Japan industrial production rose 2.2% in Mar, PMI manufacturing finalized at 3-yr high in Apr

    Japan’s Industrial production rose 2.2% mom in March, much better than expectation of -2.0% mom decline. According to survey by the Ministry of Economy, Trade and Industry, output is expected to rise another 8.4% in April, and then 4.3% in May. Unemployment rate dropped to 2.6%, down from 2.9%, better than expectation of 2.9%. Housing start rose 1.5% yoy, versus expectation of -7.4% yoy. Consumer confidence dropped to 34.7, down from 36.1, above expectation of 34.0. In Tokyo, CPI core slowed to 0.0% yoy, down from 0.3% yoy, missed expectation of 0.3% yoy.

    PMI Manufacturing was finalized at 53.6 in April, up from March’s 52.7. That’s the strongest reading since April 2018. Usamah Bhatti, Economist at IHS Markit, said: “Japanese manufacturers continued to report a positive outlook for activity in the medium term. Close to 36% of panellists estimated that output levels would rise over the coming year. This was in line with the current IHS Markit forecast for industrial production to grow 7.7% in 2021, although this does not fully recover the output lost to the pandemic in 2020.”

    ECB Lane: Economy will grow in May, June, more strongly in Q3, continue into autumn

      ECB chief economist Philip Lane said in an interview that Eurozone is “very much at an inflection point”. Looking backwards, the initial weeks of this year “have been very tough” for many businesses. But looking forward, “there will be a rebound” from the worst, even though it’s not a “full recovery” yet.

      Q1 will have seen a “slight contraction”. But the economy “will be growing in May and in June, and even more strongly in the third quarter between July and September, with that momentum continuing into the autumn,” he added. ” If you take the whole year, 2021 together, we do think activity will be about 4 per cent above 2020 values. That doesn’t quite recover all of the losses from 2020, but it’s significant progress compared with where we are now.”

      Full interview here.

      US initial jobless claims dropped to 553k, continuing claims down to 3.66m

        US initial jobless claims dropped -13k to 553k in the week ending April 24, below expectation of 560k. Four-week moving average of initial claims dropped -44k to 612k, lowest since March 14, 2020.

        Continuing claims rose 9k to 3660k in the week ending April 17. Four-week moving average of continuing claims dropped -23k to 3684k, lowest since March 28, 2020.

        Full release here.

        US GDP grew 6.4% annualized in Q1

          US GDP grew 6.4% annualized in Q1, slightly below expectation of 6.5%. BEA said: “The increase in real GDP in the first quarter reflected increases in personal consumption expenditures (PCE), nonresidential fixed investment, federal government spending, residential fixed investment, and state and local government spending that were partly offset by decreases in private inventory investment and exports. Imports, which are a subtraction in the calculation of GDP, increased.”

          Full release here.

          CAD/JPY upside breakout, NZD/JPY to follow

            Yen’s broad based decline intensifies today on extended rebound in global treasury yields. In particular, US 10-year yield is probably ready to reclaim 1.7 handle later this week or early next week. Germany 10-year yield is flirting with -0.2 handle, while Japan 10-year JGB yield is pressing 0.1 handle.

            CAD/JPY and EUR/JPY lead Yen crosses with upside break out. CAD/JPY’s strong break of 88.28 high indicate resumption of the up trend from 73.80. Such rally should now target 61.8% projection of 77.91 to 88.28 from 85.40 at 91.80. That is close to 91.62 long term resistance (2017 high).

             

            NZD/JPY could be the next to break out on the upside as it’s now heading towards 79.19. Firm break there will resume the whole up trend from 59.49. Next target is 61.8% projection of 68.86 to 79.19 from 75.61 at 81.99.

            Eurozone economic sentiment rose to 110.3, back above pre-pandemic levels

              Eurozone Economic Sentiment Indicator rose strongly by 9.4 to 110.3 in April, above expectation of 103.0. It also scored markedly above its long term average and pre-pandemic level for the first time since the coronavirus outbreak in Europe. Employment Expectations Indicator also jumped 9.3 pts to 107.1), lifting it above long-term average and pre-pandemic level too.

              Looking at some details, Eurozone industrial confidence rose from 1.1 to 9.4. Services confidence rose from -9.4 to 2.8. Consumer confidence rose from -12.1 to -9.0. Retail trade confidence rose from -11.0 to -1.5. Construction confidence rose from -5.0 to 0.8.

              EU ESI rose 9.8 pts to 109.7. The ESI rose markedly in all of the six largest EU economies, most so in Poland (+11.3), followed by the Netherlands (+10.7), Spain (+9.1), France (+8.5), Germany (+5.7) and Italy (+5.3). Thanks to the latest increases, sentiment in all six countries is above its long-term average of 100.

              Full release here.

              New Zealand ANZ business confidence rose to -2 in Apr, a pretty inflationary soup cooking

                New Zealand ANZ Business Confidence rose to -2.0 in April, up from March’s -4.1, much better than preliminary reading of -8.4. Own Activity Outlook rose to 22.2, up from 16.6, versus prelim 16.4. Exports intentions rose to 9.1, up from 4.5. Investment intentions rose to 17.1, up from 11.9. Cost expectations rose to 76.1, up from 73.3. Employment intentions rose to 16.4, up from 14.4. Pricing intentions rose to 55.8, up form 47.3.

