US ADP jobs grew 2369k in Jun, May revised up to 3065k increase

    US ADP employment report showed 2369k growth in private sector jobs in June, below expectation of 3000k. Nevertheless, May’s figure was revised sharply higher from -2760k loss to 3065k growth. By company size, small businesses added 937k jobs, medium businesses added 559k, large businesses added 873k. Goods-producing sector added 457k jobs while service-providing sector grew 1912k.

    “Small business hiring picked up in the month of June,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “As the economy slowly continues to recover, we are seeing a significant rebound in industries that once experienced the greatest job losses. In fact, 70 percent of the jobs added this month were in the leisure and hospitality, trade and construction industries.”

    Full release here.

    Eurozone PMI manufacturing finalized at 47.9, remained deep in decline, downturn fiercest in Germany

      Eurozone PMI manufacturing was finalized at 47.9, revised up from 47.8. It was just a slight improvement from March’s six-year low of 47.5. Also, it’s in contraction region below 50 for three consecutive months. Markit noted there were further marked fall in new orders recorded. Also, Germany continues to lead downturn but Greece expands at fastest rate in nearly 19 years.

      Looking at the member states, German’s reading was revised down to 44.4, a two month high but remained close to March’s 80-month low at 44.1. Italy and Austria stayed in contraction at 49.1 and 49.2 respectively. France reading was revised up to 50.0, indicating flat activity. Greece reading, though, rose to 226-mont high at 56.6.

      Commenting on the final Manufacturing PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

      “The manufacturing sector remained deep in decline at the start of the second quarter. Although the PMI rose for the first time in nine months, the April reading was the second-lowest seen over the past six years, signalling a deterioration of overall business conditions for a third successive month. The survey’s output index is indicative of factory production falling at a quarterly rate of approximately 1%, setting the scene for the goods producing sector to act as a major drag on the economy in the second quarter.

      “The downturn remains the fiercest in Germany, with Italy and Austria also in decline and France stagnating. Spain’s expansion remains only modest.

      “Some encouragement can be gained from the PMIs having risen in all four largest euro member states in April, and forward-looking indicators such as future expectations, new order inflows and the orders-to-inventory ratio having all come off their lows. But it remains too early to call a turning point, especially as future sentiment remains around its lowest level since the end of 2012, hinting that the manufacturing downturn will persist in the coming months.

      “The surveys continue to see widespread concerns over weak global demand as well as reports of businesses struggling amid rising trade protectionism, Brexit and the subdued auto sector.

      “The steepest fall in backlogs of work since late 2012 meanwhile suggests firms will increasingly look for cost-cutting opportunities and exercise increased caution with respect to hiring.”

      Full release here.

      German PMI hit 5 month high, growth regains momentum

        German PMI manufacturing rose to 57.3 in July, up from 55.9, way above expectation of 55.7. PMI services dropped to 54.4, down from 54.5 and missed expectation of 54.5. PMI composite rose to 55.2, up from 54.8, and hit a 5- month high.

        Commenting on the flash PMI data, Trevor Balchin, Economics Director at IHS Markit said:

        “Private sector output growth in Germany continued to regain momentum in July, having previously sank to a 20-month low in May. The manufacturing sector was the source of stronger growth in the latest month, after services had driven the expansion in June.

        “Private sector employment continued to expand at a historically sharp rate in July, with the pace unchanged from June’s five-month high. Manufacturers added staff at a faster pace than service providers for the seventeenth consecutive month.

        “Data on new business were less positive than the trends for total activity and jobs, however. This mainly reflected new orders in manufacturing not rising as fast as output, resulting in the slowest rise in backlogs in the sector for two years.

        “The latest survey also signalled greater inflationary pressures in July, with both input and output prices rising more steeply. Manufacturers widely reported higher steel prices, and supply shortages from China in general. Meanwhile, service providers hiked their own charges at the second-fastest rate on record.”

        Full release here.

