Thu, Dec 09, 2021 @ 07:11 GMT

Fed Bostic: Finishing tapering before end of Q1 is in our interest

    Atlanta Fed President Raphael Bostic said yesterday that with robust growth, an improving job market and inflation more than twice Fed target, having tapering finished “some time before the end of the first quarter” would be “in our interest”.

    Bostic also referred to OECD’s projection that inflation in the US could be above 4% for the year of 2022. He said, “if it is at that kind of level, I think there is going to be a good case to be made that we should be pulling forward more interest-rate increases and perhaps do even more than the one I have penciled in.”

    Chinese VP Liu: Correct choice for US to remove China as currency manipulator

      Chinese Vice Premier Liu He said after signing the trade deal that “cooperation is the only correct option, especially in this new era… We don’t think tariffs are a good solution. Both sides need to solve problems through negotiation.” “China and the U.S. will make positive impacts on the whole world.”

      Liu also noted that the negotiations were “cultural talks, not just economics…or just trade” and “after two years of talks, we realize that this is a systematic process.” “We will use the results of the phase one deal to prove that our negotiations are working to improve the economy.”

      On currency manipulation, he said “it is the correct choice for the U.S. to remove China from the currency manipulator list. A week after the U.S. labeled China as a currency manipulator, the IMF issued a report that China did not manipulate the exchange rate. The U.S. realized this fact, and we welcome the U.S. meeting China halfway on this.”

      NASDAQ extending record run, pressing projection level at 15665

        NASDAQ extends recent record run today, together with other major US indexes. Daily MACD’s break of the falling trend line suggests upside acceleration. Focus is now on 61.8% projection of 13002.53 to 15403.43 from 14181.69 at 15665.44. Decisive break there will likely bring acceleration to 100% projection at 16582.59. That would also solidify near term bullishness that would probably last for the rest of the year.

        Meanwhile, rejection by 15665.44 would bring corrective pull back. But outlook will stay bullish as long as 55 day EMA (now at 14936.75) holds, even in case of deep correction.

        Canada CPI unchanged at 1.9%, but core CPI accelerated

          Canada headline CPI dropped -0.4% mom in September, much worse than expectation of 0.0%. Annually, CPI was unchanged at 1.9% yoy, below expectation of 2.0% yoy. However, CPI core common rose to 1.9% yoy, up from 1.8% yoy and beat expectation of 1.8% yoy. CPI core median rose to 2.2% yoy, up from 2.1% yoy and beat expectation of 2.1% yoy. CPI core trimmed also rose to 2.1% yoy, up from 2.0% yoy, matched expectations.

          Full release here.

          BoJ Kuroda pledges again to take additional easing if risks heigten

            BoJ Governor Haruhiko Kuroda remained optimistic that inflation, at around 0.5% currently, would accelerate toward the 2% target. Though, he reiterated again that “we will adjust policy as necessary to maintain momentum toward our price stability target while examining risks.”

            And, “we will not hesitate to take additional easing steps if risks heighten to an extent that the momentum toward the price target is undermined.”

            Fed Barkin: We will see price pressure this year

              Richmond Fed President Thomas Barkin told CNBC yesterday, “we will see price pressure this year”, with a “very strong demand situation” and “constraints in supply”. “When those things happen, you’re definitely going to see price pressure,” he added.

              “Inflation is a recurring phenomenon. Prices go up this year, prices go up next year,” he said. “I think it’s fair to argue the question of whether the combination of supply chain constraints and stimulus-driven price increases actually revert next year.”

              Fed Bullard: The time is right to pull back emergency measures

                St. Louis Fed President James Bullard said in a WSJ interview, “I think with the economy growing at 7% and the pandemic coming under better and better control, I think the time is right to pull back emergency measures.”

                But he added, “we do want to do it gently and carefully” on tapering asset purchases. “But I think we’re in a very good position to start a taper. I don’t need to get going tomorrow, but I think we’re—I think we’re in very good shape for this”.

                Bullard also said recent fall in bond yields was a “bullish” development. He’s “comfortable with the idea that the economy will continue to grow very robustly through the second half of this year, and go through the first half of 2022, and all of 2022.”

