US initial jobless claims dropped -4k to 267k in the week ending November 6, slightly above expectation of 266k. Four-week moving average of initial claims dropped -7k to 278k. Both were lowest since March 14, 2020.
Continuing claims rose 59k to 2160k in the week ending October 30. Four-week moving average of continuing claims dropped -111k to 2245k, lowest since March 21, 2020.
UK Prime Minister Boris Johnson is pushing for a “yes or no” meaningful vote on his Brexit deal today. His spokesman said “The meaningful vote will go ahead if the speaker allows it and if no amendments are selected which would render the vote pointless. There is not point having a meaningless vote, the government would pull the motion”.
He added: “The public want Brexit done. The government is determined to pass the PM’s great new deal and get us out of the EU on Oct. 31 … The deal with the EU has just been agreed, it is done, it is closed”. “The negotiations with the EU have already gone on far too long. The prime minister has achieved what is a very good deal and he is focused on getting that deal through parliament.”
Swiss KOF Economic Barometer, a key indicator for forecasting the economy’s direction, has shown a slight improvement in November, rising from 95.1 to 96.7. This rise slightly exceeded market expectations, which were set at 96.2.
According to KOF Swiss Economic Institute, since mid-2023, the barometer has stabilized, though it remains at a level below the historical average. This stabilization indicates moderate outlook for the Swiss economy in the near future.
The increase in the KOF Barometer can primarily be attributed to positive developments in manufacturing sector and other services sector.
However, not all sectors are signaling positive trends. Indicators for hospitality industry and finance and insurance sector are showing slightly negative signals.
Eurozone CPI was finalized at 1.3% yoy in June, revised up from 1.2%, up from May’s 1.2% yoy. Core CPI was finalized at 1.1% yoy, unrevised, up from May’s 0.8% yoy. EU 28 CPI was finalized at 1.6% yoy, stable compared to May.
The lowest annual rates were registered in Greece (0.2%), Cyprus (0.3%), Denmark and Croatia (both 0.5%). The highest annual rates were recorded in Romania (3.9%), Hungary (3.4%) and Latvia (3.1%). Compared with May, annual inflation fell in seventeen Member States, remained stable in one and rose in nine.
In June, the highest contribution to the annual euro area inflation rate came from services (0.73%), followed by food, alcohol & tobacco (0.30%), energy (0.17%) and non-energy industrial goods (0.07%).
Speaking on CNBC, New York Fed President John Williams warned that “there are risks to that outlook that maybe the economy will slow further”. He also emphasized that Fed is “listening” and it’s “ready to re-assess and reevaluate our views and…policy stance”. And, Fed will “go into the new year with eyes wide open, willing to read the data and listen to what we are hearing, re-assess our economic outlook, and take the right policy decisions.”
To be more specific, Williams said “Something like two rate increases would make sense in a really strong economy going forward. But we’re data dependent, we’re going to adjust our views dependent on how the outlook changes.”
Yesterday, Atlanta Fed President Raphael Bostic expressed guarded optimism and highlighted the “significant progress” in controlling inflation. He observed, “Inflation is well off its highs that we saw in the last year. And recent numbers have come in promising in ways that suggest that we might be seeing continued declines.”
Bostic pointed to the ongoing economic evolution as in line with an “orderly slowdown,” which he views as “quite promising”. As such, he advocated to be cautious, patient and resolute” in policy-making.
He also voiced concerns about the risk of overtightening monetary policy. “I think we are in a phase now where there is some risk of us overtightening. And so we’ve just got to have that in mind,” he said. By exercising appropriate caution, Bostic believes that the damage to employment can be minimized.
Looking forward, Bostic said, “My baseline outlook doesn’t contemplate any cuts until the second half of next year at the earliest.” He insists on being “resolute to make sure that we don’t move our policy posture in a different direction until we’re absolutely, absolutely certain that inflation is going to get to our target.”
ECB Executive Board member Yves Mersch said in a speech that the pandemic emergency purchase programme (PEPP) is the “most appropriate instrument compared with a recalibration of standard policy tools, such as interest rate cuts”. PEPP purchases are “separate from and cannot be consolidated with APP purchases”, making it a “distinct monetary policy measure”.
