ECB: Sept easing package gradually transmitted to the economy

    In the accounts of ECB January 22-23 meeting, it’s noted that the package of stimulus measures announced last September “have lowered term premia and contributed to the overall substantial easing in financial conditions.” There were also “indications” that the package was “being gradually transmitted to the economy”.

    “Market sentiment had turned positive and risk appetite among market participants seemed strong.” Additionally, “uncertainties were perceived as receding”, mainly due to US-China trade deal and stabilization in economy outlook. But monetary policy “had to remain highly accommodative for a prolonged period of time”, with inflation “still far away” from target, and “robust convergence” of inflation towards target was “not yet assured”.

    Meanwhile, “risks remained tilted to the downside” even though they had become “less pronounced”. Also, “it was cautioned that a more optimistic outlook for the economy needed to be communicated carefully in order not to give rise to a premature tightening of financial conditions.”

    Full ECB accounts here.

    UK CBI industrial order books jumped to 30 yr high, output prices surged

      According to the latest UK CBI Industrial Trends Survey, total order books rose to 19 in June, up from 17 in May, hitting the strongest level since May 1988. Export order books also improved to -8, up from -17, hitting the best reading since April 2019. Output prices expectations for the next three months jumped to 48, up from 38, strongest since January 1982.

      Anna Leach, CBI Deputy Chief Economist, said: “The rebound in manufacturing activity has gathered pace in June, with output growth accelerating to its fastest pace on record and order books their strongest in over 30 years. Encouragingly, this performance is reflected in the majority of manufacturing sub-sectors and looks set to continue in the coming quarter. However, supply shortages continue to bite, and firms expect that to push through into prices in the months ahead.

      Full release here.

      ECB Knot: Decision next week would imply a reduction in PEPP purchase pace

        ECB Governing Council member Klass Knot said he’d expects a decision in next week’s meeting that “should not be incompatible” with ending the PEPP in March. And, “that would imply a reduction in the purchase pace.”

        Knot explained that “PEPP has a clearly delineated objective — repairing the damage that the coronavirus has inflicted on the inflation outlook.” And, “the stars are much better aligned than they have been for a long time for the return of inflation back to 2%.”

        Though, he added, “I can understand that next week we may want to maintain some optionality, also to see how the delta variant will play out.”

        Australia retail sales rose 0.9% mom in May, higher prices added to growth

          Australia retail sales rose 0.9% mom in May, above expectation of 0.4% mom. That’s the fifth consecutive monthly growth.

          Ben Dorber, Director of Quarterly Economy Wide Statistics said, “There was growth across five of the six retail industries in May as spending remained resilient. Higher prices added to the growth in retail turnover in May. This was most evident in cafes, restaurants and takeaway food services and food retailing.”

          Full release here.

          US consumer confidence rose to 135.7, highest this year

            Conference Board US Consumer Confidence Index rose to 135.7 in July, up from 124.3, and beat expectation of 125.0. Present Situation Index rose from 164.3 to 170.9. Expectations Index Rose from 97.6 to 112.2.

            Conference Board said: “After a sharp decline in June, driven by an escalation in trade and tariff tensions, Consumer Confidence rebounded in July to its highest level this year,”

            “Consumers are once again optimistic about current and prospective business and labor market conditions. In addition, their expectations regarding their financial outlook also improved. These high levels of confidence should continue to support robust spending in the near-term despite slower growth in GDP.”

            Full release here.

            Fed’s Bowman: Rate hike needed amid inflation, solid growth

              Fed Governor Michelle Bowman emphasized her ongoing concerns about inflationary pressures, underscoring the need for sustained vigilance. Speaking on Saturday, she reiterated that, despite notable progress in curbing inflation, the levels remain worryingly high.

              She highlighted the necessity for further rate hikes, stating, “it will likely be appropriate for the Committee to raise rates further and hold them at a restrictive level for some time to return inflation to our 2 percent goal in a timely way.”

              Bowman pointed to the recent rise in the PCE index as a tangible indication of inflationary pressures. This increase, she believes, is partly attributed to climbing oil prices, which, if they persist or grow, could derail some of the achievements in inflation control observed over the past few months.

              On a brighter note, Bowman acknowledged the overall positive health of the US economy. “Real gross domestic product has been growing at a solid pace,” she remarked, signifying a robust economic backdrop. This growth is supported by strong consumer spending, a rejuvenating housing sector, and encouraging labor market data that reflects consistent job gains.

              However, Bowman concluded by emphasizing flexibility in the Fed’s approach, suggesting that monetary policy remains adaptable to the evolving economic landscape. “It is important to note that monetary policy is not on a pre-set course,” she clarified, ensuring that she and her colleagues will make informed decisions rooted in the most recent economic data and the broader implications for the economic future.

              Full remark of Fed Bowman here.

