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German ZEW economic sentiment jumped to -22.5, but outlook remains negative

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    ActionForex
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    German ZEW Economic Sentiment rose to -22.5 in September, up from -44.1 and beat expectation of -38. But it’s still well below long-term average of 21.5. Current Situation index dropped to -19.9, down from -13.5 and missed expectation of -15.0. Eurozone ZEW Economic Sentiment rose to -22.4, up from -43.6, beat expectation of -37.4. Eurozone Current Situation index dropped -1.1 to -15.6.

    “The rise of the ZEW Indicator of Economic Sentiment is by no means an all-clear concerning the development of the German economy in the next six months. The outlook remains negative. However, the rather strong fears that financial experts had in the previous month regarding a further intensification of the trade conflict between the USA and China did not come true. And there is still hope that a no deal Brexit can be avoided. In addition, the European Central Bank is attempting to reduce the economic risks in the eurozone by further easing its monetary policy,” comments ZEW President Professor Achim Wambach.

    Full release here.

    SECO: downgrades 2019 Swiss GDP growth forecast to 0.8%

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      ActionForex
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      Swiss State Secretariat for Economic Affairs downgraded 2019 growth forecasts and warned that the outlook has become “gloomier”. And in the coming years, “Swiss economy is set to brighten only gradually.” GDP growth is projected to be at 0.8% for 2019, way below June forecasts of 1.2%. For 2020, though, GDP growth forecast was kept unchanged at 1.7%.

      Exports growth will be below-average in 2019 “as signs of a weak second half of 2019 for important trade partner Germany are increasing, among other factors.” Domestic outlook has come gloomier too as “companies are set to invest only hesitantly in equipment in the near future”. Consumer is expected to continue moderate growth.

      Globally, downside risks “clearly predominate”, with new US-China tariffs, Brexit and fragile situation in some emerging economies like Argentina. “Upward pressure on the Swiss franc could also increase if further risks with considerable implications materialize, with corresponding dampening effects on the export economy. ”

      Full release here.

      RBA minutes suggest easing bias, affirm more rate cut

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        ActionForex
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        In the minutes of September meeting, RBA maintained easing bias with some dovishness between paragraphs. The minutes overall are inline with market expectations of further rate cut ahead, probably in October. It’s noted that “members would assess developments in both the international and domestic economies, including labour market conditions, and would ease monetary policy further if needed to support sustainable growth in the economy and the achievement of the inflation target over time.”

        On international developments, RBA said “risks to the global growth outlook were to the downside”. US-China trade disputes had “escalated” while China’s growth “had continued to slow”. These developments were “affecting trade and investment decisions in overseas economies”. And, “against this backdrop and with ongoing low inflation, a number of central banks had reduced interest rates over recent months and further monetary easing was widely expected.”

        Domestically, employment growth continued to be strong but “unemployment rate had remained steady at around 5.2 per cent”. Wages growth had “remained slow” with few indications of building pressures. Also, RBA repeated that the economy “could sustain lower rates of unemployment and underemployment.” Q2 Growth was expected to have been around 0.5%. “Private final demand, which includes consumption, business investment and dwelling investment, was expected to have been weak.”

        US-China to start deputy level trade talks this Thursday

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          ActionForex
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          US Trade Representative office said yesterday that deputy level US-China trade talks will start in Washington this Thursday. That would pave the way for high-level talks in October. There is no details regarding the upcoming deputy-level talks for now.

          Separately, US Chamber of Commerce Chief Executive Tom Donohue said USTR Robert Lighthizer indicated he was seeking a “real agreement” on intellectual property theft and forced technology transfer issues. Also, Donohue also said Lighthizer “did indicate that there was some movement in the direction of purchasing of agricultural products and other issues”.

          Donohue also said, “I don’t think you’re going to see the tariffs going away and people feeling we’ve made a great accomplishment until we have a real agreement. “A real agreement, in my opinion, will not be buying more crops and doing the small things that would be good to set the stage for us to have more substantive conversations.”

