US CPI slowed to 8.2% yoy in Sep, but core CPI rose to 6.6% yoy

    US CPI rose 0.4% mom in September, above expectation of 0.2% mom. Core CPI (all item less food and energy) rose 0.6% mom, above expectation of 0.5% mom. Energy index dropped -2.1% mom, with gasoline down 4.9%. Food index rose 0.8% mom.

    For the 12 months ending September, CPI slowed from 8.3% yoy to 8.2% yoy, above expectation of 8.1% yoy. Core CPI, on the other hand, accelerated from 6.3% yoy to 6.6% yoy, above expectation of 6.5% yoy. Energy index slowed from 23.8% yoy to 19.8% yoy. Food index was up 11.2% yoy.

    Full release here.

    China pledges to strive for good start in Q1

      Stocks in Asia surge on hope that China would launch more stimulus measures to support the slowing economy. Chinese Premier Li Keqiang pledged to work to give the economy a strong start to achieve 2019 economic targets. There is no detail on the plan so far.

      Li was quoted by State TV saying “we should strive for a good start in the first quarter to create conditions for completing the key full-year development targets and tasks.” And, “our country’s development environment is becoming more complex this year, there are more difficulties and challenges and the downward pressure on the economy is increasing,”

      It’s reported that the Chinese government is planning to lower growth target to 6-6.5%, down from expected 6.6% in 2018.

      BoJ Kuroda: Too early to debate specifics on stimulus exit

        BoJ Governor Haruhiko Kuroda told the parliament today, “it will take more time to achieve our 2% inflation target in a stable manner, so it’s too early to debate specifics on how to exit from easy policy.”

        Core consumer inflation in Japan is generally expected to climb up in the months ahead, with prospect of hitting the 2% target. But Kuroda talked down the significance of such development. “I don’t think Japan is in a condition where inflation stably hits 2%, even when the impact of cellphone fee cuts taper off and energy prices rise further,” he said.

        Kuroda just reiterated that BoJ will consider stimulus exit when 2% inflation is achieved. And, “in doing so, we will guide monetary policy to ensure markets including those for Japanese government bonds remain stable.”

        Fed Bostic: People are getting nervous again

          Atlanta Fed President Raphael Bostic said “people are getting nervous again” on coronavirus development. “Business leaders are getting worried. Consumers are getting worried. There is a real sense that this might go on longer than we had hoped and we had expected and we had planned for.”

          Bostic added that the next three to six weeks could be critical for the strength of the economic recovery. The rebound could plateau sooner and at a lower pace than expected.

          Trump: We don’t have a tariff problem, we have a Fed problem

            US President Donald Trump complains Fed again today. He pointed to “Euro is dropping against the Dollar ‘like crazy'”. (Our comment: No, it’s just a small decline). And, that give Eurozone a “big export and manufacturing advantage”. At the same time “Fed does NOTHING!”.

            Trump repeated his usual comment that “if the Fed would cut, we would have one of the biggest Stock Market increases in a long time.” He went further that “we don’t have a Tariff problem”, “we have a Fed problem”.

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            Gold breaches 1700 as correction from 1765 extends

              Gold’s decline from 1765.25 extends lower today and breached 1700 handle. The fall is getting better in shape as the correction to whole rise from 1451.16 to 1765.25 as we viewed. Further fall should be seen to 38.2% retracement of 1451.16 to 1765.25 at 1645.26 before bottoming. On the upside, break of 1735.44 resistance is needed to indicate completion of the corrective fall. Otherwise, deeper decline will remain in favor in case of recovery.

              Fed Williams is carefully monitoring a nuance picture, ready to act as appropriate

                New York Fed President John Williams said in a speech that “the economy is in a good place, but not without risk and uncertainty”. “Persistently low inflation” is a key area of his attention. In particular, he noted the “broader context is important”, with “ongoing disinflationary pressures from abroad”.

                Meanwhile, beyond the “good” headline GDP figure, there are “more mixed signals coming from different sectors”. “Robust consumer spending is balanced by signs of slowing business investment. We’ve also seen a decline in exports and weakening manufacturing data, reflecting slowing global growth and uncertainty related to trade and geopolitical risks.”

                Williams said he is carefully monitoring this “nuance picture” and “remain vigilant to act as appropriate”. And, Fed will maintain a “data-dependent approach that takes into account the risks and uncertainty that are weighing on the economy.”

                DOW loses 300pts as selloff accelerates, 24247 support in focus

                  DOW is dropping more than -300 pts, or -1.2% as selloff accelerates. 24247.84 key near term support is now in focus. As noted previously, the corrective rise from 23344.52 should have completed at 25402.83. It should be in form of an ascending triangle. Sustained break of 24247.84 should confirm this view and target a test on 23344.52.

                  In addition, that will also affirm our view that fall from 25402.83 is the third leg of the corrective pattern from 26616.71. And we should at least see a test on 38.2% retracement of 15450.56 to 26616.71 at 22351.24 before completing the correction. Let’s see how it plays out.

