BoE announced to enter into a liquidity facility with the Bank for International Settlements to “ensure the provision of Sterling liquidity during any future periods of market stress”.
“Together with the swap lines the BoE has with a number of central banks, this new facility will provide a further liquidity backstop in Sterling to help ease any potential future strains in funding markets,” BoE said.
NASDAQ closed at new record at 14138.77 overnight (S&P 500 also closed at record 4187.62), but was short of intraday record at 4175.11. Further rise is in favor in NASDAQ for now, nonetheless, as long as 13698.66 support holds. Based on current momentum, it should at least breach 14175.11.
The major near term test is from 61.8% projection of 10822.57 to 14175.11 from 12397.05 at 14468.91. Firm break there will confirm underlying medium term up side momentum, and pave the way to 100% projection at 15749.59. However, rejection by 14468.91, followed by break of 13698.66 support, will extend the corrective pattern from 14175.11 with another fall, before completion.
In the Outlook for Economic Activity and Prices, BoJ said, “the economy is likely to recover” with as impact of COVID-19 wanes gradually. Thereafter, it is projected to “continue growing with a virtuous cycle from income to spending intensifying”.
GDP growth forecasts were revised higher, “on the back of stronger domestic and external demand”. CPI forecast for fiscal 2021 was lowered “due to the effects of reduction in mobile phone charges”. But outlook is “highly unclear”. The assumption that impact of COVID-19 will “almost subside” in the middle of the projection period “entail high uncertainties.
In the new economic projections, Fiscal 2021 GDP forecast was raised slightly to 4.0%, up from January’s 3.9%. Fiscal 2022 GDP forecast was raised to 2.4%, from 1.8%. GDP growth is projected to to slow to 1.3% in fiscal 2023.
CPI forecast was downgraded to 0.1% in 2021, from 0.5%. But for fiscal 2022, CPI forecast was upgraded to 0.8%, from 0.7%. CPI is projected to rise further to 1.0% in fiscal 2023.
BoJ kept monetary policy unchanged today as widely expected. Under the yield curve control framework, short-term policy interest rate is held at -0.1%. 10-year JGB yield target is kept at around 0%. The central bank will continue to purchase ETFs and J-REITS with upper limits of about JPY 12T and JPY 180B respectively. CP and Corporate bonds purchases will continue with upper limit of JPY 20Y until the end of September 2021.
BOJ also pledged to continue with QQE with Yield Curve Control “as long as it is necessary” and “continue expanding the monetary base” until core CPI exceeds 2% target in a “stable manner”. It will also “closely monitor” of the impact of COVID-19 and “will not hesitate to take additional easing measures if necessary”.
ECB Executive Board member Fabio Panetta said in a speech that, “faced with uncertainty about the true economic damage caused by the pandemic, we must preserve accommodative financing conditions well into the recovery.”
Also, “monetary and fiscal policies should work together to deliver a stronger and more inclusive recovery, reducing the risk of inflation undershooting our aim for a prolonged period. This is the best way to avoid lasting scars.”
US durable goods orders rose 0.5% mom to USD 256.3B in March, well below expectation of 2.5% mom. Ex transport orders,however, rose 1.6% mom , matched expectations. Ex-defense orders rose 0.5% mom. Fabricated metal products, up six of the last seven months, led the increase, 3.6% mom to USD 35.4B.
WTI crude oil weakens mildly today on renewed concerns over global recovery, as India’s coronavirus crisis worsens. The rejection by 4 hour 55 EMA suggests that fall from 64.34 might be ready to resume. Overall, such decline is seen as the third leg of the corrective pattern from 67.83. Break of 57.31 would target 100% projection of 67.83 to 57.31 from 64.34 at 53.82.
Germany Ifo Business Climate rose slightly to 96.8 in April, up from 96.6, below expectation of 97.7. Current Assessment index rose to 94.1, up from 93.1, below expectation of 94.5. Expectations index dropped to 99.5, down form 100.3, below expectation of 101.4.
Ifo said: “Companies once again raised their assessments of the current business situation. However, they were no longer quite so optimistic about the coming six months. Both the third wave of infections and bottlenecks in intermediate products are impeding Germany’s economic recovery.”
Gold’s rebound lost momentum after hitting 1797.71 last week, failing to break through 1800 handle. Some consolidations could be seen first. Mild near term bullishness is maintained with gold holding above 55 day EMA as well as 1763.36 minor support. We’d still expect another rise through 1797.71 to 38.2% retracement of 2075.18 to 1676.65 at 1828.88.
Also, firm break of 1828.88 will affirm the case that correction from 2075.18 has completed with three waves down to 1676.65. However, rejection by 1828.88, or break of 1763.36 support, would likely extend the decline from 2075.18 with another leg through 1676.65 low.
BoE Deputy Ben Broadbent said in a Telegraph interview published over the weekend that UK would see “very rapid growth at least over the next couple of quarters”. Though, it’s a too son to call it a “roaring twenties” scenario. He added, “the burden of proof it seems to me should be as to why that wouldn’t happen, rather than why it would, so I have tended to be on that more optimistic side.”
He also saw “less of a disinflationary effect”. “The price rises for those hitting capacity limits are going to be bigger than the falls in prices for those seeing falls in demand”, he explained. “When you get the shift in demand, you’re going to run into bottlenecks in some areas, particularly in those areas where supply, too, has been hit for a particular reason”.
US PMI Manufacturing rose to 60.6 in April, up from 59.1. PMI Services rose to 63.1, up from 60.4. PMI Composite Rose to 62.2, up from 59.7. All three indices were at their record highs.
