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New Zealand retail sales dropped -8.1% qoq in Q3, 12 of 15 industries down

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    ActionForex.com
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    New Zealand retail sales dropped -8.1% qoq in Q3, better than expectation of -10.2% qoq. Ex-auto sales dropped -6.7% qoq, also better than expectation of -7.6% qoq.

    Twelve of the 15 industries had lower sales volumes. By industry, the largest movements were: Food and beverage services – down -19%; Motor vehicle and parts retailing – down -12%; Department stores – down -24%; Hardware, building, and garden supplies – -down 15%.

    The Auckland region dominated the national fall with a record decrease of -15% (1.5 billion), compared with the 6.2% ($618 million) rise in the June 2021 quarter.

    Full release here.

    RBA’s Bullock highlights inflation persistence and demand-supply imbalance

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      In today’s Senate Estimates appearance, RBA Governor Michele Bullock underscored the “persistent” nature of inflationary pressures within the Australian economy.

      She pointed out the crucial distinction between demand growth rates and overall demand levels, emphasizing “growth rates are slowing, but aggregate demand is still above aggregate supply, and that’s what’s generating inflationary pressures.”

      Bullock remained optimistic about RBA’s ability to manage inflation effectively without jeopardizing employment growth. “We think we’re in a good position to get inflation down in a reasonable amount of time while still keeping employment growing,” she noted.

      BoE, FCA and CFTC announced measures to ensure continuity of derivatives trading and clearing post-Brexit

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        Bank of England, UK’s Financial Conduct Authority and US Commodity Futures Trading Commission announced measures today to ensure Brexit, in whatever form “will not create regulatory uncertainty regarding derivatives market activity between the UK and US”. Measures include continued supervisory co-operation, extension of existing CFTC relief to EU firms to UK after Brexit. Also, US trading venues, firms and CCPs will be able to continue providing services in the UK.

        In a joint statement, BoE Governor Mark Carney said “As host of the world’s largest and most sophisticated derivative markets, the US and UK have special responsibilities to keep their markets resilient, efficient and open.

        “The measures we are announcing today will do that. Market participants can be confident that the clearing and trading of derivatives between the UK and US will maintain the high standards of today when the UK leaves the EU”.

        Carney also warned that “The biggest issue from a financial stability perspective, from a market integrity perspective, from a continuity perspective, is a no-deal scenario by the end of March.”

        Full statement here.Full statement here.

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        Chinese Yuan selling picks up after market close

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          The Chinese Yuan suffers renewed selling after the market came back from holiday and closed. China Shanghai SSE closed down -3.72% at 2716.51after selling pressured increased in the afternoon. USD/CNH (offshore Yuan), is currently up 0.5% at 6.9229. the choppy rise from 6.7776 will very likely extend to retest 6.9586 high.

          But for now, we don’t yet see enough momentum to get through 6.9586 to resume the up trend from 6.2358.

          Japan’s PPI slows to 2% yoy in Sep, trailing CPI core for the first time since 2021

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            Japan PPI slowed from 3.3% yoy to 2.0% yoy in September, below expectations of 2.3%. That’s the lowest level since March 2021. Also, PPI is now below CPI core (at 3.1% yoy) for the first time since early 2021.

            Import price index was unchanged at -15.6% yoy, the sixth month of decline. Export price index rose for the first time in seven months, up 0.2% yoy, comparing to prior month’s -0.7% yoy.

            For the month, PPI fell -0.3% mom. Import price index rose 0.6% mom. Export price index rose 0.5% mom.

            Full Japan PPI release here.

            BoE Saunders concerned with continuing with asset purchases

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              BoE hawk Michael Saunders said he believed that the economy was now close to the pre-pandemic level. He’s worried that continuing with the asset purchase program would cause rise in medium-term expectation.

              “I also worry that continuing with asset purchases, when CPI inflation is 4% and the output gap is closed – that is the likely situation later this year – might well cause medium-term inflation expectations to drift higher,” he said.

              “Such an outcome could well require a more substantial tightening of monetary policy later, and might limit the committee’s scope to respond promptly the next time the economy needs more stimulus,” he added.