        UK PMI composite rose to 28.9, looks set to see a frustratingly slow recovery

          UK PMI Manufacturing rose to 40.6 in May, up from 32.6, above expectation of 33.5. PMI Services rose to 27.8, up from 13.4, above expectation of 22.1 too. PMI Composite rose to 28.9, up from 13.8.

          Chris Williamson, Chief Business Economist at IHS Markit, said: “The UK economy remains firmly locked in an unprecedented downturn, with business activity and employment continuing to slump at alarming rates in May. Although the pace of decline has eased since April’s record collapse, May saw the second largest monthly falls in output and jobs seen over the survey’s 22-year history, the rates of decline continuing to far exceed anything seen previously.

          “The UK looks set to see a frustratingly slow recovery, given the likely slower pace of opening up the economy relative to other countries which have seen fewer COVID-19 cases. Virus related restrictions, widespread job insecurity and weak demand will be exacerbated by growing business uncertainty regarding Brexit. We are consequently expecting GDP to fall by almost 12% in 2020. While the quarterly rate of decline looks likely to peak at around 20% in the second quarter, the recovery will be measured in years not months.”

          Fed’s Kashkari expresses perplexity over rising treasury yields

            Minneapolis Fed President Neel Kashkari expressed a sense of bewilderment regarding recent surge in 10-year Treasury yields. He noted yesterday, “The 10-year Treasury yield has gone up quite a bit. It’s a little bit perplexing what is driving them to go up as much as they have in recent months.”

            He outlined a spectrum of possible explanations, from growing investor optimism about long-term economic strength to expectations of a more aggressive Fed stance on curbing inflation. Additionally, the rise in debt issued by the federal government could be another influencing factor.

            “It is that combination of factors that is a little bit puzzling right now,” Kashkari commented, reflecting the multifaceted nature of the economic signals currently at play.

            The relationship between inflation and long-term yields was another topic Kashkari addressed. He acknowledged the potential of elevated long-term yields to aid in reining in inflation, saying, “It’s certainly possible that higher long-term yields may do some of the work for us in terms of bringing inflation back down.”

            However, he introduced a caveat – if these yields are reflective of changed expectations about the Fed’s actions, a conformity to these anticipations might be necessary to sustain the yields.

            “But if those higher long-term yields are higher because their expectations about what we’re going to do has changed, then we might actually need to follow through on their expectations in order to maintain those yields,” he added.

            Looking to the immediate future, Kashkari reiterated what he shared last month, suggesting there’s a 60% chance Fed would implement one more rate hike this year.

             

            ECB Makhlouf: German court ruling won’t get in the way of ECB doing its job

              ECB Governing Council member Gabriel Makhlouf said German Constitutional Court ruling on ECB asset purchases was an “interesting judgment”. Yet, “fundamentally it doesn’t actually get in the way of the ECB carrying on with its incredibly important job, especially at this time in the crisis”.

              “We are determined to respond forcefully to the challenges and to do whatever it takes to deliver our mandate,” he added. “The judgement is directed at the German government and the German parliament. It looks as if it runs counter to what the European Court of Justice indicated just over a year ago but the ECB itself acts very transparently,” he said.

              US initial jobless claims rose back to 742k, continuing claims dropped to 6.37m

                US initial jobless claims rose 31k to 742k in the week ending November 14, above expectation of 707k. Four-week moving average of initial claims dropped -14k to 742k.

                Continuing claims dropped -429k to 6372k in the week ending November 7. Four-week moving average of continuing claims dropped -525k to 7055k.

                Full release here.

                Japan BSI sentiments weakened broadly in Q1

                  Japan business sentiments weakened generally in Q1. Large all industry index dropped to 3.3, down from 6.2. Large manufacturing index dropped to 2.9, down from 9.7. Large non-manufacturing index dropped to 3.4, down from 4.5. Outlook for Q2 showed further deterioration. But large companies are expectation a rebound in Q3. Deteriorations are also seen in sentiments of small and mid sized companies for Q1.

                  US initial jobless claims dropped -8k to 207k

                    US initial jobless claims dropped -8k to 207k in the week ended September 29, slightly expectation of 206k. Four-week moving average of initial claims rose 0.5k to 207k. Continuing claims dropped -13k to 1.65m in the week ended September 22. Four-week moving average of continuing claims dropped -15.25k to 1.6645m, lowest since October 27, 1973.

