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Falls in World Trade Outlook indicator could be linked to increased trade tensions

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    ActionForex.com
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    The World Trade Outlook Indicator of the WTO dropped to 101.8 as of May 17, down from 102.3 back in February.

    WTO noted that the value remains “above the baseline value of 100” which suggests “continued solid trade growth in Q2. However, it’s “probably at a somewhat slow pace” than Q1.

    It also pointed out that the dip in WTOI reflects declines in export orders and air freight. And that “may be linked to rising economic uncertainty due to increased trade tensions.”

    Full release here.

    UK GDP grew just 1.8% mom in May, economy still a quarter below Feb level

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      ActionForex.com
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      UK GDP grew notably by 1.8% mom in May but the rebound was somewhat disappointing and missed expectation of 5.0% mom. Production jumped sharply by 6.0% mom, with manufacturing up 8.4%. Services rose 0.9% mom while construction rose 8.2% mom. But all were insufficient to recover the contraction in April (production -20.2% mom, manufacturing -24.4% mom, services -18.9% mom, construction -40.2% mom. Agriculture continued contraction by -6.2% mom.

      For the three months to May, GDP dropped by -19.1% 3mo3m. Production dropped -15.5% 3mo3m. Manufacturing dropped -18.0% 3mo3m. Service dropped -18.9% 3mo3m. Construction dropped -29.8% 3mo3m. Agriculture dropped -6.3% 3mo3m.

      Jonathan Athow, Deputy National Statistician for Economic Statistics, said: “Manufacturing and house building showed signs of recovery as some businesses saw staff return to work. Despite this, the economy was still a quarter smaller in May than in February, before the full effects of the pandemic struck. In the important services sector, we saw some pickup in retail, which saw record online sales. However, with lockdown restrictions remaining in place, many other services remained in the doldrums, with a number of areas seeing further declines.”

      Full release here.

      Australia’s NAB business confidence ticks up to -1 in Q2, conditions tumbles to 5

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        ActionForex.com
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        Australia’s NAB Quarterly Business Confidence improved marginally, rising from -2 to -1 in Q2. However, business conditions overall weakened, with the index falling from 10 to 5. Trading conditions dropped from 15 to 9, profitability conditions fell from 8 to 2, and employment conditions decreased from 7 to 5.

        Cost pressures persisted, with labor costs growing at 1.2%, unchanged from the previous quarter, and purchase costs growing at 0.9%, down from 1.1%. Price growth measures showed some relief, with final product price growth at 0.6% quarter-on-quarter, down from 0.8%. Retail price growth eased to 0.7% from 0.9%, and recreation and personal services price growth slowed to 0.6% from 0.8%.

        NAB Chief Economist Alan Oster noted that the survey shows mixed results on cost pressures and prices. While materials cost growth is improving, labor costs remain high. He highlighted that 30% of firms are facing significant challenges with labor availability, and wage costs continue to be a major concern.

        Full Australia NAB quarterly business confidence release here.

        Eurozone CPI finalized at 0.1% yoy in May, core CPI at 0.9% yoy

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          ActionForex.com
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          Eurozone CPI was finalized at 0.1% yoy in May, down from April’s 0.3% yoy. Core CPI (ex-energy, food, alcohol & tobacco) was finalized at 0.9% yoy, unchanged from April’s reading.

          EU CPI was finalized at 0.6% yoy in May, down from April’s 0.7% yoy. The lowest annual rates were registered in Estonia (-1.8%), Luxembourg (-1.6%), Cyprus and Slovenia (both -1.4%). The highest annual rates were recorded in Poland (3.4%), Czechia (3.1%) and Hungary (2.2%).

          Full release here.

          Fed Rosengren sees an unusually strong post-recession recovery

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            ActionForex.com
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            Boston Fed President Eric Rosengren said in a speech, “assuming virus variants do not become especially problematic, we should see an unusually strong post-recession recovery.”

            “The combination of accommodative monetary and fiscal policy, and consumers and firms well positioned to renew spending, should result in returning to full employment much more quickly than after the last financial crisis and Great Recession,” he added.

            However, “many of the underlying problems that can disrupt financial stability – as at the outset of the pandemic – still need to be addressed.”

            Full speech here.