                  Australia retail sales rose only 0.1% mom in May, dragged by Victoria lockdown

                    Australia retail sales rose 0.1% mom in May, well below expectation of 0.7% mom. Comparing to a year ago, sales rose 7.4% yoy.

                    Ben James, Director of Quarterly Economy Wide Surveys, said: “There were mixed results across the industries and states and territories, with COVID-19 restrictions in Victoria impacting the May result. Victoria fell 1.5 per cent as the state entered its fourth lockdown on May 28 with trade restricted for physical stores.”

                    Full release here.

                    Fed Barkin: We have a look of time before July FOMC meeting

                      In a Bloomberg interview, Richmond Fed President Thomas Barkin rejected the idea that a July rate cut is a done deal. He emphasized “we have a lot of time left before the meeting, we’ll see what happens.”

                      For now, he said the economy was not heading to a recession. He added “I actually still feel pretty good about the economy… I don’t see any issues on the consumer side of the house”.

                      Though, risks to outlook is “a little more tilted to the downside” for fragile business confidence. Indicators for second-quarter growth are less strong.

                      Gold breaks 1800, more downside ahead with Silver

                        Gold is now back below 1800 handle as fall from 1853.70 extends. The development further affirms the case that rebound from 1752.32 has completed with three waves up to 1853.70. Deeper decline is expected as long as 1821.93 minor resistance holds. Current fall from 1853.70 is see as part of the pattern from 1877.05, which is a down leg inside the medium term range pattern from 1676.65. Break of 1782.48 support will add further credence to this case, and would set the stage for deeper decline through 1752.32 low to 100% projection of 1877.05 to 1752.32 from 1853.70 at 1728.97 eventually.

                         

                        Silver’s development is also inline with gold. Rebound from 21.39 should have completed with three waves up to 84.69. Deeper decline is expected as long as 23.55 minor resistance holds, to 21.93 support first. Such fall from 24.69 is seen as a leg inside the medium term falling wedge pattern from 30.07. Break of 24.69 would send silver through 21.39 low, to 50% retracement of 11.67 to 30.7 at 20.87 next.

                        AUD/JPY and NZD/JPY retreat mildly, up trend still in force

                          Commodity Yen crosses trade mildly lower today and stock markets turn into consolidation and retreat mildly. AUD/JPY formed a temporary top at 80.91 and intraday bias is turned neutral for some consolidations. Though, downside should be contained by 78.83 support to bring another rally. We’d expect up trend from 59.89 to resume, sooner rather than later, by breaking through 80.91 to 61.8% projection of 59.89 to 78.46 from 73.13 at 84.60.

                          Similarly, NZD/JPY also turned into consolidation today, with a temporary top formed at 75.56. Downside of retreat should be contained by 73.78 support to bring rise resumption. We’d expect up trend from 59.49 to resume to 100% projection of 63.45 to 71.66 from 68.86, at 77.07, after the consolidations.

                          Silver stabilized after initial dive, but more downside still expected

                            Silver tumbled along with Gold in ultra thin Asian open, and hit as low as 22.36. While it quickly rebounded, near term outlook will stay bearish as long as 25.99 resistance holds. Prior rejection by 55 day EMA also affirmed near term bearishness. Fall from 30.07 is seen as corrective whole up trend from 11.67 low.

                            There are various interpretations on the price actions. One way to see them is that a head and shoulder top was formed (ls: 29.84; head: 30.07; rs: 28.73). But in any case, firm break of 100% projection of 30.07 to 23.76 from 28.73 at 22.42 will pave the way to 161.8% projection at 18.52. That is close to 61.8% retracement of 11.67 to 30.07 at 18.69. That’s probably the level where Silver would complete the correction.

                            New Zealand ANZ business confidence improved, activity turned positive

                              In the preliminary survey results for October, New Zealand ANZ Business Confidence rose to -14.5, up from September’s -28.5. Own Activity Outlook turned positive to 3.6, up from -5.4. Employment intentions rose to -3.2, up from -11.8, but stayed negative.

                              ANZ said October’s data “saw another widespread improvement in the forward-looking activity indicators”. But, “key tests for the economy lie ahead: the winding down of the wage subsidy and the lost summer for tourism.”

                              Full release here.

                              ECB Lane: Reversal of energy prices will feed into lower core

                                ECB Chief Economist Philip Lane has asserted that falling energy prices could lead to lower core inflation due to reduced living costs and, consequently, restrained wage increases. However, he stressed the timeline and extent of this effect remain uncertain.

                                Speaking at a conference in Dubrovnik, Lane said, “I don’t think it’s symmetric… but when energy prices fall, core inflation does follow, because there is less pressure from an energy cost, there’s less pressure on the cost of living, therefore on nominal wage increases

                                “So, we do think this spectacular reversal of energy prices will feed into lower core, but the timeline for that and the scale of it is uncertain,” he added.

