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US GDP grew 6.4% annualized in Q1, unrevised

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    According to second estimate, US GDP grew 6.4% annualized in Q1, unrevised. Upward revisions to consumer spending and nonresidential fixed investment were offset by downward revisions to exports and private inventory investment. Imports, which are a subtraction in the calculation of GDP, were revised up.

    Full release here.

    Trump: Relations with China have taken a BIG leap forward

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      More from Trump regarding the weekend meeting with Xi. He said:

      • “My meeting in Argentina with President Xi of China was an extraordinary one. Relations with China have taken a BIG leap forward! Very good things will happen. We are dealing from great strength, but China likewise has much to gain if and when a deal is completed. Level the field!”
      • “Farmers will be a a very BIG and FAST beneficiary of our deal with China. They intend to start purchasing agricultural product immediately. We make the finest and cleanest product in the World, and that is what China wants. Farmers, I LOVE YOU!”
      • “President Xi and I have a very strong and personal relationship. He and I are the only two people that can bring about massive and very positive change, on trade and far beyond, between our two great Nations. A solution for North Korea is a great thing for China and ALL!”
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      Japan’s export dropped for the seventh straight month

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        In non seasonally adjusted terms, Japan exports dropped -6.7% yoy to JPY 6.585T in June. That’s the seventh straight month of decline. Imports dropped -5.2% yoy to JPY 5.995T. Trade surplus came in at JPY 0.589T.

        Looking at some details, exports to China dropped -10.1 yoy and imports dropped -5.3% yoy. That’s the fourth straight month of decline in exports to China. Exports to US rose 4.8% yoy while imports dropped -2.5% yoy. That’s the ninth straight month of increase in exports to US.

        In seasonally adjusted terms, exports rose 4.8% mom to JPY 6.554T in June. Imports dropped -4.4% mom to JPY 6.568T. Trade deficit came in at JPY -0.014T.

        ECB’s Vujcic emphasizes gradual transition in monetary policy, downplays recession risks

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          ECB Governing Council member Boris Vujcic emphasizing that a “smooth transition” in monetary policy is more important then the timing of the first rate cut. Also, he’d prefer to move in smaller steps.

          “April or June doesn’t really make much of a difference for the economy,” he stated, “I think it’s more important that we achieve a kind of smooth transition.”

          Vujcic also expressed a preference for gradual rate adjustments, favoring 25 basis point moves as opposed to larger steps. Additionally, there would be some “pauses” in between every rate move.

          Regarding the economy, Vujcic said, “the risk of a recession in the euro zone is getting smaller and smaller”, projecting an upcoming phase characterized by modest economic growth coupled with further disinflation.

           

          China’s GDP grows 5.3% yoy in Q1, but March data weak

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            China’s GDP grew 5.3% yoy in Q1, above expectation of 5.0% yoy. Comparing to Q4, GDP grew 1.6% yoy. By sector, primary industry was up 3.3% yoy, secondary industry rose 6.0% yoy, tertiary industry rose 5.0% yoy.

            In March, retail sales rose 3.1% yoy, below expectation of 5.1% yoy. Industrial production rose 4.5% yoy, below expectation of 6.0% yoy. Fixed asset investment rose 4.5% ytd yoy, above expectation of 4.3%.

            USD/CNH is steady after the release with focus on 7.2815 resistance. firm break there will resume whole rebound from 7.0870 and target 100% projection of 7.0870 to 7.2318 from 7.1715 at 7.3163. For now, outlook will stay bullish as long as 7.2354 support holds, in case of retreat.

            UK Johnson wants an EU deal but not at all costs

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              According to his spokesman, UK Prime Minister Boris Johnson reiterated at a cabinet meeting that his position on negotiation with EU hasn’t changed. That is, he wanted a deal but not at “the cost of our core principles around sovereignty and control over our laws, borders, money and our fish”.

