Stiglitz to China: Don’t appease to bully Trump

    Nobel prize-winning economist Joseph Stiglitz commented on the intensification of trade war between US an China. He pointed out that China is “sitting on $3 trillion of reserves that it can use to help those adversely affected. On the other hand, in the US, “we don’t have an economic framework that is able to respond to the particular places that will be affected by a trade war. Also, he pointed out that “the fiscal resources of the United States are strained.”

    In addition, Stiglitz also said that “when you have a bully like Trump, it would not be good to respond in a weak way.” He added that “we know about appeasement from Munich. It’s a different kind of a war but in a trade war appeasement could lead to more and more demands.”

    Fed Barkin particularly concerned with recent roller coaster

      Richmond Fed President Thomas Barkin said in a speech that the economy is giving “conflicting signals. The strength of the labor market might be saying “hold” or even “raise rates”. But low inflation and the bond market might be saying “lower rates.” He also pointed out that there are risks on “both on both sides”. Additional easing could “overstimulate inflation, distort labor markets or fuel an asset price bubble.”. Not easing could undermine Fed’s credibility” and leave policymakers “behind the curve”.

      Barkin also talked about several headwinds. There is a “great deal of uncertainty” around trade and politics, which matters for business confidence. He’s “particularly concerned” about the “roller coaster” recently. “Between Brexit, the ongoing negotiations with China, tensions in the Middle East and the political headlines—to name just a few—it’s been tough for businesses to feel like they’re on solid ground.”

      Barkin’s full speech here.

      New Zealand filled jobs rose for second month in June

        In New Zealand, filled jobs in all industries rose 0.8% mom, or 17.9k, in June. Filled jobs rose 1.4% or 1.5k in primary industries, 0.5% mom or 2.1k in goods-producing industries, and 0.8% mom or 13.8k in services industries.

        “We have seen rises in the last two months following the sharp drop of over 35,000 jobs that occurred in April, when the full COVID-19 lockdown was in place,” economic statistics manager Sue Chapman said. “While job numbers have recovered somewhat in May and June, they are still below pre-COVID levels. Filled job numbers in March and June are usually quite similar, but for this year June is nearly 20,000 jobs lower than March.”

        Full release here.

        WTI oil breaks 110 on upside acceleration, heading to 147?

          Oil price surged to highest level since 2014 on concern of supply disruptions related to Russia invasion of Ukraine. The International Energy Agency’s 31 member countries have just agreed to release 60 million barrels of oil from their strategic reserves . But that’s apparently not enough to calm the markets.

          WTI crude oil accelerated sharply to as high as 110.69 so far. Technically, further rise is expected as long as 102.19 resistance turned support holds. Next target is 100% projection of 33.50 to 85.92 from 62.90 at 115.32.

          It’s still early to say. But is should be noted that fear driven moves in commodity markets could be extremely powerful. Just remember oil price was negative less than two years ago. So, decisive break of 115.32 could easily prompt more acceleration to 161.8% projection at 147.71, in rather quick manner.

          WH Hassett said there will be a US-China trade deal by March 1

            White House economic adviser Kevin Hassett said he’s confidence that US and China will reach a trade deal by March 1 deadline. He said in a CNN interview that “Yes, I am confident that it can happen, that the talks are moving forward”.

            And, “There’s a lot of progress to be made but it’s a very strong situation right now. And I think the Chinese recognize that they’ve got a big potential gain for coming up with a deal because as you mentioned their growth has really fallen off the cliff.”

            Also, Hassett talked down the risk of government shut down on credit rating. He said “I don’t think a downgrade is in play … I don’t think that there’s any risk at all, given how strong the economy is, that we will be downgraded.”

            ANZ business confidence dropped to -44.3, risk rising that it becomes self-fulfilling

              New Zealand ANZ Business Confidence dropped sharply from -44.3 to -52.3 in August. Activity Outlook also turned negative again, down from 5.0 to -0.5. ANZ noted that “employment, investment and export intentions all fell to dismal levels, along with profit expectations.” Also, “inflation indicators were weaker despite higher reported costs.”

              Just over a third of this month’s survey responses were received after the surprised RBNZ -50bps OCR cut. ANZ noted “there were small differences in the responses before and after” and “none of the differences were statistically significant for any of the data series.” ANZ further said “the outlook for the economy appears to be deteriorating further, with firms extremely downbeat despite easier monetary conditions, fairly robust commodity prices, and positive population growth. Whatever the cause, the risk is rising that it becomes self-fulfilling.”

              Full release here.

              NZD/USD drops to as low as 0.6306 today. 100% projection of 0.6938 to 0.6481 from 0.6790 at 0.6333 was broken this week. Next stop will be 161.8% projection at 0.6051 in the medium term, which is slightly below 2015 low at 0.6102.

              Moon Jae-in scored another point as North Korea suspended nuclear tests, abolished nuclear site

                South Korea announced to stop broadcasting its propaganda along the border with North Korea, as a gesture of goodwill ahead of the highly anticipated Inter-Korean Summit at the border truce village of Panmunjom on Friday.

