Australia consumer sentiment suffered record plunge, but overall pandemic experience much less debilitating

    Australia Westpac Consumer Sentiment dropped sharply by -17.7% to 75.6 in April. That’s the single biggest monthly decline in the 47 year history of the survey. The index also dived through the trough during 2008-2009 global financial crisis, to the levels only seen during the deep recessions of the early 1990s (64.6) and early 1980s (75.5).

    Though, Westpac chief economist Bill Evans noted that “Australia’s pandemic experience to date has been much less debilitating than that of the hardest hit areas abroad… Recent evidence showing a clear slowing in new cases that indicates policy measures are working to contain the spread.” He expected the economy to be lifted in the December quarter following “three consecutive quarters of economic contraction”.

    Regarding the upcoming RBA meeting on May 5, Evans said “It seems likely that the Board considers it has done its duty to support the economy and will now look to governments if further support for the economy is required.”

    Full release here.

    Japan and EU signed landmark trade agreement, stand together against protectionism

      European Union and Japan signed an unprecedented free trade agreement in Tokyo today. The signing was delayed from last Wednesday, as Japan Prime Minister Shinzo Abe needed to give more attention to the flood in southwester Japan. It’s nevertheless a huge achievement in real terms by the two power houses after four years of negotiations. To name a few of the key points, it’s estimated that Japan GDP will be boosted by 1% with around 290k jobs created. The 10% import duty on Japan car will be dropped. And, the majority of the EUR 1B duties by European exporters will also be removed.

      Abe said today that “while protectionism is spreading in the world, Japan and the European Union will take the lead as flag bearers for free trade.” European Council President Donald Tusk said “we are sending a clear message that we stand together against protectionism.”

      Eurozone goods exports fell -4.7% yoy in Nov, imports down -16.7% yoy

        Eurozone goods exports to the rest of the world fell -4.7% yoy to EUR 252.5B in November. Goods imports fell -16.7% yoy. A EUR 20.3B goods trade surplus was recorded. Intra-Eurozone trade fell -9.4% yoy to EUR 227.2B.

        In seasonally adjusted term, goods exports rose 1.0% mom to EUR 236.8B. Imports fell -0.6% mom to EUR 222.1B. Trade surplus widened from prior month’s EUR 11.1B to EUR 14.8B, above expectation of EUR 11.2B.

        Full Eurozone trade balance release here.

        China’s NBS PMI manufacturing falls slightly to 49.1, Caixin manufacturing rises to 50.9

          China’s manufacturing sector continued its contraction for the fifth consecutive month in February, with official NBS PMI decreasing slightly from 49.2 to 49.1, matched expectations.

          New orders subindex remained steady at 49, indicating stagnant demand. New export orders fell further from 47.2 to 46.3, reflecting ongoing pressures on the export front.

          NBS PMI Non-Manufacturing rose from 50.7 to 51.4 , surpassing the anticipated 50.8. PMI Composite remained unchanged at 50.9.

          In parallel, Caixin PMI Manufacturing, which focuses more on small and medium-sized enterprises, edged up from 50.8 to 50.9 , slightly above expectations of 50.7.

          Caixin noted sustained increase in output and new orders, with firms expressing improved business optimism for the second consecutive month. Additionally, input cost inflation declined to a seven-month low, while selling prices fell.

          Full China Caixin PMI manufacturing release here.

          EU Juncker and UK May to take stock of Brexit play tomorrow

            European Commission Spokesman Margaritis Schinas, said President Jean-Claude Juncker will meet UK Prime Minister Theresa May in Brussels tomorrow to “take stock of the latest state of play on Brexit”.

            He reiterated EU’s position that “The EU 27 will not reopen the withdrawal agreement. We cannot accept a time limit to the backstop or unilateral exit clause.”