              “We are working hard to find solutions which fully respect UK sovereignty, but it is far from certain that an agreement will prove possible and time is now very short,” the spokesman added.

              US-China trade talks may end in deadlock as mood turned sour

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                Ahead of the top-level US-China trade negotiations today, Chinese officials appeared to be toning down expectations. According to a Reuters report, the Chinese government is not optimistic on any agreement out of the meetings in Washington today and tomorrow. The talks could just end up in a deadlock. Also, more time is needed to improve the overall ties between the two countries.

                The mood turned sour this week after US Commerce Department blacklisted 27 Chinese entities and imposed some visa restrictions for abuse of human rights in Xinjiang. Meanwhile, it’s reported that China is insisting on not addressing the core issues including intellectual property theft, forced technology transfer, subsidies on state-owned enterprises and enforcement of the agreement. Instead, they aiming at a partial deal which the US is not after.

                UK PMI services finalized at 49.3, all PMIs suggest -0.1% GDP contraction

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                  UK PMI Services was finalized at 49.3 in November, down from October’s 50.0. PMI Composite was finalized at 49.3, down from 50.0. Markit noted marginal fall in business activity. New work decreased at the fastest pace since July 2016. Input cost inflation also eased to the lowest level for over three years.

                  Tim Moore, Economics Associate Director at IHS Markit, which compiles the survey:

                  “November’s PMI surveys collectively suggest that the UK economy is staggering through the final quarter of 2019, with service sector output falling back into decline after a brief period of stabilisation.

                  “Lacklustre demand remains centred on business-to-business spending. Service providers have attributed the recent soft patch to delayed decision-making on new projects until greater clarity emerges in relation to the domestic political landscape. Sales to export markets were hard-hit in November, as signalled by the steepest fall in new work from abroad for more than five years.

                  “Service providers reported concerns that consumer appetite for big-ticket purchases has begun to falter, while those reliant on consumer footfall and discretionary spending noted the negative impact of unusually wet weather in November.

                  “Lower manufacturing production alongside an absence of growth in the service economy means that the IHS Markit/ CIPS Composite Output Index is consistent with UK GDP declining at a quarterly rate of around 0.1%.”

                  Full release here.

                  US initial claims rose to 23k, down trend broken

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                    US initial jobless claims rose 37k to 230k in the weekending April 20, well above expectation of 199k. Four-week moving average of initial claims rose 4.5k to 206k. More importantly, it appears the down trend since January is broken.

                    Continuing claims rose 1k to 1.655m in the week ending April 13. Four-week moving average of continuing claims dropped -25k to 1.688m.

                    Full release here.

                    Swiss KOF rose to 113.8, economy taking a V-shaped course

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                      Swiss KOF Economic Barometer rose to 113.8 in September, up from 110.2, beat expectation of 106. That’s the four rise in a row after a historic drop earlier this year. KOF said, “at present, the economy is taking a V-​shaped course, so that a recovery of the Swiss economy can be expected for the time being. However, a second wave of COVID-​19 cases could lead to a sharp revision of this assessment.”

                      Also released, Credit Suisse Economic Expectations dropped to 26.2 in September, down form 45.6.

                      New Zealand ANZ business confidence rose to 9.4, first positive since 2017

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                        New Zealand ANZ Business Confidence jumped to 9.4 in December, up from-6.9. That’s the first positive reading since August 2017. Own Activity index rose to 21.7, up from 9.1, highest since March 2018.

                        ANZ added, “the New Zealand economy is showing impressive resilience. After a 14% bounceback in the September quarter, the economy is the same size it was pre-COVID.” Nevertheless, “it’s not the same shape” with “some real stresses and strains, in both overheated sectors like construction, and chilled ones like tourism.” Also, “we expect a technical recession in Q4 and Q1 as the policy-fuelled bounce fades and the tourism hole hurts”.

                        Full release here.

