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Japan GDP suffered worst contraction in 6 years, sentiments pessimistic

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    ActionForex.com
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    Japan GDP contracted -1.6% qoq in Q4, much worse than expectation of -0.9% qoq. In annualized term, GDP contracted -6.3%, biggest contraction in six years. Looking at some details, private consumption dropped -2.9% in response to the sales tax hike in October. Capital expenditure dropped -3.7%. External demand contributed to 0.5% point to GDP growth, in sufficient to offset -2.1% negative contribution from domestic demand. With impact from China’s coronavirus outbreak, contraction might extend into Q1, making it a technical recession.

    Outlook is pessimistic too based on a Reuters survey that tracks BoJ’s Tankan. The Reuters Tankan manufacturer sentiments index rose from -6 to -5 in February. Services index rose from 14 to 15. Business confidence is not too much lifted by the US-China trade deal. The government might be forced to launch another around of fiscal stimulus soon to support growth.

    China coronavirus deaths hit 1770, PBoC cut 1-yr MLF rate

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      ActionForex.com
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      According to China’s National Health Commission, on February 16, confirmed coronavirus cases in the country rose 2048 (comparing to 2009 on February 15), to 70548. Death tolls rose 105 (comparing to 142 a day ago) to 1770. Health officials said on Sunday that two days of decline in new confirmed cases affirmed the government’s effort in containing the outbreak. But data released today clearly disagree to the claim.

      Outside of China, Japan is hardest hit with over 400 cases, mainly due to the numbers in Diamond Princess liner. Singapore (75 cases) and Hong Kong (57) follow. Death toll reached 5 with one new case in Taiwan over the weekend.

      China’s central bank PBoC announced today to cut interest rate on its medium term loans to cushion the impact on the economy from the Wuhan coronavirus outbreak. Rate of CNY 200B worth of one-year medium-term lending facility loans is lowered by 10bps to 3.15%. Also, CNY 100B of liquidity is injected to financial institution through reverse repos. Today’s move is believed to pave the way for a cut in the benchmark loan prime rate on Thursday.

      US retail sales rose 0.3%, ex-auto sales rose 0.3%

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        ActionForex.com
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        US retail sales rose 0.3% to USD 529.8B in January, matched expectations. Ex-auto sales rose 0.3% mom, below expectation of 0.4% mom. Ex-gasoline sales rose 0.3% mom. Ex-auto, ex-gasoline sales rose 0.4% mom.

        Import price index rose 0.0% mom in January, above expectation of -0.2% mom.

        Eurozone GDP grew 0.1% qoq in Q4, employment rose 0.3% qoq

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          ActionForex.com
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          Eurozone GDP grew 0.1% qoq in Q4, matched expectations. Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 0.9% yoy. EU 27 GDP grew 0.1% qoq, 1.2% yoy.

          Eurozone employment grew 0.3% qoq above expectation of 0.1% qoq. EU 27 employment grew 0.2% qoq.

          Full release here.

          German GDP stalled in Q4, mixed signals in domestic demand

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            ActionForex.com
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            Germany GDP was flat in Q4, below expectation of 0.1% qoq. For the year of 2019, the economy grew 0.6%, both price and seasonally adjusted.

            Statistisches Bundesamt said there were “mixed signals” regarding domestic demand. Both final consumption expenditure of both households and government “slowed down markedly” after a strong Q3. On the other hand, trends “diverged” for fixed capital formation. Foreign trade slowed down the economy, with exports slightly down on the quarter while import increased.

            Full release here.

            New Zealand BusinessNZ PMI rose to 49.6, relatively decent in context of global ructions

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              ActionForex.com
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              New Zealand BusinessNZ Performance of Manufacturing Index rose 0.4 to 49.6 in January, staying in contraction region. BNZ Senior Economist, Craig Ebert said that “in the context of the latest global ructions – this time related to the COVID-19 virus – January’s PMI could arguably be read as a relatively decent outcome. At the same time, it is surely too early for the PMI to capture the economic consequences of the virus”.

              Full release here.

              China’s coronavirus cases rose 5090 to 63851

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                ActionForex.com
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                Market sentiments stabilized in Asian markets today. China’s Hubei province reported just 4823 additional confirmed coronavirus cases. The figure suggests that yesterday’s massive 15000 new cases was just a one-off due to change in counting methods. Total cases in China rose 5090 to 63851. Death tolls rose 121 to 1380 with 108 cases removed due to double-counting.

                IMF spokesman Gerry Rice said there’s “a lot of uncertainty” regarding China’s Wuhan coronavirus outbreak, and “it’s fast moving”. It’s too early to gauge the impact of the Chinese and global economy. IMF would hope to have more insights when G20 meet in Saudi Arabia at the end of next week.

                Nevertheless, he added, “over the medium to long term we remain confident that China’s economy is resilient. “It’s a large economy, and China has the resources and the resolve to meet this challenge.”

