Tue, Dec 06, 2022 @ 23:34 GMT

Japan Motegi: Trade deal in August just Trump’s hopes, two sides still narrowing the gap

    Japan Economy Minister Toshimitsu Motegi said today that Trump’s comment regarding a trade deal in August just reflects his own hope for quick progress in the negotiations. For now, the two sides are still working on “narrowing the gap”.

    Motegi told reporters, “When you look at the exact wording of his comments, you can see that the president was voicing his hopes of swift progress in talks toward something that is mutually beneficial.” He also reiterated the differences between US and Japan, and no timetable had yet be set for more meetings. He noted, “we’ve agreed that we’ll strive to narrow the gap, including through possibly holding working-level talks.”

    Trump said on Monday, after meeting Japanese Prime Minister Shinzo Abe in Japan, that he expected the two countries to be “announcing some things, probably in August, that will be very good for both countries” on trade.

    RBA Ellis: Neutral is not a destination we necessarily reach

      RBA Assistant Governor Luci Ellis said in a speech that “don’t think of this as a mechanistic approach of ‘we have to get back to neutral’, or above neutral” interest rate.

      “The neutral rate is an important guide rail for thinking about the effect policy might be having. It is not necessarily a prescription for what policy should do,” he said.

      “‘Neutral’, then, is not a destination we necessarily reach, but more a pole-star to guide us. And even then, its location is sufficiently uncertain that we are perhaps better served by paying more attention to the ground as it shifts beneath our feet than to that faraway pole-star,” he added.

      Full speech here.

      Carney: BoE assessing economic impacts of coronavirus, considering policy implications

        BoE Governor Mark Carney told the Parliament that the MPC is “assessing the economic impacts” of the global coronavirus outbreak. And it’s “considering the policy implications of various possible scenarios, including the extent to which supply disruptions have aggregate demand consequences via cash flow, cost and availability of finance, as well as confidence effects.”

        He noted that BoE’s role is to “help UK businesses and households manage through an economic shock that could prove large but will ultimately be temporary.” The bank will also “take all necessary steps to support the UK economy and financial system consistent with its statutory responsibilities.”

        US durable goods orders rose 1.9% mom, ex-transport orders up 0.3% mom

          US durable goods orders rose 1.9% mom to USD 272.6B in June, much better than expectation of -0.5% mom decline. Ex-transport orders rose 0.3% mom, below expectation of 0.4% mom. Ex-defense orders rose 0.4% mom. Transportation equipment rose 5.4% mom to USD 92.7B.

          Full release here.

          China Caixin PMI services dropped to 46.7, third month of contraction

            China Caixin PMI Services dropped from 48.4 to 46.7 in November, below expectation of 48.8. PMI Composite dropped from 48.3 to 47.0, signalling a third successive monthly contraction in business activity. The rate of decline was the strongest since May.

            Wang Zhe, Senior Economist at Caixin Insight Group said: “Manufacturing and services activity contracted in varying degrees, with the services sector hit harder by Covid outbreaks…. The prolonged pandemic has battered the economy. While the third wave has led to a softened slowdown on both supply and demand than the previous ones, there has been significant pain in the job market.”

            Full release here.

            ECB Villeroy: There is no point in putting predetermined threshold or duration on inflation overshoot

              ECB Governing Council member Francois Villeroy de Galhau said the new 2% symmetric inflation target is a “significant change”. But, “there is no point putting in rules with such-and-such predetermined threshold or duration” on inflation overshoot.

              “In the hypothesis that we stop net purchases under the pandemic emergency purchases program next March, our monetary policy will remain very accommodative for as long as necessary, thanks to our quartet of unconventional tools. There is no doubt about that,” Villeroy added.

              Yannis Stournaras said that the new strategy will leave ECB better prepared for further crisis. Ignazio Visco noted ECB is not adopting average inflation target like that Fed, which suggests a period of catch-up in inflation.

              US initial jobless claims dropped to 400k, worse than expected

                US initial jobless claims dropped -24k to 400k in the week ending July 24, above expectation of 365k. Four-week moving average of initial claims rose 8k to 394.5k.

                Continuing claims rose 7k to 3269k in the week ending July 17. Four-week moving average of continuing claims dropped -54k to 3291k, lowest since March 21, 2020.

                Full release here.

                Japan industrial production dropped -1.5% mom in Jul, but expected to bounce back ahead

                  Japan industrial production dropped -1.5% mom in July, better than expectation of -2.5% mom. The overall output was back below pre-pandemic levels already. The Ministry of Economy, Trade and Industry expects, however, a bounce back of 3.4% in production in August, and 1.0% in September.

                  Unemployment rate ticked down to 2.8%, better than expectation of 2.9%.