                BoJ Wakatabe: QQE has clearly positive impact on the economy and prices

                  BoJ Deputy Governor Masazumi Wakatabe reiterated to the parliament that the quantitative and qualitative easing program (QQE) had “clearly positive” impact of the economy and prices. And, benefits of easing is “outweighing” its costs.

                  He admitted that BoJ hasn’t put a sustained end to deflation yet while inflation remains below 2% target. But he emphasize “we’re seeing an end to a long period of time when consumer prices kept falling.”

                  On exit, he said “how an exit from easy policy affects BOJ’s balance sheet would depend on various factors such as means, the order in which it exits.”

                  Japan national CPI core ticked up to 0.5%

                    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.”

                    BoJ Kuroda: No intention of pushing 10-year yield up above 0% target

                      BoJ Governor Haruhiko Kuroda told the parliament today that “it’s important now to keep the entire yield curve stably low as the economy suffers the damage from COVID-19”. Also, “the BOJ has no intention of pushing up (10-year bond yields) above its target of around 0%.”

                      On monetary policy, Kuroda said “it may take time but the BOJ must achieve 2% inflation by helping expand the positive output gap, prop up inflation expectations with a commitment to expand base money until inflation stably above 2%… By stressing BOJ’s commitment to hit 2% inflation, it hopes to push up inflation expectations and lower real interest rates.

                      BoJ will also include the study on whey inflation has not sufficiently picked up in the upcoming March review. “The BOJ will examine the effects and side-effects of our asset purchases in hope of making them more effective and sustainable,” Kuroda reiterated. “We’re already buying ETFs flexibly because doing so is possible even under current guidelines.”

                      US ISM services jumped to 69.1, corresponds to 6.9% annualized growth in GDP

                        US ISM Services rose from 66.7 to 69.1 in November, above expectation of 65.5. Business activity/production rose from 69.8 to 74.6. New orders was unchanged at 69.7. Employment rose from 51.6 to 56.5. Prices dropped from 82.9 to 82.3. Employment rose from 51.6 to 56.5.

                        ISM said: “The past relationship between the Services PMI and the overall economy indicates that the Services PMI for November (69.1 percent) corresponds to a 6.9-percent increase in real gross domestic product (GDP) on an annualized basis.”

                        Full release here.

                        UK PMI construction rose to 54.7, beat expectations

                          UK PMI Construction rose to 54.7 in November, up from 53.1, well above expectation of 52.3. Markit noted that house building remained the best-performing category. New order growth was highest for just over six years. But stretched supply chains led to rising costs.

                          Tim Moore, Economics Director at IHS Markit: “UK construction output stayed on a recovery path in November and there were signs that the main growth driver has transitioned from catch-up work to new projects. The latest increase in new orders was the strongest since late-2014, with construction firms reporting a boost from rising client confidence and the release of budgets that had been held back earlier in the pandemic.”

                          Full release here.

                          Fed Harker still supportive of moving the taper along

                            Philadelphia Fed President Patrick Harker said he’s “still supportive of moving the taper along”, because he didn’t think asset purchase is “doing a whole lot right now”. He added that Fed should finish tapering before considering raising interest rates.

                            He said the Fed has achieved “substantial further progress on inflation” already. There is “some evidence that inflationary pressure “may not be so transitory”. Meanwhile, the job market is changing the people’s thinking about what a job is has changed too.

                            China Caixin PMI services rose to 53.8, composite rose to 51.5

                              China Caixin PMI Services rose to 53.8 in October, up from 53.4, above expectation of 53.6. PMI Composite ticked up to 51.5, from 51.4.

                              Wang Zhe, Senior Economist at Caixin Insight Group said: “As the number of new Covid-19 cases dropped from late September to the middle of October, related disruption faded and market demand recovered while supply was relatively weak. Manufacturing was significantly weaker than services.

                              “Supply strains became the paramount factor affecting the economy. Shortages of raw materials and soaring commodity prices, combined with electricity supply problems, created strong constraints for manufacturers. Those factors also had a significant impact on services enterprises.