                                Lane further observed that wage growth is generally progressing at a moderate pace, with many people still bound to older contracts. “The latest deals are coming in at above 5%, but (this is in the) ballpark of what we expect,” he noted.

                                Despite this, he expects nominal wage growth to peak this year and suggested it would take real wages until 2025 to recover back to their 2019 level.

                                US shot up by yield, but EUR resilience held dollar index in range

                                  USD surged broadly overnight as boosted by the strong rally in treasury yields. But still, it’s just trading as the second strongest major currency this week, following EUR. And because of that, the dollar index is still bounded in recently established range, held below 55 day EMA.

                                  Taking a look at 10 year yield, TNX’s strong rise yesterday now suggests that the pull back from Feb’s high at 2.943 has completed and the medium term up trend is resuming. Focus will be on this 2.943 resistance today, if not taken out, early next week. A firm break there should likely push TNX through 2013 high at 2.036. That will be an important signal of reversal of the multi decade down trend.

                                  For dollar index, we maintained our view that a breakout is imminent as it’s close to medium term falling trend line. If the break out is accompanied by surge in treasury yield, then favor will be on the case of an upside breakout for bullish reversal. And in that case, we would likely see EUR/USD dropping through 1.22 handle. Let’s see how it’s going to play out.

                                  WTI oil heading back to 67.79 after initial volatility

                                    Oil market experienced significant volatility on the first trading day of the year. Initially, oil prices saw an uptick, fueled by concerns over supply disruptions linked to escalating tensions in the Red Sea region, a vital gateway to the Suez Canal.

                                    This surge was triggered by an incident where US helicopters thwarted an attack by Iran-backed Houthi forces on a vessel operated by Danish shipper Maersk in the Red Sea. Adding to the geopolitical complexities, an Iranian warship’s entry into the Red Sea, reported by the semi-official Tasnim news agency, further heightened market anxieties.

                                    However, as the day progressed, the oil markets reassessed the situation and concluded that direct engagement between the Iranian warship and American forces was unlikely. This reassessment led to a subsiding of initial fears regarding supply disruptions, causing oil prices to reverse their earlier gains and close lower.

                                    From a technical analysis standpoint, WTI’s rebound from 67.79 short term bottom should have completed at 76.02. Rejection below 55 D EMA keeps near term outlook bearish. Further fall is expected as long as 73.52 minor resistance holds, to retest 67.79 low. Firm break there will resume larger decline from 95.50 (2023 high) to retest 63.67 (2023 low).

                                    Nevertheless, break of 73.52 will extend the corrective pattern from 67.79 with another leg through 76.02 instead.

                                    BoE Saunders: Next move is quite plausible a cut

                                      BoE policymaker Michael Saunders said that “it is quite plausible that the next move in Bank Rate would be down rather than up.” He noted that “even without a no-deal Brexit, a scenario of persistently high uncertainty is probably the most likely outcome. And, “that would probably imply continued weakness in business confidence and investment, with softer job growth that drags on consumer spending, Saunders added, “it might well be appropriate to maintain a highly accommodative monetary policy stance for an extended period and perhaps to loosen policy at some stage, especially if global growth remains disappointing.”

                                      In case of disorderly Brexit, Saunders repeated BoE’s position that policy options won’t be automatic. And he warned that no-deal Brexit would “probably immediately leave some firms unprofitable. Others might face longer-term questions about their viability, or whether they would be better off relocating.”

                                      Australia Westpac leading index ticked up, growth below trend through most of 2023

                                        Australia Westpac-MI leading index ticked up slightly in January. Growth in the three to nine months period is estimated to be -1.04% below trend, comparing to -1.09% in December.

                                        Westpac added that growth would remain below trend through most of 2023, with global factors, monetary policy and, recently, hours worked have weighed heavily on the Index.

                                        Regarding RBA policy, Westpac expects another 25bps hike at March meeting to 3.60%. The cash rate is expected to peak at 3.85%, but recent communications from RBA “imply upside risks to that forecast”.

                                        Full release here.

                                        Australia PMI manufacturing rose to 35-month high

                                          Australia CBA PMI manufacturing surged to 56.1 in November, up from 54.2, hitting a 35-month high. PMI Services rose to 54.9, up from 53.7, a 4-month high. PMI Composite rose to 54.7, up from 53.5, also a 4-month high.

                                          Bernard Aw, Principal Economist at IHS Markit, said: “Latest PMI data showed the recovery in the Australian private sector economy gained pace during November, setting the scene for a stronger GDP performance during the final quarter of 2020… That said, the subdued rise in new business remains a concern. Renewed lockdown measures in parts of the world due to second waves of infections may keep border controls and travel restrictions in place for a longer period, thereby dampening external demand. If Australian sales growth continues to lag behind the rise in business activity in the months ahead, the current economic recovery could risk losing momentum.”

                                          Full release here.