          US & Japan reach trade deal, but auto tariffs to be reconfirmed

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            ActionForex
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            US President Donald Trump indicated in a letter to Congress that he’s entering in to a trade deal with Japan in the “coming weeks”. There will be agreements on trade tariffs and digital trade that could allow him to make reciprocal tariff reductions by proclamation. No Congress approval would be needed.

            For now, it’s unclear whether there is agreement for avoiding so-called Section 232 national security tariffs on Japanese autos. Japan’s Foreign Minister Toshimitsu Motegi said a a regular news conference that “at the finishing stage, we plan to reconfirm that 232 won’t be imposed.” Finance Minister Taro Aso also indicated the deal won’t contain any provision on currencies.

            UK Johnson and EU Juncker agreed to intensify discussion on Brexit

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              ActionForex
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              UK Prim Minister Boris Johnson’s office issued a statement after his meeting with European Commission President Jean-Claude Juncker. The statement noted “the leaders agreed that the discussions needed to intensify and that meetings would soon take place on a daily basis”.

              And, “It was agreed that talks should also take place at a political level between Michel Barnier and the Brexit Secretary, and conversations would also continue between President Juncker and the Prime Minister.”

              Johnson’s spokesman also reiterated that he would not request a delay to Brexit beyond October 31.

              US Empire state manufacturing dropped to 2, future optimism waned

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                ActionForex
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                US Empire State Manufacturing Survey general business conditions index dropped to 2.0 in September, down from -4.8 and missed expectation of 4.0. 27% of respondents reported that conditions had improved over the month, but 25% said conditions had worsened. Number of employees index jumped sharply from -1.6 to 9.7, back in positive territory. The index for future business conditions fell -12 points to 13.7, suggesting that “optimism about future conditions waned”.

                Full release here.

                ECB Stournaras: Insufficient contribution from fiscal policy

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                  ActionForex
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                  ECB Governing Council member Yannis Stournaras said there is strong case for incoming President Christine Lagarde to maintain policy stimulus. And, he added, “stimulus package last week was necessary because inflation remains very low. Benefits of taking action now exceed to a large extent the costs. There has been an insufficient contribution from fiscal policy.

                  Another Governing Council member Pablo Hernandez De Cos urged stronger progress towards fiscal union. He said in an event in Spain that “I strongly believe that a central fiscal capacity at euro area level could contribute … to macroeconomic stabilization.” Additionally, “monetary policy would not become overburdened, as it might be in the current economic juncture.”

                  WTO services trade barometer at 98.4, broad loss of momentum

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                    ActionForex
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                    The new WTO’s Services Trade Barometer came in at 98.4, slightly below baseline value of 100. The reading indicates that serves trade continued to face strong headwinds into second half of the year.

                    WTO noted that “declines in most of the Services Trade Barometer’s component indices drove the second quarter softening, as they signalled a broad loss of momentum across various services sectors.” However, despite loss of momentum this year, “services trade has generally held up better than goods trade since the latter is more directly affected by recent trade tensions.”

                    Full release here.

                    UK Raab: Contours of Brexit deal are very clear

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                      ActionForex
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                      UK Foreign Minister Dominic Raab said today that the “contours” of a Brexit deal are now “very clear”. And, the meeting between Prime Minister Boris Johnson and EU leaders in Luxembourg is an “important milestone”. The EU summit on October 17-18 is “the place where a deal can be done.”

                      He added “our requirements are very clear: we want to remove the anti-democratic backstop and we want to be able to transition our future relationship to a best in class free trade agreement.” Still, if there is no agreement, Raab said the UK will leave on October 31.

                      Juncker reiterated on Sunday that there is no possibility of reopening the Withdrawal Agreement. And, I am not optimistic when it comes to finding alternative arrangements that will allow us to limit the Irish backstop,” he said. He added, “We do not know what the British want in detail, precisely and exactly, and we are still waiting for alternative proposals. I hope we can get it, but time is running out.”