                              “Input costs for manufacturers have risen much faster than their output prices for several months. The growth rate of input costs for service providers was also higher than that for prices they charged, putting pressure on downstream enterprises.”

                              Full release here.

                              Australia retail sales rose 1.4% mom in Mar, led by Victoria and Western Australia

                                Australia retail sales rose 1.4% mom, or AUD 423.9m, in March. Over the year, sales was up 2.3% yoy. The rises were led by Victoria (4%) and Western Australia (5.5%), with both states rebounding from COVID-19 lockdown restrictions during February. Queensland, which saw COVID-19 restrictions impact March 2021, saw a minor fall.

                                Full release here.

                                UK unemployment rate edged higher to 3.9%, wage growth mixed

                                  UK unemployment rose to 3.9% in the three months to January, slightly above expectation of staying at 3.8%. Average earnings excluding bonus grew 3.1% 3moy, slowed form 3.2% and missed expectation of 3.3%. Average earnings including bonus, on the other hand, rose 3.1% 3moy, rose 2.9% and beat expectation of 3.0%.

                                  Full release here.

                                  Japan Nikkei dropped -2%, as corrective pattern develops the third leg

                                    Japan’s Nikkei closed sharply lower by -2.07%, or -617.9pts, to 29174.15. Markets attribute the decline to many reasons, from the fire at semiconductor supplier Reneasas’ plant, to BoJ’s stop in purchasing Nikkei-linked ETFs, to surging US treasury yields, and even to the free fall in Turkish Lira.

                                    But technically, the sharp fall was seen as nothing more than the third leg of the consolidation pattern from 30714.52. There wasn’t remotely enough evidence to suggest a change in the medium term up trend from 16358.19.

                                    While deeper correction cannot be ruled out, the first line of defense will be from 55 day EMA (now at 28767.46). Sustained break of that would turn focus to channel support (now at 27170). We’d see how deep the correction would develop into.

                                    UK PMI services finalized at 55.0, staff shortages, self-isolation rules and stretched supply chain capacity

                                      UK PMI Services was finalized at 55.0 in August, down from July’s 59.6, and way below May’s record high of 62.9. PMI Composite was finalized at 54.8, down from July’s 59.2. Markit said recovery in business activity eased further from May’s peak. Employment numbers rose at fastest rate since survey began in July 1996. Business optimism also climbed to three-month high.

                                      Tim Moore, Economics Director at IHS Markit, which compiles the survey: “The service sector lost momentum for the third consecutive month as the impact of looser pandemic restrictions faded in August. Many businesses suffered constraints on growth due to staff shortages, self-isolation rules and stretched supply chain capacity…

                                      “Tight labour market conditions pushed up wages as service sector companies sought to attract and retain employees. The overall rate of input cost inflation remained steep, but eased from the record high seen in July…

                                      “Business optimism edged up to a three-month high during August, suggesting that service providers have become slightly more confident about longer-term prospects for demand and supply availability.”

                                      Full release here.

                                      UK Q2 GDP growth finalized at 5.5% qoq, still -3.3% below pre-pandemic level

                                        UK Q2 GDP growth was finalized at 5.5% qoq, revised up from 4.8% qoq. GDP remained -3.3% below the pre-pandemic level at Q4 2019.

                                        In output terms, the largest contributors to this increase were from wholesale and retail trade, accommodation and food service activities, education and human health, and social work activities.

                                        There were increases in all main components of expenditure, with the largest contribution from household consumption.

                                        Full release here.

                                        China PMI manufacturing rose to 50.1, non-manufacturing dropped to 52.3

                                          China official PMI Manufacturing rose from 49.2 to 50.1 in November, above expectation of 49.6. PMI Non-Manufacturing dropped from 52.4 to 52.3, below expectation of 53.0. PMI Composite rose from 50.8 to 52.2.

                                          “A series of policy measures to ensure energy supply and stabilize market prices have borne some fruits. The tight supply of electricity eased while prices of some raw materials dropped significantly in November,” said Zhao Qinghe, a senior NBS statistician.