North Korea infuriated by Bolton, threatens to cancel Trump-Kim summit

    North Korea threatened to cancel Trump-Kim summit after they’re infuriated by comments from Trump’s national security adviser John Bolton that North Korea could follow a Libyan model of nuclear disarmament. The meeting is scheduled to be on June 12.

    North Korea’s vice-foreign minister Kim Kye-gwan used strong words in a statement carried by the state news agency KCNA. He condemned that Bolton’s suggestion was “not an expression of intention to address the issue through dialogue”. And, “it is essentially a manifestation of awfully sinister move to impose on our dignified state the destiny of Libya or Iraq which had been collapsed due to yielding the whole of their countries to big powers.”

    Kim went further and warned that if the US “corners us and unilaterally demands we give up nuclear weapons we will no longer have an interest in talks and will have to reconsider whether we will accept the upcoming DPRK-US summit”. And, “if President Trump follows in the footsteps of his predecessors, he will be recorded as more tragic and unsuccessful president than his predecessors, far from his initial ambition to make unprecedented success.”

    Australia consumer sentiment surged to 105.0, highest since Jul 2018

      Australia Westpac Consumer Sentiment rose 11.9% to 105.0 in October, up from 93.8. The Index has now lifted by 32% over the last two months. It’s also stands at the highest level since July 2018, 10% above the six-month average prior to the coronavirus pandemic. Confidence was also lifted in all states, including even Victoria (up 13.7%) which is still in lockdown. Confidence in New South Wales surged 17.5%, Queensland up 7.1%, Western Australia up 2.4%, South Australia up 9.3%.

      Westpac also noted that one of the “likely factors” for the surge in sentiment was an expectation of RBA rate cut from 0.25% to 0.10% in November. Communications from RBA over the last few weeks “points to this outcome” too. And, “there seems to be no reason for the Board to delay its decision”.

      Full release here.

      USTR Lighthizer: A breakthrough in NAFTA talks in the next several days

        US Trade Representative Robert Lighthizer said yesterday that he’s “hopeful” that there will be a “breakthrough” in NAFTA talks with Mexico in the “next several days”. But he didn’t offer any details. It’s reported that the two sides have largely agreed on the new rules regarding auto trade. And Lighthizer appeared to be willing to ease on the request of sunset clause in exchange for some concessions from Mexico.

        On the other hand, Mexican Economy Minister Ildefonso Guajardo urged that “everybody has got to show some flexibility. And he added that “we have everything on the table, there are no preconditions and we’ll see at the end how the whole thing falls into place.” Also, Guajardo said the sunset clause will be among the “very last times” to be dealt with.

        While there appears to be some progresses, it should be noted that Canada is not involved in the bilateral talks between the US and Mexico. And is unsure how Canada would be reengaged.

        UK Hammond: The governor will not vote for no-deal Brexit

          More from Chancellor of the Exchequer Philip Hammond. He told BBC radio that “The government is very clear where the will of parliament is on this. Parliament will vote not to leave the European Union without a deal,” and he had “a high degree of confidence about that.”

          At the same time, he also warned that voting against Prime Minister Theresa May’s deal, the UK “will then be in unknown territory where a consensus will have to be forged across the House of Commons and that will inevitably mean compromises being made.”

          US to re-initiate trade talk with China before new tariffs, Aussie and DOW surge

            The WSJ reported that the US is proposing new round of trade talk with China. That could happen in the near future before Trump imposes the new round of 25% tariffs on USD 200B in Chinese goods. It’s reported that Treasury Secretary Steven Mnuchin sent an invitation to Chinese officials, proposing a meeting in the next few weeks to discuss trade issues, citing unnamed sources.

            The proposal could be resulted from public hearing ended last week. Or, it could also be in response to outcries from American businesses.

            As we noted here, over 60 US industry groups formed a coalition “Americans for Free Trade” to launch a campaign against Trump’s tariffs and trade policies.