He also emphasized that “crisis measures must be temporary and targeted. They are justified only in the light of the exceptional circumstances seen during the pandemic. Extraordinary times require extraordinary action. As the crisis evolves and subsides, the ECB will reconsider its tools and supervisory practices.
UK PMI services dropped sharply to 51.7 in March, downf rom 54.5 and missed expectation of 54.0. That’s the lowest level in 20 months and it’s “partly linked to snow distruption”.
Quote from Chris Williamson, Chief Business Economist at IHS Markit:
China GDP grew 4.0% yoy in Q4, much faster than expectation of 3.3% yoy. On a quarterly basis, GDP grew 1.6% qoq, above expectation of 1.1% qoq. For 2021 as a whole, GDP grew 8.1%, slightly above expectation of 8.1%.
In December, industrial production rose 4.3% yoy, above expectation of 3.6%. Retail sales rose 1.7% yoy, below expectation of 3.7% yoy. Fixed asset investment rose 4.9% ytd yoy, slightly above expectation of 4.8%.
The National Bureau of Statistics said, “we must be aware that the external environment is more complicated and uncertain, and the domestic economy is under the triple pressure of demand contraction, supply shock and weakening expectations.”
Also from China, steel production dropped for the first time in six years in 2021, down -3% from 1.065B tonnes to 1.03B tonnes. Birth rate dropped to a record low of 7.52 births per 1000 people in 2021, down from 2020’s 8.52 births per 1000 people.
In the October Monthly Economic Report, Japan’s Cabinet Office downgraded assessment on exports to “increasing at a slower pace”, from “continue to increase moderate”. That’s the first downgrade in seven months.
Overall, the economy is “picking up although the pace has weakened in a severe situation due to the Novel Coronavirus.” Private consumption “shows weakness further”. Business investment is “picking up”. Industrial production is “picking up”. Corporate profits are “picking up”. Employment situation “shows steady movements in some components”. Consumer prices show “steady movements”.
As the government lifted state emergency, it will “develop a new economic stimulus package” to address the issues of reopening. It expects BoJ to “pay careful attention to the economic impact of the infections and conduct appropriate monetary policy management”.
US stocks extended record run in holiday trading this week, with all three major indices closing at new record highs. S&P 500’s rally in the past two week is impressive, with strong pick up in upside momentum. Long term channel resistance was taken out without much hesitation.
Overbought condition in weekly RSI shouldn’t limit the rally for now. Current up trend is now on track to 100% projection of 1810.10 to 2940.91 from 2346.58 at 3477.39. Though, strong resistance should be seen around there to bring corrections.
NASDAQ also extended recent up trend and closed above 9000 level for the first time. It’s now facing long term channel resistance. Considering that equivalent resistance was taken out by S&P 500 rather decisively, we’d expect NASDAQ to follow soon. NASDAQ should be heading to 100% projection of 4209.76 to 8133.30 from 6190.17 at 10113.71.
Japan GDP grew 0.1% qoq in Q3, slowed from Q2’s 0.3% qoq and missed expectation of 0.2% qoq. Annualized rate slowed sharply from 1.8% to just 0.2%, way below expectation of 0.9%. GDP deflator accelerated to 0.6% yoy, up from 0.4% yoy and beat expectation of 0.5% yoy. Private consumption growth slowed to 0.4%, down from 0.6%, despite pre-tax hike purchases. Capital spending, though, accelerated to 0.9%, up from 0.7%.
Economy Minister Yasutoshi Nishimura blamed the weak GDP growth on worsening relations with South Korea. He said that had a “big impact” on exports, while dropped -0.7% from the prior quarter. Also, declines in in-bound tourists from South Korea was a drag, along with some impact form the prolonged trade war between US and China.
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ECB Executive Board member Fabio Panetta said in a speech that “a digital euro represents a natural evolution in response to this transformation – not only to underpin efficiency and innovation, but also to preserve the role of the central bank in offering safe means of payment”.
A key goal of digital euro should “should therefore be to preserve a fine balance between sovereign and private money to ensure payments remain stable and efficient.” However, “if innovations in central bank money are not well designed, they can become a source of financial disruption.”
Panetta added that ECB will publish the consultation replies on digital euro in the spring. That would provided the input to the decision on, towards the middle of the year, about whether or not to formally launch a digital euro preparation project.