                  Johnson confirms he’ll vote for Brexit Withdrawal Agreement

                    UK MP Boris Johnson’s tweets today confirmed he will vote for the Withdrawal Agreement even if it’s “very painful”. Ans in short, “a bad deal that we have a chance to improve in the next stage of negotiations must be better than those alternatives” of “worse version of Brexit or losing Brexit altogether.”

                    Attorney General Geoffrey Cox said in the Brexit debates in the Commons that any Brexit deal will require Withdrawal Agreement to be approved today. And it’s the last chance for MPs to secure UK’s “legal right” to an Article 50 extension until May 22.

                    Cox also said the government will agree to legislate to ensure MPs can vote to set the negotiating mandate for the next phase of the Brexit talks. Some MPs indeed see the next phase of trade agreement and future relationship as the most important.


                    BoJ stands pat, global downside risks increasing

                      BoJ left monetary policy unchanged as widely expected. Under the yield curve control framework, short-term policy rate is kept at -0.1%. The central bank will continue JGB purchases to keep 10-year yield at around 0%. Annual monetary base expansion will be kept at around JPY 80T.

                      On the outlook, BoJ expects that the economy is “likely to continue on a moderate expanding trend, despite being affected by the slowdown in overseas economies”. Domestic demand is “expected to follow an uptrend”. Exports are “projected to show some weakness”, but still be on a “moderate increasing trend”. CPI is likely to increase “gradually toward 2 percent”.

                      Risks include US macroeconomic policies, protectionism, emerging markets, global adjustments in IT goods, Brexit and geopolitical risks. BoJ warned that “downside risks concerning overseas economies seem to be increasing, and it also is necessary to pay close attention to their impact on firms’ and households’ sentiment in Japan.”

                      Full statement here.

                      ECB de Guindos: Police needs to be based on wide array of data, not just labor

                        ECB Vice President Luis de Guindos urged fellow policymakers to look beyond labor market data. He said “The current low unemployment rate and the recent wage increases do not necessarily imply that higher inflation is around the corner”.

                        And, “monetary policy decisions need to be based on a wide array of economic indicators, not just the unemployment rate and wages”.

                        US housing starts has strongest gain since 2016, industrial production dropped -0.3%

                          US housing starts jumped 16.9% mom to 1.61m annualized rate in December, well above expectation of 1.38m. That’s the largest percentage gain since October 2016. Building permits dropped -3.9% mom to 1.42m, below expectation of 1.47m.

                          Industrial production dropped -0.3% mom in December, below expectation of 0.0% mom. Capacity utilization dropped to 77.0%, below expectation of 77.2%.

                          Australia NAB business conditions improved, but confidence dropped

                            Australia NAB Business Conditions rose 3 pts to 7 in March, beat expectation of 2.On the positive side, employment index rose 2 pts to 7. It remains “well above average, suggesting that for now, survey indicators of labour demand remain favourable.” Trading and profitability also rebounded.

                            However, Business Confidence dropped -2 pts to 0, missed expectation of 4. It also “continued the below average run. “Other forward looking indicators – capacity utilisation and forward orders – showed some improvement but remain at or below average. Also, it’s noted that “overall survey measures of prices and inflation remain weak.”


                            Full release here.

                            Australia AiG services dropped to 51.7, but employment holding up

                              Australia AiG Performance of Services dropped sharply by -6.1 pts to 51.7 in July. That’s the largest monthly decline since April 2020. Looking at some details, sales dropped -12.9 to 53.2. Employment dropped -3.2 to 51.0. New orders rose 0.1 to 56.7. Supplier deliveries dropped -9.6 to 45.3. Input prices rose 8.7 to 74.1. Selling prices rose 13.2 to 66.7. Average wages rose 2.0 to 68.0.

                              Ai Group Chief Executive, Innes Willox, said: “The substantial easing in the performance of the Australian services sector in July was mainly driven by the COVID-19 outbreaks and associated restrictions…. There were some encouraging signs with employment and sales holding up and new orders coming in at a faster pace than in June. This provides some grounds to expect the services sector could bounce back quickly if restrictions were able to be lifted. However, with COVID-19 infections and restricted areas on the rise in the early days of August, the chances of an early rebound appear to be fading.”

                              Full release here.

                              RBNZ stands pat, outlook remains highly uncertain

                                RBNZ left stimulatory monetary policy unchanged as widely expected, with OCR at 0.25% and  Large Scale Asset Purchase and Funding for Lending program unchanged. It maintained that to meet the requirements of sustainable 2% inflation and maximum employment will “necessitate considerable time and patience”. The committee is also “prepared to lower the OCR if required”.

                                The medium-term growth outlook was “similar” to the scenario presented in the February statement. Outlook remains “highly uncertain, determined in large part by both health-related restrictions, and business and consumer confidence.” The would be some temporary factors for near-term price pressures, including global supply chain disruptions and higher oil prices. But medium-term inflation and employment will “likely remain below its remit targets in the absence of prolonged monetary stimulus.”

                                Full statement here.