              German ZEW rose to -12.3, but current situation dived

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                August’s ZEW Economic Sentiment Index for Germany showed an unexpected improvement, moving from -14.7 to -12.3, beating forecasted -15. However, the Current Situation index took a hit, declining sharply from -59.5 to -71.3—its lowest since October 2022 and below the predicted -63.

                Conversely, Eurozone’s ZEW Economic Sentiment took an optimistic turn, rising from -12.2 to -5.5, surpassing expected -12. Current Situation Index in the Eurozone also advanced, marking a rise of 2.3 points to -42.0.

                ZEW President Professor Achim Wambach commented on the mixed results, noting, “The ZEW Indicator of Economic Sentiment remains in negative territory” but added that there’s an anticipated “slight uptick in the economic situation by year-end.”

                However, he cautioned against over-optimism due to Germany’s worsening current economic assessment. Highlighting external influences, Wambach mentioned that the prevailing sentiment suggests no further “interest rate hikes in the eurozone and the United States.” He also pointed out a “significant increase” in US economic outlook, which positively impacts Germany’s prospects.

                Full German ZEW release here.

                Japan tankan capex surged, PMI manufacturing improved

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                  ActionForex.com
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                  Economic data released from Japan today are not bad. Based on the results of the Tankan survey, it’s unlikely for BoJ to ease monetary further. Yet, it’s not time for the central bank to start stimulus exit too.

                  • Large manufacturing index was unchanged at 19 versus expectation of a drop to 17.
                  • Large manufacturing outlook dropped notably by -4 to 15, missed expectation of 16.
                  • Large non-manufacturing index rose 2pts to 24, above expectation of 21.
                  • Large non-manufacturing outlook also rose 2pts to 24, above expectation of 20.
                  • Large all industry capex rose 14.3% in Q4, beat expectation of 12.7%.

                  PMI manufacturing improved to 52.4, up from 52.2 and beat expectation of 52.3. Markit noted that “new order growth accelerates despite exports declining to sharpest extent in over two years”. However, “business confidence drops for seventh straight month to lowest since October 2016”.

                  Joe Hayes, Economist at IHS Markit, said in the release that “Japan’s manufacturing sector closed 2018 with a strong finish.” But the data also “bring some cautious undertones to the fore,”. In particular “Export orders declined at the fastest pace in over two years, while total demand picked up only modestly. Confidence also continued to fall, a seventh straight month in which this has now occurred.” He added “the prospects heading into 2019 ahead of the sales tax hike still appear skewed to the downside.”

                  Fed Kaplan prefers to avoid further actions on interest rates

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                    Dallas Fed President Robert Kaplan said he’d like to “avoid having to take further action” on interest rates. Though, he’s going to “have an open mind about taking action over the next number of months if we need to.”

                    He added “even though the consumer is very strong and a key underpinning to the economy, manufacturing sector is weak and probably weakening and global growth decelerating is probably finding its way to seep into the U.S. economy.” There are “downside” risks to Fed’s GDP growth forecast of 2% this year.

                    Regarding yield curve inversion, Kaplan said “I’m more focused on the fact that the whole curve has moved down over the last three and a half months and the Fed funds rate at two to two and a quarter is now above every rate along the curve which to me is a bit of a reality check that says it’s possible our monetary policy stays a little tighter than I would have thought three or four months ago.”

                    ECB Kazaks see significant rate increases at Feb and Mar meetings

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                      ECB Governing Council member Martins Kazaks said yesterday, “in the next two meetings I think we can still do quite large steps” on interest rates.

                      “Of course the steps may become smaller as necessary as we find the level appropriate to bring the inflation down to 2%,” he added.

                      “Currently I would see that at the February and March meetings we will have significant rate increases,” he said.

                      ECB Vasle: TLTRO keeps favorable financing conditions and supports transmission of monetary policy

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                        ECB Governing Council member Bostjan Vasle said the biggest risks for Eurozone growth is that worsening global condition could slow trade. However, the current favorable financing conditions and robust domestic demand will support Eurozone economy.

                        He emphasized that “it is of key importance that the instrument (TLTRO) keeps favorable conditions of financing for banks and thus supports transmission of monetary policy into banks’ credit activity”. Also ECB stand ready to use “other available measures” if needed.