            The news boosts Australian and New Zealand Dollar sharply higher. Meanwhile, Dollar clearly suffers.

            Meanwhile, DOW is also surging around 170 pts , taking recent high at 26167.74.

            ECB Lane: Biggest challenge is making adjust to a mixed reality

              ECB Chief Economic Philip Lane said in an interview that “the fact that it looks like the vaccines are on their way confirms our baseline scenario and makes it less likely that we will have more severe scenarios.” But “trick” is the Europe is “in the middle of the second wave” of the pandemic and it’s going to be a “mixed reality”. The biggest challenge is “making that adjustment: to realize and to benefit later in 2021 from as widespread vaccination as possible but, in the meantime, to reconcile the need to control the virus with the importance of supporting the economy.”

              On monetary policy, Lane said, “if we can keep financing conditions where they are these days, at a low level, that supports the economic recovery and offsetting the pandemic shock to inflation. And in that world – we know and we’ve been saying that –,for example, fiscal policy can be very powerful. In a world with low interest rates, the multiplier effect of fiscal policy can be quite high, compared with normal conditions.”

              Full interview here.

              ECB de Galhau: ECB can do more if slowdown becomes a real slamming of the brakes

                ECB Governing Council Member Francois Villeroy de Galhau said as inflation falls short of the central bank’s target, monetary policy must be kept “active and accommodative”.

                Also, “if the current slowdown becomes a real slamming of the brakes, we can do more than we are doing currently”. However, he also warned that “they can temporarily attenuate the consequences of a weaker global economy, but they cannot take care of the cause.” De Galhau referred to uncertainty created by trade tensions.

                BoC governor Poloz press conference live stream and opening statement

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                  Monetary Policy Report Press Conference Opening Statement

                  Japan PMI manufacturing dropped to 52.7, but services jumped to 54.2

                    Japan PMI Manufacturing dropped slightly from 53.3 to 52.7 in June, below expectation of 54.4. PMI Services rose from 52.6 to 54.2, highest since October 2013. PMI Composite Output rose form 52.3 to 53.2.

                    Usamah Bhatti, Economist at S&P Global Market Intelligence, said:

                    “Activity at Japanese private sector businesses rose solidly at the midway point of 2022 as border restrictions related to the COVID-19 pandemic were eased. The rise was the fourth in as many months and the sharpest recorded since last November amid the strongest expansion in the services sector since October 2013, with firms relating the increase to the return of international visitors. Concurrently, manufacturers signalled the softest upturn in the current four-month growth sequence as COVID-19 restrictions in mainland China contributed to further supply chain disruption and exacerbated existing supply and demand pressures.

                    “Private sector firms also noted a further robust increase in prices in June. While the rate of input price inflation remained broadly similar to May’s series record, the slight easing in inflation was the first for five months and provided tentative evidence that the rise in input prices had peaked. That said, prices charged for Japanese goods and services rose at an unprecedented rate for the second successive month as higher material and staff cost burdens were partially passed through to customers.”

                    Full release here.

                    Fed Kashkari: Only relax on compelling evidence that inflation on its way down

                      Minneapolis Fed President Neel Kashkari said yesterday, “By many, many measures we are at maximum employment and we are at very high inflation. So this is a completely unbalanced situation, which means to me it’s very clear: We need to tighten monetary policy to bring things into balance.”

                      “When inflation is 8% or 9%, we run the risk of unanchoring inflation expectations and leading to very bad outcomes that would cause us to have to be very aggressive — Volcker-esque — to then re-anchor them,” he said.

                      “We definitely want to avoid allowing that situation to develop. So with inflation this high, for me, I’m in the mode of we need to err on making sure we’re getting inflation down, and only relax when we see compelling evidence that inflation is well on its way back down to 2%,” he said.

                      Gold reclaiming 1850 after strong rebound

                        Gold drew support from 1821.96 support earlier this week, despite dipping to 1819.09. Subsequent rebound retains near term bullishness. Breach of 1850.11 resistance suggests that stronger rise could be seen back to retest 1875.27 resistance first. Break will resume the rally from 1764.31 for 61.8% projection of 1764.31 to 1875.27 from 1819.05 at 1887.62 next. We’ll see if that would happen.