                ANZ said: “Given supply-side constraints are biting so hard, the confidence and robust employment intentions of firms may represent greater upside to wages and prices than to actual growth. It’s looking like a pretty inflationary soup. The RBNZ will be keen to look through cost-push inflation as far as possible, because it’s temporary…. But there’s clearly plenty of demand and risk-taking out there. The notion that the RBNZ might be overcooking things may well gain some traction in the months ahead, especially with headline inflation expected to rise above 2% in mid-2021.”

                Full release here.

                New Zealand goods exports dropped -2.3% yoy, imports rose 11.0% yoy in March

                  New Zealand goods exports dropped -2.3% yoy to NZD 5.7B in March. Imports rose 11.0% yoy to NZD 5.6B. Trade surplus narrowed to NZD 33m, down from NZD 201m, matched expectations.

                  Exports to China was up NZD 423m to NZD 1.8B. But exports to all other top trading partners were down, with USA down NZD -52m, EU down NZD -49m, AU down NZD -105m, Japan down NZD -25m.

                  Imports from China was up NZD 624m to NZD 1.3B, from EU was up NZD 132m, from AU was up NZD 65m, from Japan was up NZD 19m. But imports from USA was down NZD -74m.

                  Full release here.

                  Dollar index falls after Fed, on track to retest 89.20 low

                    Dollar weakened overnight as Fed Chair Jerome Powell indicated in the post meeting press conference that “it is not time yet” to start discussing any change in the monetary policy stance. He added that recovery is “uneven and far from complete.” Fed is still “a long way from our goals” and it’s “going to take some time” to have substantial further progresses.

                    Powell also talk down the “one-time increases in prices”, as they are “likely to only have transitory effects on inflation.” “We think of bottlenecks as things that in their nature will be resolved as workers and businesses adapt, and we think of them as not calling for a change in monetary policy since they’re temporary and expected to resolve itself,” Powell said. “We know the base effects will disappear in a few months.”

                    Dollar index dropped further to close at 90.60 overnight. Near term outlook stays bearish with 55 day EMA (now at 91.54) intact. Retest of 89.20 should be seen next. Break there will resume larger fall from 102.99.

                    Fed stands pat, publish near carbon copy statement

                      FOMC left monetary policy unchanged today. Federal funds rate is held at 0-0.25%. QE will continue with USD 80B in treasury securities and USD 40B in MBS per month. Overall the statement is nearly a carbon-copy of the prior one. There is little reaction to the announcement.

                      Full statement below.

                      The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.

                      The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened. The sectors most adversely affected by the pandemic remain weak but have shown improvement. Inflation has risen, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.

                      The path of the economy will depend significantly on the course of the virus, including progress on vaccinations. The ongoing public health crisis continues to weigh on the economy, and risks to the economic outlook remain.

                      The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer­term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage-­backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee’s maximum employment and price stability goals. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.

                      In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

                      Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Raphael W. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Charles L. Evans; Randal K. Quarles; and Christopher J. Waller.

                       

                      US oil inventories rose 0.1m barrels, WTI extending rebound

                        US commercial crude oil inventories rose 0.1m barrels in the week ending April 23. At 493.1m barrels, oil inventories are at the five year average for this time of year. Gasoline inventories rose 0.1m barrels. Distillate dropped -3.3m barrels. Propane/propylene rose 0.5m barrels. Total commercial petroleum inventories dropped -1.6m barrels.

                        WTI rebounded strongly after hitting 60.62 earlier this week. Today’s breach of 64.34 suggests that choppy rebound form 57.31 is resuming. But after all, the structure still suggests that it’s the second leg of the corrective pattern from 67.83. Hence, while strong rise might be seen, up side should be limited by 67.83 high. Meanwhile, break of 60.62 will extend the corrective pattern with another falling leg, towards 57.31 support.

                        US goods trade deficit widened to USD 90.6B in March

                          US goods exports rose USD 11.4B to USD 142B in March. Goods imports rose USD 14.9B to USD 232.6B. Trade deficit widened to USD -90.6B, from USD -87.1B, larger than expectation of USD -87.5B.

                          Wholesale inventories rose 1.4% mom to USD 693.4B. Retail inventories dropped -1.4% mom to USD 613.2B.

                          Full release here.

                          Canada retail sales rose 4.8% mom in Feb, up in 9 of 11 sectors

                            Canada retail sales rose 4.8% mom to CAD 55.1B in February, above expectation of 4.0% mom. Sales grew in 9 of 11 subsectors, higher sales at motor-vehicle and parts dealers and gasoline stations. Core retail sales, excluding gasoline stations and motor-vehicle and parts dealers, rose 3.8% mom.

                            Statistics Canada also estimated that retail sales would increase 2.3% mom in March. But owing to its preliminary nature, this figure will be revised.

                            Full release here.