                South Korean President Moon Jae-in has made tremendous progress in solving the Korea crisis by continuously seeking dialogue. The meeting between high level officials of the two countries earlier this year was the turning point. And, the limited, yet successful, joint participation in recent Winter Olympic in the South created a crucial diplomatic window for the relationship.

                It’s only the third top level summit between the two countries, with the two previous meetings held back in 2000 and 2007. Ahead of the meeting, North Korea has announced to suspend nuclear and missile tests effective immediately. Its northern nuclear test site will also be abolished. And now, a formal end to the Korean War is also on agenda in the meeting between Moon and North Korean leader Kim Jong-un.

                Considering that South Korea was in a mess when Moon took office last May. His predecessor was impeached for corruption. The achievements domestically and diplomatically deserved much recognition. And that’s a main reason Moon is chosen as the 4th of the World’s 50 Greatest Leaders by Fortune as announced last week.

                Fed Waller supports 50bps hikes for several meetings

                  Fed Governor Christopher Waller said in a speech, “longer-range inflation expectations have moved up from a level that was consistent with trend inflation below 2 percent to a level that’s consistent with underlying inflation a little above 2 percent.”

                  When these expectations are “anchored”, “they influence spending decisions today in a way that helps inflation move toward our target,” he added.

                  “To ensure these longer-term expectations do not move up broadly, the Federal Reserve has tools to reduce demand, which should ease inflation pressures,” he said”.

                  “I support tightening policy by another 50 basis points for several meetings”. In particular, “I am not taking 50 basis-point hikes off the table until I see inflation coming down closer to our 2 percent target.” Additionally, Waller said he supports “having the policy rate at a level above neutral” by the end of this year.

                  Full speech here.

                  Attorney General Cox said risk of indefinite Irish backstop reduced, not eliminated, Pound dives

                    Sterling is knocked down sharply after UK Attorney General Geoffrey Cox published is updated legal advice up the new Brexit deal agreed by UK Prime Minister Theresa May and European Commission President Jean-Claude Juncker late Monday. In short, Cox said that he new documents “reduce the risk” the UK is trapped indefinitely in the Northern Ireland backstop. But such risk is not eliminated.

                    And most importantly, as Cox’s letter concluded: “the legal risk remains unchanged that if through no such demonstrable failure to either party, but simply because of intractable differences, that situation does arise, the United Kingdom would have, at least while the fundamental circumstances remained the same, no internationally lawful means of exiting the Protocol’s arrangements, save by agreement”.

                    Legal Opinion on Joint Inst… by on Scribd

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                    US Empire State manufacturing dropped to 4.9, but employment posted strongest gains in months

                      US Empire State manufacturing index dropped to 4.9 in December, down from 6.3. New orders increased marginally, and shipments were modestly higher. Inventories continued to move lower, and delivery times edged up. Employment posted its strongest gain in months, and the average workweek lengthened somewhat. Input prices increased at the fastest pace in two years, while selling prices increased at about the same pace as last month.

                      Import price index rose 0.1% mom in November, below expectation of 0.3% mom.

                      China GDP grew 6.8% in Q1, Added USD 8.5B US debt holdings in Feb

                        Released from China, Q1 GDP grew 6.8% yoy, same as prior quarter and met expectation. Retail sales rose 10.1% yoy in March, up from prior 9.7% yoy and beat expectation of 9.7% yoy. Industrial production, however, rose 6.0% yoy, slowed from prior 7.2% yoy and missed expectation of 6.9% yoy. Fixed assets investment also slowed to 7.5% yoy, down from 7.9% yoy and missed expectation of 7.7% yoy. Overall, the set of data showed robust growth momentum.

                        Separately, US Treasury data showed showed that China remained the largest foreign creditor to the US, holding USD 1.18T in US bonds, bills and notes in February. Debt holding by China has indeed by USD 8.5B for the month, the largest rise in six months. But it should be noted that the data was for the period even before the 232 steel tariffs of the US, not to mention the Section 301 tariffs against China. The impact of trade tensions on Chinese interest in US debts remains to be seen.

                        Meanwhile, Japan came as second largest foreign holder of US debts, dropped slightly from USD 1.07T to USD 1.06T.

                        US CPI slowed to 8.3% yoy, core CPI down to 6.2% yoy, but food index surged

                          US headline CPI rose 0.3% mom in April, above expectation of 0.2% mom. CPI core rose 0.6% mom, above expectation of 0.4% mom. Food index rose 0.9% mom. Energy index declined -2.8% mom.

                          Over the 12-month period, headline CPI slowed from 8.5% yoy to 8.3% yoy, but beat expectation of 8.1% yoy. CPI core slowed from 6.5% yoy to 6.2% yoy, also beat expectation of 6.0% yoy. Food index rose 9.4% yoy, highest since April 1981. Energy index rose 30.3% yoy.