                         

                        South Korea GDP grew 1.1% qoq in Q4, supported by strong exports

                          South Korea’s GDP grew 1.1% qoq in Q4, above expectation of 0.7% qoq. Momentum of the recovered was dampened, comparing to Q3’s 2.1% qoq, by second wave of coronavirus pandemic. Though, strong exports, which grew at 26-month high of 12.6% yoy in December, offset some weakness in private consumption. For the whole year, GDP contraction was limited to just -1%.

                          Analysts are also expecting a solid year for South Korea in 2021. Vaccination roll-outs to be started in February should reduce the need for restrictions and stimulate local demand. Return of global growth and 5G deployment would also support exports from Q2 onwards. Economists are expectation around 3% GDP growth this year.

                          ECB Knot expects more than 4% growth over the full year

                            ECB Governing Council member Klaas Knot said yesterday, “we can take comfort that the euro area in the coming months will take the exact same trajectory, services will also pick up, we expect more than 4% growth over the full year.” Further, he added, “I would argue that there is still significant upside risk actually, and that has to do with pent-up demand.”

                            “Traditionally we have been very conservative within the ECB, assuming in our baseline projections that the savings rate would just return to its pre-corona level, that there would be no pent-up demand taking place,” Knot said. “I personally think that’s a bit of an overly conservative assumption.”

                            Nevertheless, inflation is still too low and ECB would need to provide abundant support even if the PEPP purchases end in 2022. “The only thing we are talking about is rotation from emergency support to other forms of unconventional support,” he said, “we will still have the old asset purchase programme, we will still have the negative interest rates in place and most importantly, the targeted longer-term refinancing operations to the banks.”

                            China’s Caixin PMI manufacturing rises, as NBS PMI shows contraction

                              December brought mixed signals from China’s manufacturing sector, as indicated by two key indices: Caixin PMI and official NBS PMI. Caixin PMI Manufacturing slightly increased from 50.7 to 50.8, surpassing expectations of 50.4, suggesting a marginal yet steady expansion in the manufacturing sector. Notably, Caixin highlighted that both output and new orders are rising at faster rates, indicating increased production and demand within the industry.

                              However, the same period saw a dip in official PMI Manufacturing, which fell from 49.4 to 49.0. This decline suggests contraction in the sector, contrasting with optimism reflected in Caixin PMI data. The difference between these two indices can be attributed to their varied focus groups; Caixin PMI typically surveys small and medium-sized enterprises, while NBS PMI is more reflective of larger, state-owned companies.

                              Wang Zhe, Senior Economist at Caixin Insight Group, emphasized the improved economic outlook for the manufacturing sector, with expanding supply and demand, and stable price levels. Yet, he also pointed out significant challenge in employment, highlighting businesses’ cautious approach in areas like hiring, raw material purchasing, and inventory management.

                              On the other hand, NBS PMI Non-Manufacturing showed a slight improvement, rising from 50.2 to 50.4. This marginal increase suggests a modest expansion in China’s services sector.

                              Full China Caixin PMI release here.

                              Eurozone PMI manufacturing finalized at 48.4, ugly combination of recession and inflation

                                Eurozone PMI Manufacturing was finalized at 48.4 in September, down from August’s 49.6. That’s also a 27-month low. Looking at some member states, France PMI Manufacturing was finalized at 47.7, a 28-month low. Germany was finalized at 47.8, a 27-month low. Greece (49.7), the Netherlands (49.0), Spain (49.0), Austria (48.8) and Italy (48.3) were all in contraction, while Ireland (51.5) was in expansion.

                                Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “The ugly combination of a manufacturing sector in recession and rising inflationary pressures will add further to concerns about the outlook for the eurozone economy… Excluding the initial pandemic lockdowns, eurozone manufacturers have not seen a collapse of demand and production on this scale since the height of the global financial crisis in early-2009.