                            German Gfk consumer sentiment dropped to -8.8, consumption not a pillar of the economy this year

                              German Gfk consumer sentiment for May dropped to -8.8, down from -6.2, missed expectation of -4.8. In April, economic expectations dropped from 17.7 to 7.3. Income expectations tumbled from 22.3 to 9.3. Though, propensity to buy rose from 12.3 to 17.3.

                              Rolf Bürkl, GfK consumer expert comments on the subject: “The recovery of the domestic economy will continue to lag due to the third wave. As in 2020, consumption will again not be a pillar of the economy this year. In the years before the pandemic, private consumer spending had still made an important contribution to the growth of the German economy.”

                              Full release here.

                              FOMC to emphasize substantial actual progress before tapering

                                Fed is widely expected to keep monetary policy unchanged today. Fed funds rate target will be held at 0-0.25%. QE will continue with the same monthly pace at USD 80B in of treasury securities and USD 40B of MBS. FOMC statement will reiterate that QE will continue until “substantial further progress” has been made.

                                Fed Chair Jerome Powell could sound a bit more upbeat in the press conference. Though, he would reiterate that Fed is not even thinking about tapering for the moment. He would also emphasize that policymakers need to see improvement in economic actual data, rather than outlook, before removing stimulus.

                                Here are some previews:

                                 

                                Aussie drops after CPI miss, AUD/CAD heading to 0.9488 support first

                                  Australian Dollar dips notably after weaker than expected consumer inflation data. AUD/CAD’s recovery from 0.9488 could have already completed at 0.9757. Deeper fall could be seen back towards 0.9488 support. Break there will resume the whole decline from 0.9991.

                                  But overall, the fall from 0.9991 is seen as a correction to the up trend from 0.8058 only. Hence, in case of downside extension, strong support should be seen from 0.9247 cluster support level to contain downside and bring rebound. This level coincides with 38.2% retracement of 0.8058 to 0.9991 at 0.9253, as well as 100% projection of 0.9991 to 0.9488 from 0.9757 at 0.9254.

                                  Australia CPI rose 0.6% qoq in Q1, missed expectations

                                    Australia CPI rose 0.6% qoq in Q1, well below expectation of 0.9% qoq. Annually, CPI accelerated to 1.1% yoy, up from 0.9% yoy, but missed expectation of 1.4% yoy. At the all groups level, the CPI rose in all eight capital cities, ranging from 0.3% in Melbourne to 1.4% in Perth and 2.6% in Darwin.

                                    Head of Prices Statistics at the ABS, Michelle Marquardt said: “Higher fuel prices, compared with the low prices seen in 2020, accounted for much of the rise in the March quarter CPI.”

                                    Full release here.

                                    BoC Macklem: Further QE adjustments will be gradual and deliberated

                                      BoC Governor Tiff Macklem told the House of Commons Standing Committee on Finance that “the economy is making good progress”. But “a complete recovery will still take some time” with the third wave of coronavirus a new set back. BoC remains “steadfast in our commitment to support Canadian households and businesses through the full length of the recovery”.

                                      With vaccinations progressing, he added, “we are expecting strong consumption-led growth in the second half of this year”. Inflation would increase over the next couple of months largely reflecting “base-year effects” and rise is gasoline prices. But inflation would only return to target as slack is absorbed in H2 of 2022.

                                      The reduction of weekly QE purchase from CAD 4B to CAD 3B reflects the progress made toward economic recovery. Macklem noted, “further adjustments to the pace of net purchases will be guided by our ongoing assessment of the strength and durability of the economic recovery”. Also, “further adjustments to our QE program will be gradual, and we will be deliberate in both our assessment of incoming data and the communication of our analysis.”

                                      Full remarks here.

                                      US consumer confidence rose to 121.7 in Apr, highest since Feb 2020

                                        US Conference Board Consumer Confidence rose sharply to 121.7 in April, up from 109.0, above expectation of 112.0. Present Situation index rose from 110.1 to 139.6. Expectations index rose from 108.9 to 109.8.

                                        “Consumer confidence has rebounded sharply over the last two months and is now at its highest level since February 2020,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board.

                                        “Consumers’ assessment of current conditions improved significantly in April, suggesting the economic recovery strengthened further in early Q2. Consumers’ optimism about the short-term outlook held steady this month. Consumers were more upbeat about their income prospects, perhaps due to the improving job market and the recent round of stimulus checks. Short-term inflation expectations held steady in April, but remain elevated. Vacation intentions posted a healthy increase, likely boosted by the accelerating vaccine rollout and further loosening of pandemic restrictions.”

                                        Full release here.

                                        Germany upgrades 2021 GDP forecasts to 3.5% despite current serious infection situation

                                          German government upgraded 2021 GDP growth forecasts to 3.5%, up from prior projection of 3.0%. GDP growth is expected to remain strong at 3.6% in 2022. On the whole, the economy would reach its pre-pandemic level next year at the latest.

                                          Economy Minister Peter Altmaier said “today’s spring projection is an encouragement despite the currently serious infection situation.” He added that most pandemic restrictions should be lifted in the course of summer.