            US crude oil inventories rose 4.9m barrels, WTI pressing 42 key resistance

              US commercial crude oil inventories rose 4.9m barrels in the week ending July 17, versus expectation of -2.1m barrels decline. At 536.6m barrels, oil inventories are about 19% above the five year average for this time of the year. Total motor gasoline inventories dropped -1.8m barrels. Distillate fuel inventories rose 1.1m barrels. Propane/propylene inventories rose 2.0m barrels. Total commercial petroleum inventories rose 8.8m barrels.

              WTI gyrated higher to 42.29 this week with rather weak upside momentum. 42.05 key resistance level was breached but WTI couldn’t sustain above it yet. We’d maintain that 42.05 should eventually hold. Break of 38.45 support would confirm short term topping and bring long-overdue pull back. However, sustained break of 42.05 would carry some larger bullish implications.

              Kaplan: Fed should have earnest discussion on tapering later this year

                Dallas Fed President Robert Kaplan emphasized “we should be as aggressive as we can be while we are in the teeth of this pandemic, until we are convinced that we have weathered this pandemic.”

                Though, “later this year, my own view is, we should at least be having an earnest discussion about when it’s appropriate to taper” the asset purchase program.

                He expects the US economy to grow around 5% this year, with unemployment rate falling back to 4.50-4.75% from current level of 6.7%. The economy will then have made “substantial progress” towards Fed’s dual mandate.

                By the time, “I think it’s a healthier for the U.S. economy and for markets to wean off these extraordinary actions and this extraordinary stimulus,” he said.

                Fed Bostic foresees no rate cut until well into 2024

                  Atlanta Fed President Raphael Bostic recently made some forward-looking remarks on monetary policy in an interview with MarketPlace, stating that the likelihood of a rate cut before 2024 is low given the current inflation levels.

                  He noted, “My best case is that we won’t be thinking about a cut until well into 2024. And, you know, inflation is just double what our target is by just about every measure.”

                  “I don’t see scenarios where the economy is going to evolve in a way such that inflation gets close enough to our target where we might contemplate any kind of cut,” he added.

                  Full interview of Fed Bostic here.

                  Swiss CPI at -0.1% mom, 1.5% yoy in Dec

                    Swiss CPI dropped -0.1% mom in December, matched expectations. the decline was due to several factors including falling prices for heating oil, fuel and air transport. For the 12-month period, CPI was unchanged at 1.5% yoy, below expectation of 1.6% yoy.

                    Average annual inflation in 2021 was at 0.6%. Prices for domestic products increased by 0.3% on average, those for imported products increased by 1.5%. Average annual inflation was –0.7% in 2020 and +0.4% in 2019.

                    Full release here.

                    Eyes on NASDAQ’s next move after Nvidia’s earnings triumph boosts confidence

                      In a significant boost to investor sentiment, Nvidia’s earnings report surpassed even the loftiest expectations, particularly spotlighting its thriving data center business. The company’s A100 and H100 AI chips, integral to powering AI marvels like ChatGPT, stood out as key contributors to their success. In a forward-looking statement, Nvidia anticipates a fiscal third-quarter revenue of approximately USD 16B, hinting at a colossal 170% growth compared to the same quarter last year.

                      NASDAQ, seemingly anticipating this optimistic news, had already surged by 1.59% at the day’s close, prior to Nvidia’s earnings announcement. The development now argues that pull back from 14446.55 has completed at 13161.76, just ahead of the medium term channel support, as well as 38.2% retracement of 10982.80 to 14446.55 at 13123.39. More importantly, if this turn out to be true, rise from 10088.82 should then remain intact for another high above 14446.55.

                      Market watchers will now keenly focus on the momentum in the coming days, especially awaiting reactions post the much-anticipated speech by Fed Chair Jerome Powell at the Jackson Hole Symposium. This will likely shed light on the feasibility of this bullish prognosis.

                      Fed Bullard: Interest rate now a little bit restrictive

                        St. Louis Fed President James Bullard just described current interest rate as “a little bit restrictive” after that rate hike in December. And, to him, Fed is now “putting downward pressure rather than upward pressure on inflation”. And that could drag core inflation further below Fed’s 2% target. Thus, he expects Fed to miss inflation target again in 2019.