                BoJ Maeda: Economy suffered big contraction in Q4

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                  ActionForex.com
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                  BoJ Executive Director Director Eiji Maeda said Japan’s economy have suffered a “big contraction” in Q4 due to sales tax hike and sluggish global demand. But he maintained that the “economy is expected to continue expanding moderately as a trend, thanks to robust capital expenditure and government spending. He also warned that “we need to be vigilant against various risks such as the impact the coronavirus outbreak could have on output and spending by inbound tourists”.

                  The government announced today to spend JPY 10.3B from budget reserves to ease the impact from China’s coronavirus. Finance Minister Taro Aso said the government was ready to take additional steps depending on how big the impact from the outbreak could be. Economy Minister Yasutoshi Nishimura also said the economy was expected to pick up but the coronavirus outbreak could pose a risk to growth.

                  Fed Williams: 2020 growth about the same as last year

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                    ActionForex.com
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                    New York Fed President John Williams said the three rate cuts last week “positioned us well to keep the economy growing above trend”. The economy is in a “very, very good place” and he expected 2020 growth would be “about the same” as the 2.25% last year. Also he sees inflation picking back up to close to 2%.

                    Nevertheless, some risks persist including ongoing global slowdown, persistently low inflation, as well as the Wuhan coronavirus outbreak in China.

                    US CPI accelerated to 2.5%, core CPI unchanged at 2.2%

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                      ActionForex.com
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                      US headline CPI accelerated to 2.5% yoy in January, up from 2.3% yoy, matched expectations. CPI core was unchanged at 2.3% yoy, beat expectation of 2.2% yoy.

                      Full release here.

                      US initial jobless claims rose 2k to 205k

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                        ActionForex.com
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                        US initial jobless claims rose 2k to 205k in the week ending February 8, better than expectation of 210k. Four-week moving average of initial claims was unchanged at 212k.

                        Continuing claims dropped -61k to 1.698m in the week ending February 1. Four-week moving average of continuing claims dropped -17.5k to 1.727m.

                        Full release here.

                        Sterling surges as Javid resigns as Chancellor of Exchequer

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                          ActionForex.com
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                          Sajid Javid surprisingly resigns as UK Chancellor of Exchequer today. He’s expected to be replaced by Rishi Sunak, the chief secretary to the Treasury. The Guardian said that Javid was asked by Prime Minister Boris Johnson to “fire all his special advisers and replace them with No 10 special advisers to make it one team”. Javid believed that “no self-respecting minister would accept those terms.”

                          Sterling responds positively to the news though. Instead of viewing it as some political uncertainty, markets see that Johnson is gaining more control over the cabinet, and thus creating more certainty for the country. EUR/GBP is now heading for a test on 0.8276 low as current decline accelerates.

                          EU keeps Eurozone 2020, 2021 GDP forecast unchanged, raises inflation projection slightly

                            By
                            ActionForex.com
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                            European Commission kept Eurozone GDP growth forecast unchanged at 1.2% in both 2020 and 2021. Eurozone inflation forecasts is raised by 0.1% in both 2020 and 201, to 1.3% and 1.4% respectively. For the EU as a whole, GDP forecast was also left unchanged at 1.4% in both 2020 and 2021. EU inflation forecast was also raised by 0.1% to 1.5% in 202, but 2021 projection remains unchanged at 1.6%.

                            Valdis Dombrovskis, Executive Vice-President, said, “Despite a challenging environment, the European economy remains on a steady path, with continued job creation and wage growth. But we should be mindful of potential risks on the horizon: a more volatile geopolitical landscape coupled with trade uncertainties.”

                            Paolo Gentiloni, European Commissioner for the Economy, said: “The outlook for Europe’s economy is for stable, albeit subdued growth over the coming two years. This will prolong the longest period of expansion since the launch of the euro in 1999, with corresponding good news on the jobs front… But we still face significant policy uncertainty, which casts a shadow over manufacturing. As for the coronavirus, it is too soon to evaluate the extent of its negative economic impact.”

                            Full release here.

                            ECB de Cos: Coronavirus keeps balance of risks to downside

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                              ActionForex.com
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                              ECB Governing Council member Pablo Hernandez de Cos said monetary policy will remain highly accommodative for a prolonged period of time.

                              But he also warned that “low-for-long interest rate environment could be encouraging excessive risk-taking by some financial intermediaries.” In particular, “asset valuations appear stretched in several advanced economies in markets such as equity, high-yield debt, and property markets.

                              Meanwhile, China’s Wuhan coronavirus “does keep balance of risks to downside.” Also, “Brexit entails significant risk of further fragmentation, as some companies may relocate to different financial centres.

                              Hawkesby: RBNZ has genuine neutral bias, rates could stay low for a long time

                                By
                                ActionForex.com
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                                RBNZ Assistant Governor Christian Hawkesby said in a Bloomberg interview that the central bank has a “genuine neutral bias” on rates, and “a genuine openness about where things go from here.” For now, “we can stay on hold, keep rates low for a long time”.