                      UK Johnson to seek Brexit progress in the next few days

                        By
                        ActionForex
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                        UK Prime Minister Boris Johnson will travel to Luxembourg today, to meet outgoing European Commission President Jean-Claude Juncker. Ahead of that, he wrote in the Daily Telegraph that “if we can make enough progress in the next few days, I intend to go to that crucial summit on Oct. 17, and finalize an agreement” for Brexit.

                        He also criticized the parliament for hampering his negotiation, by approving that law that forces him to seek another delay. He said, “Its effect is completely contrary to the UK’s interests – because it has at least given the impression to our partners that the UK is no longer either fully able or determined to leave on Oct 31.”

                        Separately, BusinessEurope Director General Markus Beyrer warned that “No deal is a recipe for disaster and should be definitely ruled out. A disorderly, no deal exit of the UK would be extremely harmful for all sides. It would cause massive damage for citizens and businesses in the UK and on the continent alike… The negative consequences would not be limited to the exit date but would drag on, endangering the fruitful and positive future relationship we all aim for.”

                        Chinese Premier Li said very difficult to grow at 6%, data showed deepened slowdown

                          By
                          ActionForex
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                          Chinese Premier Li Keqiang warned that the economy is facing “certain downward pressure” due to global slowdown and rise of protectionism. And, it’s “very difficult” for GDP to grow at 6% rate or higher. He said “for China to maintain growth of 6% or more is very difficult against the current backdrop of a complicated international situation and a relatively high base, and this rate is at the forefront of the world’s leading economies.”

                          A batch of August data released today showed deepened slowdown in China’s economy. Industrial production growth slowed to 4.4% yoy in August, down from 4.8% yoy and missed expectation of 5.2% yoy. That’s the slowest pace since February 2002. Retail sales growth slowed to 7.5% yoy, down from 7.6% yoy and missed expectation of 8.0% yoy. Fixed assets investments grew 5.5% ytd yoy, below expectation of 5.7% ytd yoy. Surveyed unemployment rate, though, dropped from 5.3% to 5.2%.

                          Oil prices jump after largest production disruption in history

                            By
                            ActionForex
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                            Oil prices surge sharply in response to drone attacks on Saudi Arabia’s oil production on Saturday. State energy producer Saudi Aramco lost about 5.7 million bps of output, which is the largest oil disruptions in history. That’s followed by 5.6m bpd loss in Iranian resolution in late 70s.

                            Saudi Arabia would need weeks to restore full output capacity even though some halted oil production would be restarted within days. Some noted that the attack highlighted the vulnerability of the infrastructure to attack. Also the tensions have intensified as US President Donald Trump said the US is “locked and loaded depending on verification” that Iran staged the attack.

                            WTI crude oil jumped to as high as 61.24 earlier today but it’s back below 60 for now. We’ll see if it can sustain above 60.93 resistance as the development unfolds.

                            US retail sales rose 0.4%, but ex-auto sales flat

                              By
                              ActionForex
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                              US retail sales rose 0.4% to in August, above expectations of 0.2%. Ex-auto sales, though, rose 0.0% mom, below expectation of 0.1% mom. Import price index dropped -0.5% mom, matched expectations.

                              ECB Knot: Stimulus measures announced, in particular QE, is disproportionate to economic situation

                                By
                                ActionForex
                                -

                                ECB Governing Council member Klass Knot blast the stimulus package announced by the central bank yesterday. He said “this broad package of measures, in particular restarting the asset purchase program, is disproportionate to the present economic conditions, and there are sound reasons to doubt its effectiveness.” He added, “there are increasing signs of scarcity of low-risk assets, distorted pricing in financial markets and excessive risk-seeking behavior in the housing markets,”

                                Another Governing Council member Robert Holzmann also questioned that the comprehensive package shouldn’t come before the planned policy review. He pointed to inflation target and said “It may be that 2% at the moment is out of reach and 1.5% also signifies stable prices, almost stable prices. So there is no need to … use all the power you have in order to move up to 2% if the cost is too high.”