                                Full release here.

                                 

                                Eurozone industrial production rose 1.0% mom in Nov, EU up 0.9% mom

                                  Eurozone industrial production rose 1.0% mom in November, above expectation of 0.6% mom. Production of capital goods grew by 1.0%, intermediate goods by 0.8% and durable consumer goods by 0.4%, while production of energy fell by -0.9% and non-durable consumer goods by -1.3%.

                                  EU industrial production rose 0.9% mom. Among Member States for which data are available, the highest monthly increases were registered in Ireland (+6.4%), Luxembourg (+5.0%) and Malta (+4.6%). The largest decreases were observed in Estonia (-3.7%), Sweden (-3.3%) and Croatia (-1.9%).

                                  Full release here.

                                  Eurozone CPI finalized at 8.5% yoy, core CPI at 5.6% yoy

                                    In February, Eurozone CPI was finalized at 8.5% yoy, a marginal drop from January’s 8.6% yoy. Meanwhile, core CPI, which excludes volatile components like energy, food, alcohol, and tobacco, was finalized at 5.6% yoy, up from the previous month’s 5.3% yoy. The primary drivers of the annual Eurozone inflation rate were food, alcohol, and tobacco, contributing 3.10%, followed by services at 2.02%, non-energy industrial goods with 1.74%, and energy at 1.64%.

                                    EU’s overall CPI for February was finalized at 9.9% yoy, slightly lower than January’s 10.0% yoy. Among member states, Luxembourg, Belgium, and Spain registered the lowest annual rates at 4.8%, 5.4%, and 6.0%, respectively. In contrast, Hungary, Latvia, and Czechia experienced the highest annual rates at 25.8%, 20.1%, and 18.4%, respectively. Notably, annual inflation fell in fifteen member states, remained unchanged in two, and rose in ten.

                                    Full release here.

                                    Pound selloff resumes with EUR/GBP upside breakout

                                      Pound’s selloff resumes today and it’s for now the second weakest, just next to Canadian. The decline is rather unrelated to today’s main theme of Trump’s tariff on Mexico. Rather, Sterling is on its own downward trajectory on Brexit uncertainty. Prime Minister Theresa May will step down on June 7. Nominations will start in the week on June 10. That’s the week we’ll finally know who are the real runners.

                                      EUR/GBP breaks out of this week’s sluggish range and hits as high as 0.8866 so far. With 0.8840 resistance now firstly taken out, next stop will be 0.9101 key resistance.

                                      GBP/USD is also on track for 1.2391 low.

                                      GBP/JPY is also targeting 131.51 low even that flash crash low looks a bit far.

                                      US Empire state manufacturing dropped to -2.15, worst since 2009

                                        US Empire State Manufacturing Survey general business conditions index dropped a massive -34pts to -21.5 in March, well below expectation of 8.7. it’s also the worst reading since 2009. Looking at some details, new orders dropped -3.14 to -9.3. Shipments dropped -20.6 to -1.7. Delivery times dropped -6.1 to 2.2. Number of employees dropped -8.1 to -1.5. Average employee workweek dropped -9.6 to -10.6.

                                        Full release here.

                                        ISM non-manufacturing dropped to 55.5, employment and price declined

                                          US ISM non-manufacturing composite dropped to 55.5, down from 56.1 and missed expectation of 57.0.

                                          Look at the details:

                                          • Business Activity Index increased rose from 57.4. to 59.5.
                                          • New Orders Index dropped from 59.0 to 58.1.
                                          • Employment Index dropped from 55.9 to 53.7.
                                          • Prices Index dropped from 58.7 to 55.7.
                                          • 15 non-manufacturing industries reported growth.

                                          ISM noted: “The non-manufacturing sector has experienced an uptick in business activity, but in general, there has been a leveling off. Respondents are still mostly optimistic about overall business conditions, but concerns remain about employment resources.”

                                          Full release here.