                        Vasle also noted that persistent low inflation is a result of moderation in growth, weaker energy prices and lower wage pressures. He said “the council of governors has responded to these movements by adjusting its decrees with a purpose of ensuring the necessary accommodation line of its monetary policy also in worsened conditions.”

                        Separately, another Governing Council member Vitas Vasiliauskas said inflation outlook is “not bad”. And, the council still needs time to see however the economy developments in the second half of the year. Also a Governing Council member, Ewald Nowotny said there is no risk of recession, just a slowdown.

                        NZD/JPY resumed up trend after brief consolidation, targeting 77.07

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                          ActionForex.com
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                          NZD/JPY’s up trend resumed after brief consolidations, following broad based risk-on sentiment. Outlook stays bullish as long as 73.78 support holds, even in case of retreat. Next target is 100% projection of 63.45 to 71.66 from 68.86, at 77.07. As the current rally could be the end of a five wave sequence from 59.49, we’d look for topping signal around 77.07.

                          BoJ Kuroda suggests no imminent easing in emergency statement

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                            ActionForex.com
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                            BoJ Governor Haruhiko Kuroda issued a rare emergency statement today, warning of the spread of the Wuhan coronavirus. He said, “Overseas and domestic financial markets continue to make unstable movements due to heightening uncertainty over the impact on the economy from the spread of the coronavirus. The BOJ will monitor developments carefully, and strive to stabilize markets and offer sufficient liquidity via market operations and asset purchases.”

                            The statement argues that BoJ would use the current tools to counter the impact of coronavirus outbreak first. That is, focuses will be on market operations and liquidity. Apparently, further monetary easing is not seen as an imminent step that BoJ would take.

                            Eurozone Sentix rose to 14.9 in Jan, fundamentally constructive outlook with an Achilles’ heel

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                              Eurozone Sentix Investor Confidence rose from 13.5 to 14.9 in January, above expectation of 12.0. Current Situation Index rose from 13.3 to 16.3. Expectations Index dropped slightly from 13.8 to 13.5.

                              Sentix said, “our fundamentally constructive outlook for the economy in 2022 (especially the first half of the year) has an Achilles’ heel: The support of expansive central banks is threatening to run out faster than expected.

                              “The sentix topic barometer ‘Central Bank Policy’ indicates an increasing burden for the bond market and thus for the real economy. The burden on this is estimated to be greater than in 2018, when the monetary guardians also adopted a more restrictive course.

                              “Fiscal balancing impulses must therefore be put in place swiftly to cushion the weakening monetary impetus from the central banks.”

                              Full release here.

                              EU Moscovic: G20 in Osaka maybe an important moment for US-China trade resolution

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                                European Economic and Financial Affairs Commissioner Pierre Moscovic said the “road map” is set for G20 to go with “intensified” global trade tension. The two things include ” reforming the World Trade Organization” and “finding bilateral solutions”. Moscovic said G20 members “expect the United States and China to find a way to get to an agreement. Maybe the Osaka summit will be an important moment for that.”

                                Over the weekend, G20 Finance Ministers the Central bank Governors said in the post-meeting communique that “trade and geopolitical tensions have intensified.” The group pledged to “continue to address these risks, and stand ready to take further action.” However, the originally proposed language of “recognize the pressing need to resolve trade tensions” was dropped.

                                BoE Bailey: The Bank will act as necessary to deliver the monetary and financial stability

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                                  BoE Governor Andrew Bailey pledged that “however the economic outlook evolves, the Bank will act as necessary to deliver the monetary and financial stability that are essential for long-term prosperity and meet the needs of the people of this country.” That is the central bank’s “total and unwavering commitment” to safeguard the UK economy during the current coronavirus crisis.

                                  He also noted that the central bank is “not out of monetary policy tools”. It’s appropriate to continues with “aggressive pace” of QE for the moment. Further, there will be another MPC meeting “before getting anywhere near completion of the QE program”. But, “it’s about what is the appropriate response and what information, news, we think we’re going to get in the quite near future.”

                                  Bailey’s comment affirmed markets’ views that BoE is on a wait-and-see approach for the moment. He left the door open for more easing if situations don’t improve over Q2.