                                BusinessNZ manufacturing index recovered to 48.4, still palpable softening in demand

                                  By
                                  ActionForex
                                  -

                                  New Zealand BusinessNZ manufacturing index rose 0.3 to 48.4 in August, indicating slightly slowing pace of contraction. However, the details are not too encouraging. The sub-index of new orders (45.6) dived further into decline, at its lowest point in over ten years since May 2009.  Production (49.7) fell from expansion to decline. Employment (49.3) remains in contraction after some recovery.

                                  BNZ Senior Economist, Doug Steel said that “disconcertingly, the PMI adds to a building case over recent times that there has been a palpable softening in demand – at least for manufactured goods”.

                                  Full release here.

                                  Trump prefers a “whole” trade deal with China, but open to an interim one

                                    By
                                    ActionForex
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                                    US President Donald Trump said yesterday that he’s open to an “interim” trade agreement with China, but insisted that he’d “rather get the whole deal done”. . He said “a lot of people are talking about, and I see a lot of analysts are saying: an interim deal, meaning we’ll do pieces of it, the easy ones first… But there’s no easy or hard. There’s a deal or there’s not a deal. But it’s something we would consider, I guess.”

                                    The comments came after Bloomberg reported that Trump’s advisers are considering the idea of an interim trade agreement with China. That involve delaying or even rolling back some tariffs. In return, China has to offer commitments on intellectual property protection and agricultural product purchases.

                                    IMF: US-China tariffs could lower 2020 global GDP by -0.8%

                                      By
                                      ActionForex
                                      -

                                      IMF Director of Communications Gerry Rice warned yesterday that US-China trade tensions are starting to affect the world economy. He said they’re “not only a threat, but are actually beginning to weigh down the dynamism in the global economy.” And, the already imposed tariffs could “potentially reduce the level of global GDP by 0.8 per cent in 2020, with additional losses in future years”. The 0.8% figure suggested more serious impact of prior estimation of 0.5% by IMF.

                                      World economic activity remained subdued, with trade and geopolitical tensions causing uncertainty and eroding business confidence, investment and trade, he said. Though, a global recession is not in IMF’s baseline for the moment. He added that had used words such as “very precarious”, “very fragile” and “delicate” to describe the economic outlook. And, “Let’s not get ahead of ourselves. Let’s wait and see.” IMF is scheduled to release updates on economic outlook next month.

                                      US said to consider interim China trade deal

                                        By
                                        ActionForex
                                        -

                                        According to a Bloomberg report, based on unnamed sources, US President Donald Trump’s advisers are considering an interim trade deal with China, that would involve delaying or even rolling back some tariffs. In return, China has to offer commitments on intellectual property protection and agricultural product purchases.

                                        Separately,  Treasury Secretary Steven Mnuchin said Trump is a “negotiator” and he’s “prepared to keep these tariffs in place. He’s prepared to raise tariffs if we need to raise tariffs”. Though, Mnuchin is “cautiously optimistic” about upcoming meetings with China’s trade team.

                                        ECB revised down growth in inflation projections after easing

                                          By
                                          ActionForex
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                                          ECB’s GDP growth projections are revised to 1.1% in 2019 (vs 1.2% in June), 1.2% in 2020 (vs 1.4%) and 1.4% in 2021 (unchanged).

                                          Eurozone’s slowdown in growth mainly reflects “prevailing weakness of international trade in an environment of prolonged global uncertainties which are particularly affecting the euro area manufacturing sector.” But services and construction show “ongoing resilience. Risk to growth “remain tilted to the downside” due to “prolonged presence of uncertainties, related to geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets.”

                                          HICP inflation projections are revised down over the whole projection horizon, “reflecting lower energy prices and the weaker growth environment.” HICP projections are at 1.2% in 2019 (vs 1.3% in June), 1.0% in 2020 (vs 1.4%), 1.4% in 2021 (vs 1.6%).

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