                    Full release here.

                    New Zealand ANZ business confidence dropped to -0.4, inflation expectations rose further

                      In the preliminary read, New Zealand ANZ business confidence dropped to -0.4 in June, down from May’s 1.8. Own activity outlook rose from 27.1 to 29.1. Looking at some more details, export intentions rose from 12.2 to 13.9. Investment intentions rose from 18.9 to 25.3. Employment intentions dropped from 20.5 to 19.6. Pricing intentions rose from 57.4 to 62.8. Inflation expectations rose further from 2.22 to 2.33.

                      ANZ said: “Shipping disruptions, rising global commodity prices, the higher minimum wage, labour shortages due to both the closed border and uneven sector growth are creating a perfect storm for the supply side of the economy at the same time as demand is holding up much more than firms (or economists!) had anticipated.

                      “Headline inflation is set to jump over the next six months as a result, but it’s best to focus on wage growth and inflation expectations for clues regarding when the Reserve Bank might conclude they can no longer look through inflation pressure and simply wait for temporary pressures to subside, necessitating a higher OCR.”

                      Full release here.

                      NASDAQ gained 0.35% to new record high, up trend in progress to 11673

                        NASDAQ gained another 0.35% overnight to close at new record of 10941.17. The upside range breakout is a sign of strength. But we’d need daily MACD to break sits trend line to confirm re-acceleration. If it happens, it’s likely that NASDAQ would have a take on 138.2% projection of 6190.17 to 9838.37 from 6631.42 at 11673.23 before making a top.

                        On the downside, the lower part of this week’s gap, last week’s high of 10747.80, is the first line of defense. 10217.31 support is the key near term structural level to maintain bullishness.

                        BoJ stands pat, maintains yield cap at 0.25%

                          BoJ left monetary policy unchanged as widely expected. Under the yield curve control framework, short-term policy interest rate is held at -0.10%. 10-year JGB yield is kept at around 0%, with bond purchases without upper limit. 0.25% fixed rate purchase operation will continue to be held to cap 10-year JGB yield. The decision was unanimous.

                          In the new economic projections:

                          • Fiscal 2022 GDP growth forecast was downgraded from 2.4% to 2.0%.
                          • Fiscal 2023 GDP growth forecast was downgraded from 2.0% to 1.9%.
                          • Fiscal 2024 GDP growth forecast was upgraded from 1.3% to 1.5%.
                          • Fiscal 2022 CPI core forecast was upgraded from 2.3% to 2.9%.
                          • Fiscal 2023 CPI core forecast was upgraded from 1.4% to 1.6%.
                          • Fiscal 2024 CPI core forecast was upgraded from 1.3% to 1.6%.
                          • Fiscal 2022 CPI core-core forecast was upgraded from 1.3% to 1.8%.
                          • Fiscal 2023 CPI core-core forecast was upgraded from 1.4% to 1.6%.
                          • Fiscal 2024 CPI core-core forecast was upgraded from 1.5% to 1.6%.

                          Full statement here.

                          Full Outlook for Economic Activity and Prices here.

                          Fed Brainard: Policy will need to be sufficiently restrictive for some time

                            Fed Vice Chair Lael Brainard said in a speech yesterday, “even with the recent moderation, inflation remains high, and policy will need to be sufficiently restrictive for some time to make sure inflation returns to 2 percent on a sustained basis.”

                            “The FOMC moved policy into restrictive territory at a rapid pace and subsequently downshifted the pace of increases in the target range at its most recent meeting,” She noted. “This will enable us to assess more data as we move the policy rate closer to a sufficiently restrictive level, taking into account the risks around our dual-mandate goals.

                            Full speech here.

                            Canada retail sales dropped -0.6% mom in Jul, estimated to rebound in August

                              Canada retail sales dropped -0.6% to CAD 55.8B in July, better than expectation of -1.2% mom fall. That’s the third decrease in four months, driven by lower sales at food and beverage stores (-3.4%) and building material and garden equipment and supplies dealers (-7.3%). Sales decreased in 5 of 11 subsectors. Based on advance estimates, sales rose 2.1% mom in August.

