Australia unemployment rate dropped to 3.5%, lowest since 1974

    Australia employment grew 88.4k in June, above expectation of 30.0k. Full time jobs grew 52.9k while part-time jobs rose 35.5k. Unemployment rate dropped sharply from 3.9% to 3.5%, below expectation of 3.8%. That’s the lowest level since August 1974. Participation rate rose from 66.7% to 66.8%. Monthly hours worked was essentially unchanged at 1856m.

    Bjorn Jarvis, head of labour statistics at the ABS, said: “The 3.4 per cent unemployment rate for women was the lowest since February 1974 and the 3.6 per cent rate for men was the lowest since May 1976.”

    “The large fall in the unemployment rate this month reflects more people than usual entering employment and also lower than usual numbers of employed people becoming unemployed. Together these flows reflect an increasingly tight labour market, with high demand for engaging and retaining workers, as well as ongoing labour shortages.”

    Full release here.

    Japan PMI manufacturing finalized at 54.3 in Dec, confidence dipped

      Japan PMI Manufacturing was finalized at 54.3 in December, slightly lower than November’s 54.5. But that was well above 2021’s average of 52.7. Markit said output and new orders increased at slower rates. Employment level rose at fastest pace in nearly four years. Business optimism eased to four-month low.

      Usamah Bhatti, Economist at IHS Markit, said: “Domestic markets were buoyed by a gradual recovery from the COVID-19 pandemic however a sharp rise in cases, particularly in South Korea, hindered international demand and continued to disrupt supply chains across the sector… Delivery delays and material shortages remained a dampener on production and sales… Average lead times across the final quarter of 2021 deteriorated further… Though still optimistic, Japanese goods producers were wary of the continued impact of the pandemic and supply chain disruption, which resulted in confidence dipping to the softest since August.”

      Full release here.

      BoJ’s Ueda: Neutral rate estimation a unique challenge for Japan

        In a speech today, BoJ Governor Kazuo Ueda reiterated the central bank’s commitment to achieving sustainable and stable 2% inflation. He acknowledged the progress made in “moving away from zero” and “lifting inflation expectations,” but underscored the need to “re-anchor” them at 2%.

        Ueda stressed the importance of a cautious approach, aligning with other central banks that employ inflation-targeting frameworks. However, he highlighted that some challenges are “uniquely difficult” for Japan.

        A notable example is determining the “neutral interest rate,” a task complicated by Japan’s “prolonged period” of near-zero short-term interest rates over the past three decades. This historical context makes it particularly challenging to estimate the neutral rate accurately.

        Despite some fluctuations in real interest rates, the lack of significant interest rate movements remains a “considerable obstacle” for BoJ. This impedes their ability to assess the economy’s response to changes in interest rates effectively.

        Full speech of BoJ Ueda.

        EU Schinas: There are no offers when Juncker visits US

          European Commission spokesman Margaritis Schinas said in a news conference today that President Jean-Claude Juncker will not bring a trade offer to the US when he visits Washington on July 25. Schinas said “I do not wish to enter into a discussion about mandates, offers because there are no offers. This is a discussion, it is a dialogue and it is an opportunity to talk and to stay engaged in dialogue.”

          This is an echo of the comments by EU Trade Commissioner Cecilia Malmstrom last week. She said that the visit was to “try to establish a good relations, try to see how we can de-escalate the situation, avoiding it going further and see if there is a forum where we can discuss these issues.” She added that “we don’t go there to negotiate anything.”

          US Navarro: No indication of delay on tariffs on China

            There were rumors that US would delay the December 15 tranche of tariffs on USD 160B of Chinese imports, essentially all untaxed goods. But such speculations are so far not backed by comments from officials formally.

            White House Trade Adviser Peter Navarro said Tuesday that “it’s the president’s decision”. And, “I’ve got no indication that he’s going to do anything other than have a great deal or put the tariffs on.” He added, it’s up to Chinese as to wether to get a great deal. “Either way we’re going to be in a great place … The president loves them (the tariffs),”

            White House National Economic Council head Larry Kudlow warned that tariff increase remains in play for now. “The reality is that those tariffs are still on the table,” even though President Donald Trump has struck a “constructive and optimistic tone” on the progress.

            BoJ Kuroda: Important to underpin economic activity with powerful monetary easing

              BoJ Governor Haruhiko Kuroda told the parliament, “it’s important for currency rates to move stably reflecting economic and financial fundamentals… The recent sharp, short-term fluctuations in the yen are undesirable, as it heightens uncertainty and makes it harder for companies to set business plans.”