            Italy PMI services rose to 54.3, a welcome upturn

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              ActionForex.com
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              Italy PMI services rose to 54.3 in June, up from 53.1 and beat expectation of 53.3. Markit noted that was fastest rises in activity and new work since February. Backlogs also increased at the fastest pace in over eight years. Input price inflation rose to highest level since June 2016.

              Paul Smith, Economics Director at IHS Markit which compiles the Italy Services PMI® survey, said:

              “There was a welcome upturn in service sector expansion during June, with both activity and new work registering stronger gains relative to the previous month.

              “The data raise hopes that the services economy is recovering from the general growth slump that has been observed since expansion hit a multi-year high at the start of the year.

              “Whilst less exposed to the trade-induced downswing that has hit manufacturing – and in that respect rising global protectionist measures – political instabilities and the potential for tightening credit conditions are notable headwinds to growth in the coming months.

              “Indeed, such factors continue to weigh on service sector business confidence, which hovered close to a two-year low in June. With that in mind, and following an expected rise of around 0.1% in Q2, GDP growth in the second half of the year is likely to remain in a fairly subdued range.”

              Full Italy PMI services release.

              China retail sales growth slowed to lowest since 2003, industrial production and fixed asset investment missed too

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                ActionForex.com
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                Despite the rebound in US stocks overnight, Asian markets are mixed. Upside of recovery was capped by poor data from China. It’s now rather apparent that the rebound in March was just temporary due to seasonal reasons. The slowdown in China is in place and could even worsen further as trade war with US drags on.

                China industrial production growth slowed to 5.4% yoy in April, missed expectation of 6.5% yoy. That’s also sharp deterioration from 4-year high of 8.5% yoy in March. Fixed-asset investment growth slowed to 6.1% ytd yoy, down from 6.3% and missed expectation of 6.4%.

                More seriously, retail sales growth slowed to 7.2% yoy, down from 8.7% yoy and missed expectation of 7.2% yoy. That’s also the lowest growth since May 2003. That dents hope of shifting the burden of the economy from exports to domestic demand growth. Unemployment rate, though, dropped to 5.2%.

                Australia building approvals dropped -9.7%, activity taking another leg down

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                  ActionForex.com
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                  Released from Australia, building approvals dropped -9.7% mom in July, much worse than expectation of 0.0% mom. The decline tool approvals to lowest level in more than six years, and down -28% on a year ago. Also, total approvals are now tracking materially below ‘underlying demand’ for the first time since 2013. The data highlighted risk that building activity is taking another leg down. Also released, private sector credit rose 0.2% mom in July, matched expectations.

                  Separately, RBA said in its corporate plan that “movements in asset values and leverage may be more important for economic developments than in the past given the already high levels of debt on household balance sheets.” And, “especially in the context of weak growth in household income, high debt levels could complicate future monetary policy decisions by making the economy less resilient to shocks,” it added.

                  US non-farm payroll grew 263k, strong wage growth

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                    ActionForex.com
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                    US non-farm payroll employment grew 263k in November, above expectation of 200k. Average job growth was 282k over the prior three months, and 392k thus far in 2022. Unemployment rate was unchanged at 3.7%, matched expectations. Participation rate dropped -0.1% to 62.1%. Wage growth was strong with average hourly earnings up 0.6% mom, versus expectation of 0.3% mom.

                    Full release here.

                    NZD and AUD strongest as risk appetite returns

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                      ActionForex.com
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                      NZD and AUD generally higher into US session. JPY and USD weakest. That’s very much thanks to return of risk appetite. At the time of writing, FTSE is up 0.79%, DAX up 1.08%, CAC up 0.77%. Earlier, Nikkei closed up 1.79%.

                      Trump’s response to EU’s counter-threat of 25% retaliatory tariff something to watch. Calendar is light with US factory orders and Canada Ivey PMI featured only. But there are some speeches to watch though, including Fed Dudley, BoE Haldane and RBA Lowe.

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

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                        ActionForex.com
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                        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.

                        BoJ eases by double ETF purchases, introduces new loan program

                          By
                          ActionForex.com
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                          After an emergency meeting today, BoJ announced further monetary easing to counter the economic impact of coronavirus pandemic. In particular, annual pace of ETF purchase is doubled from JPY 6T to JPY 12T. J-REIT purchases are also doubled to JPY 180B per year.