Chris Williamson, Chief Business Economist at IHS Markit, said:
“The US economy is enjoying a strong start to the second quarter, firing on all cylinders as loosening virus restrictions, an impressive vaccine roll-out, a brighter outlook and stimulus measures all helped boost demand.
“The upturn is broad-based: the service sector is growing at the fastest rate recorded in almost 12 years of survey history, and manufacturers reported one of the strongest expansions seen over the past seven years. The latter was all the more impressive, as factories continued to be throttled by unprecedented supply chain delays, a consequence of which was a further steep rise in prices.
“The worsening supply situation is a concern for the outlook, especially in relation to prices. Supply needs to improve to come into line with demand. But with record supply chain delays driving a rise in backlogs of uncompleted work of a magnitude not surpassed for over seven years, firms appear to be struggling to boost operating capacity in the near-term.”
UK PMI Manufacturing rose to 60.7 in April, up from 58.9, above expectation of 59.0. That’s the highest level in more than 26 years. PMI Services rose to 60.1, up from 56.3, above expectation of 59.0, a 80-month high. PMI Composite rose to 60.0, up from 56.4, an 89-month high since November 2013.
Chris Williamson, Chief Business Economist at IHS Markit, said: “Companies are reporting a surge in demand for both goods and services as the economy opens up from lockdowns and the encouraging vaccine roll-out adds to a brighter outlook. In more than 23 years of PMI history, we have only seen one spell of faster growth than this, recorded between August and November 2013”.
Eurozone PMI Manufacturing rose to 63.3 in April, up from 62.5, above expectation of 62.0. That’s also a the highest level since record began in June 1997. PMI Services rose to 50.3, up from 49.6, above expectation of 49.1, an 8-month high. PMI Composite rose to 53.7, up from 53.2, a 9-month high.
Chris Williamson, Chief Business Economist at IHS Markit said: “In a month during which virus containment measures were tightened in the face of further waves of infections, the eurozone economy showed encouraging strength. Although the service sector continued to be hard hit by lockdown measures, it has returned to growth as companies adjust to life with the virus and prepare for better times ahead. The manufacturing sector is meanwhile booming. Pent-up spending, restocking, investment in new machinery and growing optimism about the outlook have all helped fuel a further record surge in both output and new orders.”
Germany PMI Manufacturing dropped slightly to 66.4 in April, down from 66.6, above expectation of 65.9. PMI Services dropped to 50.1, down from 51.5, below expectation of 50.8. PMI Composite dropped to 56.0, down from 57.3.
Phil Smith, Associate Director at IHS Markit said: “The third wave of the pandemic has stifled progress in Germany’s service sector, with April ‘s flash PMI data showing activity close to stalling following the return to growth at the end of the first quarter. The country’s manufacturing sector remains on a strong footing, though even here the data show growth being held back by supply problems.
France PMI Manufacturing dropped to 59.2 in April, down form 59.3, above expectation of 59.0. PMI Services rose to 50.4, up from 48.2, above expectation of 44.0, hitting a 8-month high. PMI Composite rose to 51.7, up from 50.0, a 9-month high.
Eliot Kerr, Economist at IHS Markit said: “Latest PMI data pointed to the first increase in private sector activity since the end of the initial COVID-19 rebound last summer. The result was a continuation of the improved trend seen in recent months, but previously growth had remained elusive due to an ongoing decline in the service sector. However, with an expansion in services activity and another strong rise in manufacturing production during April, the French private sector finally managed to achieve growth.”
UK retail sales rose 5.4% mom in March, well above expectation of 1.50%. Ex-fuel sales rose 4.9% mom, above expectation of 1.3% mom. Over the year, headline sales rose 7.2% yoy, ex-fuel sales rose 7.9% yoy. The strongest growth was in clothing stores, other non-food stores and automotive fuel retailers of 17.5%, 13.4% and 11.1% respectively.
Bitcoin’s fall from 64828 accelerates lower today and breaches 50k handle. As noted in a previous post, a 5-wave terminal triangle has completed at the record high, which should mark a medium term top. We’re seeing the fall from there as correction to whole up trend from up trend from 4000 (Mar 2020).
Further decline is now expected as long as 57093 resistance holds. The correction should extend to 38.2% retracement of 4000 to 64828 at 41591, which is close to the top of prior range of 20283/41964. Some support could be seen there to set the medium term range.
Japan CPI core (all-item less fresh food) improved to -0.1% yoy in March, up from -0.4% yoy, above expectation of -0.2% yoy. But that’s still the eight straight months of negative reading. Further fall in core inflation is expected due to drag from mobile phone fee cuts. All-item CPI rose to -0.2% yoy, up from -0.4% yoy. CPI core-core (all-item less fresh food and energy) also ticked up to 0.3% yoy from 0.2% yoy.
Separately, BoJ Governor Haruhiko Kuroda told reiterated to the parliament, “when Japan’s inflation approaches our target, we will deliberate an exit strategy at our policy-setting meeting including details such as the timing and means for selling ETFs.” But for now, inflation remains distant from target.
Japan PMI Manufacturing rose to 53.3 in April up from 52.7, above expectation of 53.1. That’s the strongest reading since April 2018. PMI Services was unchanged at 48.3. PMI Composite ticked up from 49.9 to 50.2, returned to expansion for the first time since January 2020.
Usamah Bhatti, Economist at IHS Markit, said: “While some Japanese private sector businesses noted that a resurgence in COVID-19 cases could dampen prospects in the second quarter of the year, firms remained optimistic that overall business activity would improve in the coming 12 months. That said, there is concern the impact of the pandemic will be prolonged further.”
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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.