                                Regarding the impact of China’s coronavirus outbreak, disruptions to New Zealand economy could last just six weeks and save only 0.3% off Q1 growth. “If things are a lot worse, then the projections will look different and the policy response will look different,” he said. “At the moment the markets are probably more relaxed than they were earlier in the month. But equally we know that it’s asymmetric. If the median is six weeks it can’t be a whole lot shorter than that but it could be quite a lot longer.”

                                On the idea of rate hike, RBNZ is currently adopting a wait and see approached. He said, “When you’re in a period when there is no spare capacity left and we haven’t had inflation below target for a long time then you are in an environment where it’s safer to start lifting interest rates. We’re not close to that time. We’ve still got a long period when we can wait and watch.”

                                RBA Lowe: Global interest rates to stay low for years, if not decades

                                  By
                                  ActionForex.com
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                                  RBA Governor Philip Lowe said today, “it is quite likely that we are going to be in this world of low interest rates for years, if not decades, because it is driven by structural factors.” For now, he added that RBA is not “obsessed” with getting inflation back to 2-3% target in a hurry.

                                  Lowe repeated the central bank’s recent decision regarding balancing the risk of more monetary stimulus. “We’re conscious in our interest rate decisions that when we cut interest rates from cyclical perspectives it encourages people to borrow even more from an already high level of debt because of these structural reasons,” he said. “It’s a consideration in our decisions at the moment.”

                                  Lowe also urged more from the government to help the economy. “We have not had any fiscal stimulus in Australia,” he said. “I would like to see both business and government use the opportunity to make investments. Australian governments and business can borrow at the lowest rates of since Australia became a federation.”

                                  Wuhan coronavirus death tolls jumped 242 in Hubei, provincial party secretary replaced

                                    By
                                    ActionForex.com
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                                    According to health officials in China’s Hubei province, coronavirus death tolls surged by a record 242 on February 12, bringing total deaths in the province to 1310. A massive 14840 new confirmed cases were also reported in Hubei alone, dwarfing the 2015 cases reported for February 11 throughout whole of China. The surge in numbers were said to be due to new counting methods. Excluding cases confirmed using the new methods, the number of new cases rose by only 1,508 in the province.

                                    The new reporting system created much confusions and raised questions on transparency again. Meanwhile, at the time of writing, there is no update from the National Health Commission on country-wide numbers of the Wuhan coronavirus yet, which is very unusual.

                                    Separately, Jiang Chaoliang, Chinese Communist Party’s Hubei provincial secretary, is relieved of duty by the central committee. Shanghai Mayor Ying Yong is appointed as replacement.

                                    OPEC slashes global oil demand growth on China’s coronavirus

                                      By
                                      ActionForex.com
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                                      In the latest monthly report published today, OPEC sharply lower 2020 global oil demand growth to 0.99m barrels per day, down -0.23m bpd from the estimate released a month ago.

                                      The report warned, “the impact of the Coronavirus outbreak on China’s economy has added to the uncertainties surrounding global economic growth in 2020, and by extension global oil demand growth in 2020.”

                                      And, “clearly, the ongoing developments in China require continuous monitoring and assessment to gauge the implications on the oil market in 2020.”

                                      Eurozone industrial production dropped -2.1%, EU 27 dropped -2.0%

                                        By
                                        ActionForex.com
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                                        Eurozone industrial production dropped sharply by -2.1% mom in December, much worse than expectation of -0.4% mom. In the month, production of capital goods fell by- 4.0%, intermediate goods by -1.7%, non-durable consumer goods by -1.3%, durable consumer goods by -1.1% and energy by -0.5%.

                                        EU27 industrial production dropped -2.0% mom. Among Member States for which data are available, the largest decreases in industrial production were registered in Ireland (-6.2%), Hungary (-3.8%) and Poland (-3.0%). The highest increases were observed in Denmark (+7.2%), Portugal (+2.9%) and Greece (+2.5%).

                                        Full release here.

                                        S&P Global: China’s coronavirus to drag Eurozone, UK and US growth

                                          By
                                          ActionForex.com
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                                          S&P Global estimated that China’s coronavirus outbreak could drag Eurozone and UK growth by -0.1% to -0.2% this year. The impact will likely be felt mostly in Q1 though. It noted, “a large share of economic activity hindered by the outbreak of the virus, especially goods production, would just be postponed rather than canceled altogether.” However, “if a catch-up effect materializes, the economic outlook for 2021 could even be slightly higher than our current baseline forecast of 1.2%.”

                                          The agency’s US chief economist also warned that “most of the drag on U.S. growth to be in the first quarter, with a smaller hit in the second quarter and a rebound in the latter half.” And, “along with the potentially devastating human toll, if the virus spreads further and lasts longer, the impact on virtually every economy could be far worse,.” US GDP growth in Q1 could be dragged to just 1% annualized, from previous forecasts of 2.2%.

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