                          The Special Funds-Supplying Operations to Facilitate Corporate Financing is introduced to provide loans against corporate debt at 0% interest rate with maturity up to 1 year. The operation will be conduced until end of September this year.

                          The policies under the yield curve control is held unchanged. Short-term policy interest rate target is kept unchanged at -0.10%. BoJ will continue to purchase JGBs to keep 10-year yield at around zero percent. Annual pace of monetary base expansion is kept at around JPY 80T.

                          The central bank also pledged to “take additional monetary easing steps as needed without hesitation with a close eye on the impact from the coronavirus epidemic for the time being”.

                          Full release here.

                          Eurozone PMI manufacturing finalized at 45.7, there’s likely worse to come

                            By
                            ActionForex.com
                            -

                            Eurozone PMI Manufacturing was finalized at 45.7 in September, down from 47.0 in August. That’s the lowest level since October 2012. It’s also the eighth straight month of sub-50 reading, indicating that contraction continued. Markit also noted that output, new orders and purchasing all decline sharply during the month. Input costs also fell at the joint-sharpest rate since April 2016.

                            Looking at the member states, Germany PMI manufacturing hit 123-month low at 41.7. Austria hit 83-month low of 45.1. Spain hit 77-month low of 47.7. Italy hit 6-month low of 47.8. Ireland recovered to 2-month high at 48.7. Only readings of Franc (50.1), the Netherlands (51.6) and Greece (53.6) were above 50.

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

                            “The health of the eurozone manufacturing sector went from bad to worse in September, with the PMI survey indicating the steepest downturn for nearly seven years and sending increasingly grim signals for the fourth quarter.

                            “The September PMI points to manufacturing output falling at a quarterly rate in excess of 1%, representing a severe drag on GDP in the third quarter. Germany is leading the downturn, with the PMI down to levels not seen since 2009, but Italy and Spain are also in deepening downturns, whilst France’s manufacturing sector has stalled.

                            “There’s likely worse to come, with forward-looking indicators (such as the orders to-inventory ratio) deteriorating further during the month. Businesses also remain downbeat about the year ahead, with optimism around a seven-year low amid trade war worries, signs of slowing global economic growth and geopolitical concerns, including heightened anxiety over a disruptive Brexit.

                            “Adding to the gloom, jobs are now being cut at the fastest rate since early 2013, which is not only a sign of manufacturers bracing themselves for more trouble ahead, but also adds to the risk that a deteriorating labour market will hit households and the service sector.”

                            Full release here.

                            US Janet Yellen’s Senate confirmation hearing live stream

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                              Into US session: Sterling weakest as Brexit debate resumes

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                                ActionForex.com
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                                Entering into US session, Sterling is trading as the weakest one for today as Brexit debate resumes in the Commons. Canadian Dollar follows as the second weakest. Though, Yen remains broadly pressured as the third weakest. On the other, New Zealand and Australian Dollar are the strongest ones for today but both lacks follow through buying.

                                There are talks that investors sentiments are boosted by positive development in US-China trade talks. But we’d like to reiterate that such optimism is not really reflected in stocks and bond markets. Both China and Hong Kong stocks closed lower. Japan JGB yield ended with a decline. German 10-year yield is also currently down. Is a 60-days extension in trade truce something good for the economy? Remember that the current tariffs will likely be in place in case of extension. Such an act is only prolonging the damages.

                                Anyway, it’s still positive that Japan and German avoided recessions in H4 even though the later’s GDP was stagnated. At least Germany was not in contraction back then. Eurozone GDP growth also matched expectation. Focus will now turn to US PPI, jobless claims and more importantly retail sales.

                                In Europe, currently:

                                • FTSE is up 0.43%.
                                • DAX is up 0.26%.
                                • CAC is up 0.66%.
                                • German 10-year yield is down -0.014 at 0.112.

                                Earlier in Asia;

                                • Nikkei dropped -0.02%.
                                • Hong Kong HSI dropped -0.23%.
                                • China Shanghai SSE dropped -0.05%.
                                • Singapore Strait Times rose 0.26%.
                                • Japan 10-year JGB yield dropped -0.0039 to -0.01, staying negative.