                         

                        RBNZ Orr: Significant shocks still arriving through the global economy

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                          RBNZ Governor Adrian Orr told a parliamentary committee that the central bank has “laser-like focus” on bringing inflation down to target. Yet, he admitted that, “the (inflationary) shocks still arriving through the global economy are significant and this is where people need to think about their own ability to weather an enormous amount of unanticipated activities.”

                          “Meanwhile around our confidence of having inflation under control – that is very high, because we control the end outcome through the interest rate environment. So, that’s a guessing game. That’s about the things we will have to do to achieve low and stable inflation, subject to the continuing buffering of shocks left right and centre. Resilience and humility,” he added.

                          US Defense Secretary Esper denies leaving Iraq

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                            Market sentiments stabilized as there was no further escalation in Middle East tensions on Monday. Major US indices closed generally higher overnight, reversing initial losses. 10-year yield also recovered to close at 1.811, back above 1.8 handle. Asian markets are also in black,. with Nikkei up 1.5% at the time of writing.

                            It’s widely reported that the US military prepared a letter informing Iraq about pulling American troops out of the country. That followed Iraqi parliament’s vote on Sunday to call for all foreign troops to leave. But the news was quickly denied by top US officials overnight.

                            Defense Secretary Mark Esper told reports that “there’s been no decision whatsoever to leave Iraq.” And, “that letter is inconsistent of where we are right now.” Army General Mark Milley added the reported letter was “poorly worded, implies withdrawal. That’s not what’s happening.”

                            UK slides into technical recession with -0.3% qoq GDP contraction in Q4

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                              UK GDP contracted -0.3% qoq in Q4, worse than expectation of -0.1% qoq. This downturn was a collective result of declines across all primary sectors: services saw a -0.2% dip qoq, production tumbled by -1.0% qoq, and construction experienced a significant -1.3% qoq fall. Following -0.1% qoq contraction in Q3, these figures confirm UK’s entry into a technical recession.

                              December’s GDP data offered a slight respite with a marginal -0.1% mom decrease, better than expectation of -0.2% mom. That followed 0.2% mom growth in November, and -0.5% mom contraction in October. Services fell -0.2% mom. Production grew 0.6% mom. Construction fell -0.5% mom.

                              Reflecting on the entire year of 2023, UK’s GDP saw a meager 0.1% growth, a stark contrast to 4.3% expansion in 2022. This marks the weakest annual performance since the 2009 financial crisis, with the exception of the pandemic-stricken year of 2020.

                              Full UK monthly GDP release and quarterly GDP release.

                              Germany PMIs: Manufacturing and services on very different paths

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                                ActionForex.com
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                                Germany PMI manufacturing dropped to 47.6 in February, down from 49.7 and missed expectation of 49.9. That’ the lowest level in 74 months. PMI services, however, rose to 55.1, up from 53.0 and beat expectation of 52.9. PMI composite improved slightly to 52.7, up from 52.1.

                                Commenting on the flash PMI data, Phil Smith, Principal Economist at IHS Markit said:

                                “Germany’s manufacturing and service sectors remain on very different paths, according to February’s flash PMI data. While strong fundamentals in the domestic market are driving growth in services business activity, falling exports continue to weigh on the performance of the manufacturing sector. Measured overall, the data remain indicative of a very modest rate of underlying output growth.

                                “The manufacturing PMI fell further into contractionary territory in February to its lowest in over six years, with sustained robust job creation at factories the only positive takeaway. The strength in employment is perhaps surprising given the order book situation and lack of pressures on capacity, but goods producers are seemingly looking through the current soft patch in demand.

                                “In terms of the factors behind the slowdown in manufacturing order books, many of the usual suspects – the uncertainty relating to US-China trade tensions and weakness in the autos industry – were highlighted, although there were also reports of growing competitive pressures within Europe.”

                                Full release here.