                              Full release here.

                              US personal income and spending missed expectations, core PCE unchanged at 2%

                                US personal income rose 0.3% in August, below expectation of 0.4%. Spending rose 0.3%, below expectation of 0.4%. Headline PCE slowed to 2.2% yoy, down from 2.3% yoy and missed expectation of 2.3% yoy. Core PCE was unchanged at 2.0% yoy, matched expectations.

                                Full release here.

                                Dollar is generally firm and steady after the release, except versus Canadian.

                                US ISM manufacturing ticked up to 61.1, corresponds to 5.1% annualized GDP growth

                                  US ISM Manufacturing Index rose slightly from 60.8 to 61.1 in November, above expectation of 61.0. Looking at some details, new orders rose from 59.8 to 61.5. Production rose from 59.3 to 61.5. Employment rose from 52.0 to 53.3. Supplier deliveries dropped from 75.6 to 72.2. Prices dropped from 85.7 to 82.4.

                                  ISM said: “The past relationship between the Manufacturing PMI and the overall economy indicates that the Manufacturing PMI for November (61.1 percent) corresponds to a 5.1-percent increase in real gross domestic product (GDP) on an annualized basis”.

                                  Full release here.

                                  Germany Gfk consumer climate rose to -6.2, just a flash in the pan

                                    Germany Gfk Consumer Climate for April improved to -6.2, up from -12.7, above expectation of -11.8. For March, economic expectations rose from 8.0 to 17.7. Income expectations rose from 6.5 to 22.3. Propensity to buy also rose from 7.4 to 12.3.

                                    Rolf BĂĽrkl, GfK consumer expert: “The hard lockdown will severely damage consumer confidence and the current improvement will remain a flash in the pan. A sustained recovery in consumer confidence will continue to be a long time coming — which means difficult times ahead for retailers and manufacturers.”

                                    Full release here.

                                    BoE’s Pill stresses persistence in inflation fight

                                      In a Financial Times interview, BoE Chief Economist Huw Pill emphasized the need for the MPC to avoid prematurely “declaring victory” in the fight against inflation, noting that CPI is still considerably above BoE’s 2% target, currently at 4.6%.

                                      Pill acknowledged UK’s economic slowdown, noting “slower growth in activity and employment.” However, he assessed that the current inflation scenario is “more supply-driven rather than demand-driven.” Weakening in economic activity is not necessarily leading to a reduction in inflationary pressures, as might typically be expected.

                                      Analyzing recent economic indicators, Pill observed more evidence of “sort of stubborn, high-level rates of inflation” and and growth that are “stronger” than being compatible with 2% inflation over the medium term.

                                      He also argued that if the slowdown in economic activities and employment growth is linked to a decline in the economy’s supply performance, rather than a drop in demand, it wouldn’t create the necessary slack to ease domestically generated inflation.

                                      US NFP rose 136k, unemployment rate dropped to 3.5%

                                        US Non-Farm Payroll report showed 136k job growth in September, slightly below expectation of 140k. Job growth has averaged 161,000 per month thus far in 2019, compared with an average monthly gain of 223,000 in 2018. Unemployment rate dropped to 3.5%, down from 3.7% and beat expectation of 3.7%. That’s the lowest level since December 1969. The labor force participation rate held at 63.2%. Average hourly earnings rose 0.0% mom, missed expectation of 0.3% mom.

                                        Full release here.

                                        Australia retail sales dropped -1.1% mom in Feb, lockdown in Vic and WA

                                          Australia retail sales dropped -1.1% mom, or AUD -346.5m, in February, worst than expectation of 0.4% mom rise. The falls were led by Victoria (-4%) and Western Australia (-6%). Both states saw COVID-19 lockdown restrictions during the month.  Partially offsetting falls in these states were rises in New South Wales and Queensland, which had seen COVID-19 restrictions impact January.

                                          Full release here.