              “The economy is in the midst of a recovery and now faces headwinds from rising commodity prices,” Kuroda said. “It’s therefore important to underpin economic activity with powerful monetary easing.”

              Separately, Kuroda also said in a speech, “the coronavirus pandemic is a major risk that could further hurt Japan’s economy.” As such, “it’s appropriate to maintain … the dovish bias of our guidance for the time being.”

              “For inflation to heighten as a trend, Japan must see a shift from inflation caused by energy prices, to one that is driven by increasing corporate profits and wage growth,” he said.

              ECB Survey: Consumer inflation expectations for next tear rise to 3.3%

                ECB’s Consumer Expectations Survey for January showed that inflation expectations for the upcoming year have seen a slight uptick, increasing by 0.1% to 3.3%, while the forecast for three years ahead remains steady at 2.5%.

                On a more optimistic note, the survey indicates a slight improvement in expectations for economic growth over the next year. The mean expectation for economic growth has become less negative, adjusting from -1.3% to -1.1%.

                Furthermore, the expected mean unemployment rate for the next 12 months shows a slight decrease, moving from 10.8% to 10.6%.

                 

                US Treasury: Not contemplating blocking Chinese companies from listing at this time

                  US Treasury spokesperson Monica Crowley partially denied the report that US is considering to de-list some Chinese companies from US exchanges. She said in a statement that “the administration is not contemplating blocking Chinese companies from listing shares on U.S. stock exchanges at this time.”

                  The statement was in response to a Bloomberg report that White House economic adviser Larry Kudlow was leading deliberations regarding a potential “financial decoupling” of US and China. Options discussed included forced delisting of Chinese companies, imposition of investment in China by US government pension funds, and limits on value of Chinese companies in US managed indexes. However, it’s later said that the deliberations are at very early stage, without even a time line.

                  Separately, Reuters reported that Nasdaq is already cracking down on IPO s of small Chinese companies, by tightening restrictions and slowing down approvals. The new listing rules raised the average trading volume requirements for a stock. Additionally, Nasdaq could delay listing of a company that does not demonstrate a strong enough nexus to the US capital markets. While not being directly targeted, small Chinese IPOs have experienced longer waiting times and scrutiny.

                  BoC press conference live stream

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                    UK PMI construction dropped to 52.6, gloomy business outlook and worsening consumer demand

                      UK PMI Construction dropped from 56.4 to 52.6 in June, below expectation of 55.2. S&P Global noted that it’s the weakest rise in construction output since September 2021. House building declined for the first time since May 2020. Business optimism dropped for the fifth month running.

                      Tim Moore, Economics Director at S&P Global Market Intelligence, said: “The gloomy UK business outlook and worsening consumer demand due to the cost of living crisis combined to put the brakes on construction growth in June. Commercial construction saw a considerable loss of momentum as clients exercised greater caution on new spending, while long-term infrastructure projects ensured a relatively resilient trend for civil engineering activity.”

                      Full release here.

                      Little progress made at 7th Brexit talks

                        Little to no progress was made in at the seventh round of Brexit negotiations. EU’s chief negotiator Michel Barnier said “those who were hoping for negotiations to move swiftly forward this week will have bee disappointed and unfortunately I too am frankly disappointed and concerned, and surprised as well.”

                        Barnier further criticized, “the British negotiators have not shown any real willingness to move forward on issues of fundamental importance for the European Union and this despite the flexibility which we have shown over recent months.”

                        On the other hand, UK’s chief negotiator David Frost said, “substantive work continues to be necessary across a range of different areas of potential UK-EU future cooperation if we are to deliver it. We have had useful discussions this week but there has been little progress.”

                        Frost also blamed that “the EU is still insisting not only that we must accept continuity with EU state aid and fisheries policy, but also that this must be agreed before any further substantive work can be done in any other area of the negotiation, including on legal texts. This makes it unnecessarily difficult to make progress.”

                        Eurozone PMI manufacturing finalized at 47.1, welcome moderation in downturn intensity

                          Eurozone PMI Manufacturing was finalized at 47.1in November, up from October’s 46.4. Looking at some member countries, Ireland PMI Manufacturing was at 48.7 (30 mth-low), Italy at 48.4, Greece at 48.4, France at 48., Austria at 46.6, Germany at 46.2, the Netherlands at 46.0 (29-mth low), and Spain at 45.7. All were in contraction.