                        Further, Bullard warned that “I do think it has damaged us to have continually missed on the low side.” Thus, Fed has too “tread carefully” this in regarding interest rate decisions.

                        According to Fed’s own December projections, the longer run federal funds rate sat at 2.5-30% (central tendency) and 2.5-3.5% (range). Current federal funds rate is at 2.25-2.50%, which is still below the long running range.

                        ECB Lane: Appropriate to hike further if baseline holds up

                          In an interview with Cyprus News Agency, ECB Chief Economist Philip Lane stressed the importance of being data-dependent and scientific in deciding on a potential interest rate hike at the May meeting. He explained, “if the baseline we developed before the banking stress holds up, it will be appropriate to have a further increase in May. However, we need to be data-dependent about the assessment of whether that baseline still holds true at the time of our May meeting.”

                          Lane highlighted three factors that will influence the May decision: the inflation outlook, assessing the underlying dynamic of inflation, and the speed at which interest rate increases are restricting the economy and bringing down inflation. He urged focusing on understanding every data point instead of predicting the decision, stating, “rather than asking me what the next interest rate decision will be, the focus should be on understanding every data point that comes in.”

                          Responding to a question regarding OPEC’s production, the ECB Chief Economist note that the movement in oil prices should be weighed against the context of a large drop in recent months and a significant ongoing reduction in gas prices. Lane emphasized the importance of monitoring how the rest of the economy responds to the energy dynamic and analyzing the incoming data until the day of the May meeting.

                          Full interview of ECB Philip Lane here.

                          BoE kept rate unchanged at 0.75%, Haskel and Saunders dissented again

                            BoE left monetary policy unchanged as widely expected. Bank Rate was held at 0.75% with 7-2 vote. Jonathan Haskel and Michael Saunders dissented and voted for -25bps rate cut again. Asset purchase target was kept at GBP 435B on unanimous vote.

                            In the accompanying statement, BoE said since the previous meeting “economic data have been broadly in line” with November forecasts. GDP is expected rise “only marginally” in Q4. Household consumption has continued to grow steadily, but business investment and export orders have remained weak. There were some signs of “loosening” in labor market, but it remains tight. Headline CPI is expected to fall to around 1.75% by spring, “owing to the temporary effects of falls in regulated energy and water prices.”

                            BoE also noted that “monetary policy could respond in either direction to changes in the economic outlook”. “monetary policy may need to reinforce the expected recovery in UK GDP growth and inflation” should Brexit uncertainties remain entrenched, or global growth fails to stabilize. However, if the risks do not materialize and economy recovers in line with latest projections, “some modest tightening of policy, at a gradual pace and to a limited extent, may be needed”.

                            Eurozone CPI finalized at 5.2% in Aug, core CPI at 5.3%

                              Eurozone CPI was finalized at 5.2% yoy in August, down from 5.3% yoy in July. CPI core (all-items ex-energy, food, alcohol & tobacco) was finalized at 5.3% yoy, down from 5.5% yoy in July. Services prices slowed from 5.6% yoy to 5.5% yoy. Energy prices rose from -6.1% yoy to -3.3% yoy.

                              EU CPI was finalized at 5.9% yoy, down from 6.1% yoy in July. The lowest annual rates were registered in Denmark (2.3%), Spain and Belgium (both 2.4%). The highest annual rates were recorded in Hungary (14.2%), Czechia (10.1%) and Slovakia (9.6%). Compared with July, annual inflation fell in fifteen Member States, remained stable in one and rose in eleven.

                              Full Eurozone CPI release here.

                              ECB Rehn: Eurozone inflation outlook is too low for my taste

                                ECB Governing Council member Olli Rehn said an a Bloomberg TV interview, that Eurozone’s inflation outlook is “too low for my taste, and more importantly, too low for our aim”.

                                But, “I would not enter into a speculation on one or another instrument in our monetary toolbox. I would just say we are indeed ready to use and adjust all our instruments as appropriate,” he said.