                                  Eurozone industrial production rose 0.4% mom, above expectation of 0.3% mom

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                                    ActionForex.com
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                                    Eurozone industrial production rose 0.4% mom in August, above expectation of 0.3% mom. Annually, Eurozone industrial production dropped -2.8% yoy. Production of capital goods rose by 1.2% mom and intermediate goods by 0.3% mom, while production of non-durable consumer goods fell by -0.3% mom, and durable consumer goods and energy by -0,4% mom.

                                    EU28 industrial production came in at 0.1% mom, -2.0% yoy. Among Member States for which data are available, the highest increases in industrial production were registered in Malta (5.6% mom), Estonia (3.9% mom) and Latvia (3.0% mom). The largest decreases were observed in Croatia (-3.0% mom), Slovakia (-2.6% mom) and Lithuania (-2.4% mom).

                                    Full release here.

                                    US ISM manufacturing rose to 60.2 despite trade war threat

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                                      ActionForex.com
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                                      US ISM manufacturing index rose to 60.2 in June, up from 58.7 and beat expectation of 57.9. Prices paid component dropped to 76.8, down from 79.5 and missed expectation of 78.2. Employment component dropped to 56.0, down from 56.3.

                                      Some quotes from the respondents:

                                      • “U.S. tariff policy and lack of predictability, along with [the] threat of trade wars, [is a] causing general business instability and [is] drag on growth for investments.” (Electrical Equipment, Appliances & Components)
                                      • “We export to more than 100 countries. We are preparing to shift some customer responsibilities among manufacturing plants and business units due to trade issues (for example, we’ll shift production for China market from the U.S. to our Canadian plant to avoid higher tariffs). Within our company, there is a sense of uncertainty due to potential trade wars.” (Food, Beverage & Tobacco Products)
                                      • “The Section 232 steel tariffs are now impacting domestic steel prices and capacity. Base steel prices have already increased 20 percent since March.” (Fabricated Metal Products)
                                      • “The economy and product demand still continue to be strong. Having trouble finding people [to fill] blue collar positions. Lead times for parts and materials are moving out, and we are seeing commodity cost pressures increases with the threat of tariffs. Additionally, suppliers are asking for more price increases.” (Machinery)
                                      • “The uncertainty of U.S. tariffs and the Canada/Mexico/E.U. retaliatory tariffs continues to cloud strategic planning efforts. Contingency planning (for tariffs) is consuming large amounts of manpower that could be used for more productive projects. The tariffs are improving margins in our raw material businesses; however, our businesses which are further up the supply chain are seeing significant inflation.” (Miscellaneous Manufacturing)
                                      • “The steel tariffs continue to drive uncertainty. Projects and services using steel have limited days that prices are good for. Trucking is tight, requiring advanced planning and increasing costs.” (Paper Products)

                                      Full ISM manufacturing index release here.

                                      Eurozone PPI down -0.8% mom, -10.6% yoy in Dec

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                                        ActionForex.com
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                                        Eurozone PPI was down -0.8% mom, -10.6% yoy in December, versus expectation of -0.8% mom, -10.6% yoy. For the month, industrial producer prices decreased by -2.3% mom for energy and by -0.3% mom for intermediate goods, while prices remained stable for both capital goods and durable consumer goods, and prices increased by 0.1% mom for non-durable consumer goods. Prices in total industry excluding energy decreased by -0.1% mom.

                                        EU PPI was down -0.9% mom, -10.0% yoy. The largest monthly decreases in industrial producer prices were recorded in Ireland (-12.0%), the Netherlands (-1.8%) and Estonia (-1.4%), while increases were observed in Greece (+1.0%), Belgium (+0.5%), Cyprus and Luxembourg (both +0.3%) as well as in France (+0.1%).

                                        Full Eurozone PPI release here.

                                        Australia NAB business confidence hit 2-year low, but business condition rebounded

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                                          Australia NAB Business Confidence dropped to 4 in August, down from 7and missed expectation of 5. That’s a two year low since August 2016, and it’s below long-run average. Confidence is lowest in wholesale and manufacturing, highest in mining and construction. And, confidence declined across all states except Western Australia and Queensland in the month, with New South Wales and Victoria continue to lag.

                                          However, Business Condition rose to 15, up from 12 and matched expectations. Results were driven by increases in the profitability and trading indices. Forward looking indicators also rebounded a little in the month. Surveyed price and wage variables continue to show a gradual building of inflationary pressures.

                                          Full release here.

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