Eurozone goods exports fell -9.2% yoy to EUR 245.5B in March. Goods imports fell -12.0% yoy to EUR 221.3B. Trade balance recorded EUR 24.1B surplus. Intra-Eurozone trade fell -12.4% yoy to EUR 222.1B.
In seasonally adjusted term, goods exports rose 0.1% mom to EUR 237.7B. Goods imports fell -0.1% mom to EUR 220.4B. Trade surplus widened slightly from EUR 16.7B to 17.3B. Intra-Eurozone trade fell -0.5% mom to EUR 213.7B.
China’s industrial output and retail sales for October exceeded market expectations. Industrial production rose 4.6% yoy, surpassing forecasted 4.5% yoy, marking an improvement from September’s 4.5% yoy growth. Retail sales recorded a robust 7.6% yoy growth, significantly higher than anticipated 7.0% yoy and showing a considerable improvement from 5.5% yoy increase in September.
However, fixed asset investment experienced slower growth, rising only 2.9% ytd yoy, which was below the expected 3.1%. The real estate sector particularly faced challenges, with investment dropping by -9.3% ytd yoy, a deterioration compared to the previous period through September.
In a separate development, People’s Bank of China maintained the interest rate on CNY 1.45T worth of one-year medium-term lending facility loans at 2.50%, consistent with previous operations. As CNY 850B worth of MLF loans were set to expire this month, this move resulted in a net injection of CNY 600B of fresh funds into the banking system.
The central bank stated that this loan operation aimed to keep the banking system’s liquidity at a reasonably ample level, countering short-term factors such as tax payments and government bond issuances.
In an interview with Le Monde, ECB Vice President Luis de Guindos indicated barring any surprises, a June rate cut is a “fait accompli.”
“If things move in the same direction as they have in recent weeks, we will loosen our restrictive monetary policy stance in June,” he said.
However, looking beyond June, the Vice President expressed considerable caution due to heightened levels of uncertainty. “I’m inclined to be very cautious,” said de Guindos.
Eurozone PMI Manufacturing rose to 57.7 in February, up from 54.8, well above expectation of 54.4. That’s also the highest level in 36 months. PMI Services dropped to 44.7, down from 45.4, slightly above expectation of 44.5. PMI Composite rose to 48.1, up from 47.8.
Chris Williamson, Chief Business Economist at IHS Markit said:
“Ongoing COVID-19 lockdown measures dealt a further blow to the eurozone’s service sector in February, adding to the likelihood of GDP falling again in the first quarter. However, the impact was alleviated by a strengthening upturn in manufacturing, hinting at a far milder economic downturn than suffered in the first half of last year. Factory output grew at one of the strongest rates seen over the past three years, thanks to another impressive performance by German producers and signs of strengthening production trends across the rest of the region.
“Vaccine developments have meanwhile helped business confidence to revive, with firms across the eurozone becoming increasingly upbeat about recovery prospects. Assuming vaccine roll-outs can boost service sector growth alongside a sustained strong manufacturing sector, the second half of the year should see a robust recovery take hold.
“One concern is the further intensification of supply shortages, which have pushed raw material prices higher. Supply delays have risen to near-record levels, leading to near-decade high producer input cost inflation. At the moment, weak consumer demand – notably for services – is limiting overall price pressures, but it seems likely that inflation will pick up in coming months.”
Bundesbank President Jens Weidmann said today that German economy growth will “fall well short of the potential rate of 1.5 percent in 2019”. That’s because “there is much to suggest that the dip in growth here in Germany has persisted into the current year”.
However, he emphasized that the prerequisites for growth remain intact, including low financing cost, expansion in employment market and rising wages. Thus, there is no reason for pessimism yet.
Separately, it’s reported that German cabinet gave green-light for a second eight-year term for Weidmann, as the current term expires at the end of APril.
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Swiss KOF dropped to 100.3, growth to hover around 10 year average
Swiss KOF Economic Barometer dropped 1.4 pts to 100.3 in August, below expectation of 101.2. KOF noted that it “pints to a level that is only marginally above its long-term average.” And, “in the near future Swiss growth should hover around its average over the last ten years.”
Also, it’s noted that “the strongest contributions to this negative result come from manufacturing, followed by the indicators from the exporting sector.” On the other hand, “the indicators related to private consumption give a positive signal. “. Financial and construction sectors were practically unchanged.
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