                                “We are closely monitoring developments in the exchange rate, especially regarding the inflation outlook,” he added.

                                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.

                                  Eurozone economic sentiment ticks down to 93.3

                                    Eurozone Economic Sentiment Indicator fell slightly from 93.4 to 93.3 in October. Employment Expectations Indicator fell from 102.9 to 102.8. Economic Uncertainty Indicator rose from 21.5 to 22.7. Industrial confidence fell from -8.9 to -9.3. Services confidence rose from 4.1 to 4.5. Consumer confidence ticked down from -17.8 to -17.9. Retail trade confidence fell from -5.7 to -7.8. Construction confidence rose from -6.0 to -5.9.

                                    EU ESI rose from 92.9 to 93.1. EEI fell from 102.6 to 102.3. EUI rose from 21.1 to 22.2. Amongst the largest EU economies, the ESI improved in Poland (+1.4), Spain (+1.2) and Germany (+0.5). By contrast, sentiment deteriorated markedly in France (-2.9) and, to a lesser extent, Italy (-0.9). The ESI remained unchanged in the Netherlands (±0.0).

                                    Full Eurozone economic sentiment release here.

                                    Chinese Xi urged to safeguard the rule-based multilateral trading regime

                                      Chinese President Xi Jinping called for joint effort in fighting protectionism at a BRICS summit in South Africa today. He told BRICS leaders that “we must work together … to safeguard the rule-based multilateral trading regime; promote trade and investment, globalization and facilitation; and reject protectionism outright.”

                                      But Xi should be reminded that EU and US have agreed on a joint position. That is, both EU and US agreed to join forces against “unfair global trade practices”. And specifically, they the practices include “intellectual property theft, forced technology transfer, industrial subsidies, distortions created by state owned enterprises, and overcapacity.” They clearly target China and it’s time for Xi to step up reforms.

                                      ECB Makhlouf: Fears of excessive euro area inflation are overstated

                                        ECB Governing Council member Gabriel Makhlouf said, “I believe that, at the moment, fears of excessive euro area inflation are overstated and that the current price pressures reflect transitory factors that will fade out over time.”

                                        But he also admitted, “there is considerable uncertainty about the persistence of price pressures and we need to interpret this (inflation) data and the outputs of our models with caution.”

                                        US PMI manufacturing dropped to 50.6, 116-month low, spreading to services

                                          In May, US PMI manufacturing dropped sharply to 50.6, down from 52.6, missed expectation of 52.7. It’s also the lowest level in 116 months. PMI services dropped to 50.9, down from 53.0 and missed expectation of 53.5. it’s the lowest level in 39 months. PMI Composite dropped to 50.9, down from 53.0, a 36-month low.

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

                                          “Growth of business activity slowed sharply in May as trade war worries and increased uncertainty dealt a further blow to order book growth and business confidence.

                                          “A decline in the headline ‘flash’ PMI to its lowest for three years pushes the survey data down to a level historically consistent with GDP growing at an annualised rate of just 1.2% in May. Worse may be to come, as inflows of new business showed the smallest rise seen this side of the global financial crisis. Business confidence has meanwhile slumped to its lowest since at least 2012, causing firms to tighten their belts, notably in respect to hiring. Jobs growth in May was the weakest seen for over two years.

                                          “The slowdown has been led by manufacturing, but shows increasing signs of spreading to services. The survey data have been consistent with falling manufacturing output since February, but suggest that the sector’s woes intensified in May to mean factories will therefore likely act as an increasing drag on the economy in the second quarter. Trade wars remained top of the list of concerns among manufacturers, alongside signs of slower sales and weaker economic growth both at home and in key export markets.

                                          “However, an additional concern is the spreading of the malaise to the service sector, growth of which slumped in May to one of the weakest since the global financial crisis. With the service sector’s performance being a key gauge of the health of domestic demand, this broadening-out of the slowdown poses downside risks to the outlook.”

                                          Full release here.