                                Fed Bullard favors successive rate hike at upcoming meetings

                                  St. Louis Fed President James Bullard said he’d favor successive rate hikes at the upcoming March, May and June meetings, rather than a 50bps hike in March. “The point of this is to get better positioned right now and in coming months, and then we will be able to assess, at that point, whether we need to do more or not,” he said.

                                  “We are going to be have to be more nimble, faster, better at reacting to inflation data and other developments as we go through this year,” Bullard said. “It’s going to be a more data-dependent environment.”

                                  Bullard added he’d like to start the balance sheet runnoff in Q2, and “that the runoff can be faster than it was last time around.” “We are cognizant of the inflation issue, we’re moving on the policy rate, but we’re also going to move on the balance sheet so we’re not that far from reaching neutral if you are willing to consider both of those,” he said

                                  US Mnuchin: IP protection, forced JVs & enforcement top on agenda in China trade talks

                                    US Treasury Secretary Steven Mnuchin said yesterday that “IP (intellectual property) protection, no more forced joint ventures, and enforcement are three of the most important issues on the agenda” in trade negotiation with China.

                                    He emphasized that “we want to make sure that when we get a deal, that deal will be enforced.” Though, he also admitted “The details of how we do that are very complicated. That needs to be negotiated. ”

                                    Mnuchin, a relative trade dove, also said there had been “significant movement” in the trade talks so far. And he expected this week’s meetings to end with significant progress.

                                    China’s Xinhua news agency reported that a Chinese delegation led by Vice Premier Liu He arrived in Washington yesterday, for the meeting with US Trade Representative Robert Lighthizer. PBoC Governor Yi Gang is expected to join the meeting too. On the US side, Lighthizer will lead the talks with participation from Mnuchin, Commerce Secretary Wilbur Ross, White House economic adviser Larry Kudlow and White House trade and manufacturing adviser Peter Navarro.

                                    BoJ stands part, downgrades 2022 growth forecasts, upgrades inflation

                                      BoJ left monetary policy unchanged today as widely expected. Under the yield curve control frame work, short-term policy rate is held at -0.10%. BoJ will also will continue to purchase JGBs, without setting upper limit, to keep 10-year yield at around 0%. It will continue to offer to purchase 10-year JGBs at 0.25% yield every business day through fixed rate operations. Goushi Kataoka dissented again, pushing for further strengthening monetary easing.

                                      In the new economic projections, BoJ downgraded fiscal 2022 GDP forecasts, but upgraded both fiscal 2023 and 2024. CPI forecasts was upgraded across the horizon. Here are the new projections.

                                      • Fiscal 2022 GDP growth at 2.4% (downgraded from April’s 2.9%).
                                      • Fiscal 2023 GDP growth at 2.0% (up from 1.9%).
                                      • Fiscal 2024 GDP growth at 1.3% (up from 1.1%).
                                      • Fiscal 2022 CPI at 2.3% (up from 1.9%).
                                      • Fiscal 2023 CPI at 1.4% (up from 1.1%).
                                      • Fiscal 2024 CPI at 1.3% (up from 1.1%).
                                      • Fiscal 2022 CPI core-core (ex-fresh food and energy) at 1.3% (up from 0.9%).
                                      • Fiscal 2023 CPI core-core at 1.4% (up from 1.2%).
                                      • Fiscal 2024 CPI core core at 1.5% (unchanged).

                                      Full statement here.

                                      Full Outlook for Economic Activity and Prices.

                                      Fed Mester: We’re not in a recession, have more work to do on inflation

                                        Cleveland Fed President Loretta Mester said in a Washington Post interview yesterday, “I don’t believe we’re in a recession… We don’t have a slowdown in labor markets, and that’s two key factors that go into calling a recession.”

                                        “Our policy has been to raise interest rates in order to cool down the demand side of the economy…. but certainly it hasn’t slowed enough, (a), to call it a recession; and (b), to even see that moderation in demand showing through yet to a moderation and a cooling-off of price increases and inflation,” she added.

                                        “We have more work to do because we have not seen that turn in inflation. It’s got to be a sustained several months of evidence that inflation has first peaked – we haven’t even seen that yet – and that it’s moving down,” she also noted.

                                        Full interview here.

                                        ECB Visco: Eurosystem ready to use a wide of of instruments to support economy

                                          ECB Governing Council member Ignazio Visco said today that the economic prospects of Eurozone are clouded by uncertainties. Italy and global economy are experiencing a difficult time too. He noted that trade, mostly fueled by US, added to global economic slowdown. And as Bank of Italy Governor, he urged the country to boost productivity to fully recovery its growth path.

                                          Though, he dismissed the worries that ECB is “disarmed” should current situation deteriorates into a full-blown recession. He emphasized “central banks can rely on a wide range of instruments to support economic activity and, if necessary, the Eurosystem is ready to use them all in order to fulfill its mandate.”