                          Full release here.

                          Canada retail sales rose 0.7% mom in Nov, to drop -2.1% mom in Dec

                            Canada retail sales rose 0.7% mom to CAD 58.1B in November, below expectation of 1.0% mom. The increase was led by higher sales at gasoline stations (+4.9%), building material and garden equipment and supplies dealers (+3.0%) and food and beverage stores (+1.0%).

                            Sales increased in 6 of 11 subsectors, representing 63.8% of retail trade. Core retail sales—which exclude gasoline stations and motor vehicle and parts dealers—increased 0.5%.

                            According to advance estimate, sales decreased -2.1% mom in December.

                            Full release here.

                            Fed’s Barr: Not confident to start easing monetary policy yet

                              Fed Vice Chair Michael Barr stated in a speech today that while inflation has decreased from its peak of 7.1% to 2.7%, it is “not yet all the way to 2% target. He noted that inflation readings for the first quarter were “disappointing,” as highlighted in FOMC’s recent statement.

                              “These results did not provide me with the increased confidence that I was hoping to find to support easing monetary policy by reducing the federal funds rate,” Barr noted.
                              He added that Fed’s restrictive policy would need “some further time to continue to do its work” in bringing inflation down.

                              SNB Zurbruegg: Important to keep rate differential to avoid excessive Franc appreciation

                                SNB Vice Chairman Fritz Zurbruegg said in a l’agefi interview, “Switzerland has always had lower rates than others since the financial crisis. It is very important for us to keep this differential to avoid an excessive appreciation of the Swiss franc.”

                                “As soon as the situation requires it, we’ll raise our interest rate,” he said. But, “we’ll keep this ability to intervene in foreign exchange markets if needed to ensure price stability.”

                                “Experience has shown that having some leeway within the range we associate with price stability has worked well in the past in Switzerland,” he added. “We are a small, open economy with capital flows linked to our safe-haven status. We cannot always achieve a precise target and inflation can fluctuate in the short term because we aim for the medium term.”

                                Swiss Franc unconvincingly the second strongest today, a look at EURCHF again

                                  Yen is trading as the strongest one for today as boosted by risk aversion and falling treasury yields. Trump’s pull out from the meeting with Kim triggered some selloff in stocks. But loss is relatively limited. On the other hand, it’s the steep decline in 10 year yield, which hit as low as 2.955 so far, that looks more serious.

                                  Swiss Franc follow as the second strongest one for today. However, even so, it’s held below yesterday’s high against all major currencies. Momentum is rather unconvincing. Having a look at EURCHF action bias table, while D action bias stays consistently downside red, 6H Action Bias is showing some hesitation.

                                  A further look at the 6H Action Bias chart, it seems that EUR/CHF started to lose downside momentum after hitting 1.1580. Though, there is no convincing evidence that the cross is reversing yet.

                                  Following up on our short strategy here. In the current situation, there are two choices, get out, or stay short. Considering that EUR/CHF is in deep over sold region as seen in daily RSI, we’d prefer to close short right now, with around 80 pt profit first. For those we’d like to hold on for 1.1445 target, we’d suggest to lower the stop to break even at 1.1705.

                                  BoC Poloz press conference live stream

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                                    US ADP employment grew 132k, a shift towards more conservative hiring pace

                                      US ADP private employment grew 132k in August, well below expectation of 300k. By sector, goods-producing jobs grew 23k. Services-providing jobs grew 110k. By company size, small businesses added 25k jobs, medium added 53k, large added 54k. Annual pay was up 7.6%.

                                      “Our data suggests a shift toward a more conservative pace of hiring, possibly as companies try to decipher the economy’s conflicting signals,” said Nela Richardson, chief economist, ADP. “We could be at an inflection point, from super-charged job gains to something more normal.”

                                      Full release here.

                                      US initial jobless claims dropped -8k to 209k

                                        US initial jobless claims dropped -8k to 209k in the week ending August 3, below expectation of 217k. Four week moving average of initial claims rose 0.25k to 212.25k.

                                        Continuing claims dropped -15k to 1.684m. Four-week moving average of continuing claims dropped -11k to 1.687m.

                                        Full release here.

                                        Bundesbank Weidmann: ECB not striving for either lower or higher inflation

                                          Bundesbank President Jens Weidmann said ECB is “”not striving for either lower or higher rates” of inflation with the new symmetric target. He added, the 2% medium term inflation goal is a “clear and easily understandable objective,” and that “temporary deviations from the target in either direction can occur.”

                                          Separately, Governing Council member Olli Rehn said the “new inflation goal is unambiguous.” Clearly, the “medium-term core inflation forecast of 1.4% below new aim.”

                                          Another Governing Council member Francois Villeroy de Galhau said ECB will still need to analyze the meaning of a “temporary” overshoot of inflation. “We didn’t discuss any duration, we didn’t discuss any numbers. It’s all about the context,” he said. “In monetary policy, you have to combine the direction with judgment. We set the direction very clearly.”