              Italian yield drops to record low as Draghi wins backing from politicians and investors

                Italy 10-year yield dropped to record low of 0.501% in early trading and remains low for the moment. Former ECB President Mario Draghi seemed to be winning confidence from a wide spectrum of political parties, as well as investors, for forming a new government.

                Draghi will continue to meet with parties to get their backing. Yesterday, he reiterated that a common Euro-are budget will be one of his key priorities. He’s seen as someone who’s “pro-EU” and “pro-reform” at the same time, who could prompt a paradigm shift for the country.

                US initial jobless claims rose to 240k, above expectation

                  US initial jobless claims rose 17k to 240k in the week ending November 19, above expectation of 224k. Four-week moving average of initial claims rose 4.4k to 227k.

                  Continuing claims rose 48k to 1551k in the week ending November 12. Four-week moving average of continuing claims rose 28k to 1510k.

                  Full release here.

                  Into US session: AUD maintains gains on strong Chinese stocks, GBP turns weak

                    Entering into US session, Australian Dollar remains the strongest one, followed by New Zealand Dollar. Strength in Chinese stocks gave the Aussie a solid boost as Shanghai SSE rose 2.47% to 3096.42, just a touch below 3100 handle. Sterling is the weakest one so far, suffering some brief selloff in European session. Brexit hardliner Rees-Mogg indicated that he might back PM May’s Brexit deal as a bad deal is better than no-Brexit. But at this point, it’s unsure whether the government will have enough support to make tomorrow’s meaningful vote “meaningful”. Dollar and Yen follow as the next weakest.

                    In Europe:

                    • FTSE is up 0.59%.
                    • DAX is down -0.15%.
                    • CAC is up 0.01%.
                    • German 10-year yield is up 0.008 at 0.093, getting close to 0.1 handle again.

                    Earlier in Asia:

                    • Nikkei rose 0.62%.
                    • Hong Kong HSI rose 1.37%.
                    • China Shanghai SSE rose 2.47%.
                    • Singapore Strait Times rose 0.40%.
                    • Japan 10-year JGB yield rose 0.002 to -0.035.

                    Australia trade surplus at 0.83B, retail sales rose 0.3%

                      In seasonally adjusted terms, Australia trade surplus on goods and services widened to AUD 0.827B in May, well below expectation of AUD 1.21B. Prior month’s figure was also revised sharply lower to AUD 0.472B, from 0.98B. Exports rose 4% mom to AUD 33.562B. Imports rose 3% mom to AUD 34.735B.

                      Full trade balance release.

                      Retail sales rose 0.4% mom in May, above expectation of 0.3% mom. Prior month’s figure was also revised up to 0.5%, from 0.4%. Ben James, Director of Quarterly Economy Wide Surveys noted in the release that “department stores (3.9 per cent) led the rises.” And, “there was also a strong result in clothing, footwear and personal accessories, which rose 2.2 per cent. Both industries were able to rebound after unusually warm weather impacted April sales.”

                      Full retail sales release.

                      New Zealand NZIER business sentiment further improved in Q4

                        The latest NZIER Quarterly Survey of Business Opinion showed a net 15% of business expect a deterioration in general economic conditions over the coming months. That’s notable improvement from Q3’s 38% and the worst reading of 68% during the most pessimistic period in March 2020.

                        On companies’s own activity, a net 1% reported reduced demand. NZIER said This measure suggests a rebound in annual GDP growth to around 2 percent at the end of 2020 from the lockdown lows in mid-2020.

                        Full release here.

                        Australia PMI composite edged up to 50.8, at risk of heading into contraction territory

                          Australia PMI Manufacturing ticked up from 53.8 to 53.9 in September. PI Services also rose slightly from 50.2 to 50.4. PMI Composite Output rose from 50.2 to 50.8.

                          Laura Denman, Economist at S&P Global Market Intelligence said: “September data indicated that the recent interest rate hikes made by the RBA have begun to have the desired effect in terms of prices…. At the same time, the private sector has remained in expansion territory with the pace of growth even accelerating very slightly…

                          “On the negative side, the full effects of recent interest rate hikes will be lagged… Should the RBA continue to increase the base rate further, the private sector economy may be at risk of heading into contraction territory in the future as disposable incomes across the nation tighten and overall demand conditions remain subdued.”

                           

                          Full release here.

                          UK CPI rose to 9.4% yoy in Jun, goods up 12.7% yoy, services up 5.2% yoy

                            UK CPI accelerated from 9.1% yoy to 9.4% yoy in June, above expectation of 9.3% yoy. That’s also the highest level since the series began in January 1991. Indicative model estimates that it’s the highest since 1982, when it was 11%.

                            The CPI all goods index rose by 12.7% yoy, accelerated from 12.4%. CPI all services rose 5.2% yoy, accelerated from 4.9%. CPI core (excluding energy, food, alcohol, and tobacco) slowed from 5.9% yoy to 5.8% yoy, below expectation of 6.0% yoy.