                                NZ ANZ business confidence rose to -52, inflation pressures remains intense

                                  By
                                  ActionForex.com
                                  -

                                  New Zealand ANZ Business Confidence improved from -70.2 to -52.0 in January. Own activity outlook rose form -25.6 to -15.8.

                                  Looking at some details, exports intentions rose from -10.0 to -5.4. Investment investment intentions rose form -20.5 to -13.7. Employment intentions rose from -16.3 to -11.1.Pricing intentions rose from 59.1 to 62.4. Cost expectations rose from 84.4 to 91.3. Profit expectations rose from -52.7 to -42.6. Inflation expectations dropped from 6.23 to 5.99.

                                  ANZ said: “Inflation pressures remain intense. Pricing intentions rose 3 points, and cost expectations rose 7 points. Inflation expectations remain stuck around the 6% mark. There’s good reason for the RBNZ to keep hiking a while yet (we are picking +50bp in February).”

                                  Full release here.

                                  EU reiterates no Brexit renegotiation even with new UK PM

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                                    ActionForex.com
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                                    European Commission reiterates its stance that there will be renegotiation of the Brexit deal even with a new UK Prime Minister. The Commission’s spokesman said today, “Everybody knows what is on the table. What is on the table has been approved by all member states and the election of a new prime minister will not change the parameters.”

                                    The stance is echoed by both Germany and France. Germany’s Europe Minister Michael Roth said “I see no willingness to restart negotiations from the beginning. The candidates would do well to bear that in mind in the course of their internal party campaigns.” France’s state secretary for European affairs Amélie de Montchalin said “We consider it is up to Britain to decide how it wants to proceed. The exit agreement was not negotiated against the British; negotiators on both sides tried, painstakingly, to find the best solution for all concerned.” Also, without a “new political line” in the UK or a second referendum, Britain must expect to leave the bloc on 31 October.

                                    German Ifo dropped to 103.7, economy remains robust

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                                      ActionForex.com
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                                      German Ifo Business Climate Index dropped -0.1 to 103.7 in September but beat expectation of 103.2. Business Expectations index dropped -0.2 to 101.0, above consensus of 100.5. But Current Assessment Index was unchanged at 106.4, above expectation of 106.0.

                                      Ifo President Clemens Fuest noted in the release “firms’ assessments of their current business situation deteriorated marginally, but remain at a high level. Companies also scaled back their business expectations somewhat. Despite growing uncertainty, the German economy remains robust.”

                                      Full release here.

                                      BoJ Kuroda suggests no imminent easing in emergency statement

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                                        ActionForex.com
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                                        BoJ Governor Haruhiko Kuroda issued a rare emergency statement today, warning of the spread of the Wuhan coronavirus. He said, “Overseas and domestic financial markets continue to make unstable movements due to heightening uncertainty over the impact on the economy from the spread of the coronavirus. The BOJ will monitor developments carefully, and strive to stabilize markets and offer sufficient liquidity via market operations and asset purchases.”

                                        The statement argues that BoJ would use the current tools to counter the impact of coronavirus outbreak first. That is, focuses will be on market operations and liquidity. Apparently, further monetary easing is not seen as an imminent step that BoJ would take.

                                        Markets in risk aversion as coronavirus spreads globally

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                                          ActionForex.com
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                                          Markets start the week in deep risk aversion cases of coronavirus and death tolls surged in China. The spread to other countries is also widening. Nikkei is currently down -1.7% while many other Asian are on lunar new year holiday. DOW future is down -0.9% while WTI crude oil is down -2.33%. Gold is up 0.56%, with Yen jumps across the board with Dollar.

                                          Confirmed cases in China jumped to 2744 on Monday, up from 1975 yesterday, and 1287 on Saturday. Death tolls also hit 80. The virus has now spread to countries including the US, France, Australia, Taiwan Japan, South Korea, Singapore, Thailand, Malaysia, Vietnam and Nepal.

                                          The Chinese government extends the annual lunar new year break until February 2, from January 30 originally. The US is planning to evacuate some Americans from Wuhan on Tuesday. France is preparing to do the same by mid-week. Japan is also planning to evacuate its nationals.

                                          Source: Washington Post

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