely important that we get inflation up to 2% …I actually think it’s important that we overshoot.”

                                          New York Fed President John Williams said “I feel very good about how the economy’s been this year, how it’s progressed and feel very good about how it’s going to look next year.” He expected the economy to growth by about 2% in 2020, with unemployment staying close to current 3.5%. Also, he expected inflation to approach Fed’s 2% target.

                                          Richmond Fed President Thomas Barkin “the major reason the consumer is strong is they have jobs and not only do they have jobs but real wages are up”. He said that Fed’s rate cuts this year “have helped some, but they’ve helped in the context of what’s been a very strong consumer all year long.”

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