                            Full CPI release here.

                            Also published from the UK, PPI input was at 1.8% mom, 24.0% yoy, versus expectation of 0.9% mom, 23.5% yoy. CPI output was at 1.4% mom, 16.5% yoy, versus expectation of 2.0% mom, 16.8% yoy. CPI output core was at 0.8% mom, 15.2% yoy, versus expectation of 2.0% mom, 15.5% yoy.

                            Eurozone Sentix investor confidence dropped slightly to -8.3, parallels with 2009 crisis preserved

                              Eurozone Sentix Investor Confidence dropped to -8.3 in October, down from -8.0, better than expectation of -10.5. That nonetheless broke the streak of five months of increases. Current Situation index rose from -33.0 to -32.0, highest since March. Expectations index, however, dropped from 20.8 to -18.8, lowest since May.

                              Sentix said: “The parallels between the current recovery movement and the post-crisis year 2009 will be preserved. Even then, we noticed a continuous improvement, which surprised investors and had a positive effect on the stock markets. The fundamental facts were then delivered in 2010 as “proof”. Many economists still have doubts about a sustainable recovery of the economy. Fears of corona and renewed negative consequences for the real economy are too strong. However, the “first mover” among the leading indicators underlines that the chances of a positive economic surprise are quite real.”

                              Full release here.

                              Japan tankan large manufacturing rose to -10, non-manufacturing rose to -5

                                Japan Tankan large manufacturing index rose 17 points from -27 to -10 in Q4, above expectation of -15. Outlook also improvement to -8, up from -17, and beat expectation of -11. Non-manufacturing index rose 7 pts from -12 to -5, slightly above expectation of -6. Non-manufacturing outlook rose from -11 to -6, above expectation of -7. However, all industry capex dropped -1.2%, much worse than expectation of -0.1%.

                                The set of data would affirm BoJ’s decision to stand pat on interest rate and QE program later in the week. Though, extensions of the emergence lending programs would be extended, as Japan is currently in a “relatively” serious third wave of coronavirus infections.

                                Full release here.

                                US initial jobless claims rose to 351k, above expectations

                                  US initial jobless claims rose 16k to 351k in the week ending September 18, above expectation of 317k. Four-week moving average of initial claims dropped -750 to 335.75k.

                                  Continuing claims rose 131k to 2845k. Four-week moving average of continuing claims dropped -16k to 2804k, lowest since March 21, 2020.

                                  Full release here.

                                  China prepared to response to all possible outcomes of trade talks with US

                                    Chinese Ministry of Commerce spokesman Gao Fend said in a regular briefing that “the U.S. side has given many labels recently, ‘backtracking’, ‘betraying’ etc … China sets great store on trustworthiness and keeps its promises, and this has never changed.”

                                    Gao added, “we hope the U.S. can meet China halfway, take care of each others’ concerns, and resolve existing problems through cooperation and consultations”

                                    But he alsosaid that “China’s attitude has been consistent, and China will not succumb to any pressure”. Gao warned “China has made preparations to respond to all kinds of possible outcomes.”

                                    Bank of France estimate -4% GDP loss in Oct, -12% in Oct on pandemic restrictions

                                      Bank of France said the outlook for November is “on the whole oriented clearly downwards”, but in a more differentiated and limited way than during the first round of coronavirus restrictions earlier this year.

                                      The loss of GDP in October, comparing to normal pre-pandemic level is estimated at around -4%, just slight deterioration from September’s -3.5%. For November, GDP loss is estimated to be around -12%. The figures were much better than the -31% loss in GDP recorded in April.

                                      Full release here.

                                      ECB Muller: 75bps hike should be an option for Sep meeting

                                        ECB Governing Council member Madis Muller said, “I think 75 basis points should be among the options for September given that the inflation outlook has not improved.”

                                        “Still, I’m going into the meeting with an open mind and I want to both see the new projections and hear my colleague’s arguments,” he added.

                                        “We should not be too timid with policy moves as inflation has been too high for too long and we are still far below the neutral rate,” he said.

                                        UK PMI manufacturing finalized at 58.9 in Mar, signs of spring appeared

                                          UK PMI Manufacturing was finalized at 58.9 in March, up from February’s 55.1. That’s the highest level in 121 months since February 2011. Business optimism rose to seven-year high. But supply-chain disruption and inflationary pressures built.

                                          Rob Dobson, Director at IHS Markit: “Signs of Spring have appeared in the UK manufacturing sector, with the PMI hitting its highest level in a decade… Weak export sales and supply-chain issues are likely to remain constraints on growth moving forward, however… Demand outstripping supply to such a wide extent is meanwhile driving up prices… The longer these inflationary and supply-chain worries persist, the greater the potential to curb the strength of the upturn as the economy unlocks in the coming weeks and months.”

                                          Full release here.