                                US to escalate global trade war again, targeting EU

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                                  The US is set to escalate global trade war by considering to impose tariffs on a range of European Union products, ranging from large commercial aircraft and parts to dairy products and wine, from helicopters to some motorcycles.

                                  In a statement published yesterday, US Trade Representative said WTO repeated found that EU subsidies to Airbus have “caused adverse effects” to the US, with harm in USD 11B in trade each year. USTR has begun Section 301 process to identify EU products to tariff, until EU removes Airbus subsidies. A preliminary list of products are identified for public comment.

                                  USTR Robert Lighthizer said: “Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft.  When the EU ends these harmful subsidies, the additional U.S. duties imposed in response can be lifted.”

                                  Full statement here.

                                  Reuters poll showed chance disorder Brexit at 25%

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                                    ActionForex.com
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                                    According to a Reuters poll conducted between August 29 and September 3, chance of disorderly Brexit stood at 25%, unchanged from a month ago. Opinions were divided as nine of the 34 contributors raised the chance, but four lowered the odds. Highest prediction was 60% chance.

                                    Nevertheless, chance of a recession in the year post-Brexit was seen at 15%, down from July’s 20%. Chance for recessions within two year of Brexit was at 25%.

                                    On BoE policies, the poll suggested that the central bank would have a 25bps rate hike soon after March 2019 Brexit date. Then, another 25bps would be added in 2020.

                                    New Zealand BusinessNZ manufacturing rose to 54.3, recovery from a large hard hit

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                                      ActionForex.com
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                                      New Zealand BusinessNZ Performance of Manufacturing Index rose from 51.6 to 54.3 in October. Looking at some details, production rose from 49.8 to 54.0. Employment dropped from 54.2 to 52.1. New orders dropped from 54.1 to 53.9. Finished stocks rose from 50.2 to 54.9. Deliveries rose from 47.9 to 59.9.

                                      BNZ Senior Economist, Doug Steel stated that “even though October’s reading is above average, we’d classify it more in the realm of some recovery from a large hit rather than an indication of outright strength.”

                                      Full release here.

                                      US ADP employment grew 227k, significant gains across all industries

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                                        ActionForex.com
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                                        US ADP report showed private sector employment grew 227k in October, higher than expectation of 190k. ADP vice president Ahu Yildirmaz noted in the release that there were “significant gains across all industries with trade and leisure and hospitality leading the way”. Also, “larger employers benefit in this environment as they are more apt to provide the competitive wages and strong benefits employees desire.”

                                        Moody’s Analytics chief economist Mark Zandi said “The job market bounced back strongly last month despite being hit by back-to-back hurricanes. Testimonial to the robust employment picture is the broad-based gains in jobs across industries. The only blemish is the struggles small businesses are having filling open job positions.”

                                        Full release here.

                                        ECB Praet: Some slowdown in Eurozone growth, significant stimulus still needed

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                                          ActionForex.com
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                                          ECB Chief Economist Peter Praet admitted in a speech that recent developments in the Eurozone “point to some slowdown in the pace of economic growth”. The slowdown reflects “a loss of momentum in global activity”. And, the retreat from strong growth of 2017 was “compounded by short term country-specific of sector-specific factors. Nevertheless, domestic demand “remained resilient” and sentiment indicators remained in “expansionary territory”. He added that the underlying strength of the economy “continues to support our confidence that the sustained convergence of inflation to our aim will proceed.” But “significant monetary policy stimulus is still needed”.

                                          On monetary policy, Praet emphasized that “winding-down of net asset purchases is not tantamount to a withdrawal of monetary policy accommodation.” The “rotation” from net asset purchase towards enhanced forward guidance has “preserved the ample degree of monetary policy accommodation”. And looking ahead, the key policy rates and forward guidance will become an “anchor” for monetary policy as end of asset purchase is nearing. The communications and the rate path will be “calibrated to ensure that inflation remains on a sustained adjustment path.”

                                          Full speech “Preserving monetary accommodation in times of normalisation“.

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