                          Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “The PMI signals some welcome moderation in the intensity of the eurozone manufacturing downturn in November, which will support hopes that the region many not be facing a winter downturn as severe as previously anticipated by many. However, the survey’s production index continuing to run at one of the lowest levels recorded over the past decade. At these levels the survey is indicative of a marked annualised rate of contraction of approximately 4%. While official manufacturing data have been more buoyant – and more volatile – in recent months, such weak PMI readings have always been followed by commensurate steep declines in the official statistics.”

                          Full release here.

                          ECB stands pat, declining trend in underlying inflation continues

                            ECB left monetary policy unchanged as widely expected. Main refinancing, marginal lending and deposit rates are held at 4.50%, 4.75%, and 4.00% respectively.

                            In the accompanying statement, ECB noted that incoming information has “broadly confirmed its previous assessment of the medium-term inflation outlook. “Aside from an energy-related upward base effect”, the declining trend in underlying inflation “has continued.

                            The central bank also maintained that current interest rates, “maintained for a sufficiently long duration”, will make substantial contribution to bringing down inflation to target. Future policy decisions will follow a “data-dependent approach” to determine both the level of duration of monetary restriction.

                            Full ECB statement here.

                            Japan industrial production contracted most since 2013 in Q4, despite Dec rebound

                              Japan industrial production grew 1.3% mom in December, beat expectation of 0.7% mom. However, in the three months of October-December, factory output has indeed contracted -4.0%. That was the worst decline since data began in 2013. The Trade Ministry also said “the pace of rebound (in Dec) was not big… we will closely monitor whether factory output will recover in coming months.” It also kept the assessment of production as weakening.

                              Retail sales dropped -2.6% yoy in December, down for a third straight month, and missed expectation of -1.8% yoy. Unemployment rate was unchanged at 2.2%, better than expectation of 2.3%. Housing starts dropped -7.9% yoy, versus expectation of -11.5% yoy. Tokyo CPI core slowed to 0.7% yoy in January, down from 0.8% yoy, missed expectation of 0.8% yoy.

                              France PMI composite rose to 56.2, Russia invasion intensified already existing issues

                                France PMI Manufacturing dropped from 57.2 to 54.8 in March, below expectation of 55.1. That’s also a 5-month low. PMI Services rose from 55.4 to 57.4, above expectation of 55.2, a 4-month high. PMI Composite rose from 55.5 to 56.2, an 8-month high.

                                Joe Hayes, Senior Economist at S&P Global said: “Services was the sole driver of March’s accelerated expansion as manufacturing output growth slowed sharply since February… Russia’s invasion of Ukraine has intensified already existing issues for businesses. According to survey respondents, the war has worsened the availability of certain inputs, generated hesitancy among some clients to place new orders, dented business confidence and exerted further considerable upward pressure on costs due to the impact on fuel, energy and commodity prices.”

                                Full release here.

                                US ISM manufacturing rose to 52.6, growth cycle returned

                                  US ISM manufacturing index rose to 52.6 in June, up from 43.1, beat expectation of 49.0. The index returned to expansion region above 50 after three months of contraction. Also, the 9.5 pts rise was the largest since August 1980. Looking at some details, new orders rose 24.6 pts to 56.4. Production rose 24.1 pts to 57.3. Employment rose 10.0 pts to 42.1. Prices rose 10.5 pts to 51.3.

                                  “As predicted, the growth cycle has returned after three straight months of COVID-19 disruptions. Demand, consumption and inputs are reaching parity and are positioned for a demand-driven expansion cycle as we enter the second half of the year, ” said Timothy Fiore, Chair of ISM Manufacturing Business Survey Committee:

                                  Full release here.

                                  SNB Jordan signals readiness for further policy tightening amid inflation concerns

                                    SNB Chairman, Thomas Jordan indicated yesterday that there might be a need to further tighten the monetary policy in Switzerland, signaling the bank’s unwavering commitment to keeping inflation in check.

                                    “Monetary policy is still not restrictive enough to anchor inflation in the area of price stability,” Jordan said. “We cannot exclude that we have to further tighten monetary policy.”

                                    Jordan pointedly noted, “If the inflation forecast is significantly above the area of price stability, then monetary policy is too loose.” This remark underscores the central bank’s resolve to use monetary policy levers to ensure that inflation doesn’t exceed the stability range.

                                    The chairman’s comments come on the heels of recent data showing that annual inflation in Switzerland edged down to 2.6% in April from 2.9% in March. While these figures are modest compared to many countries grappling with double-digit inflation rates, they still exceed SNB’s traditional definition of price stability.

                                    NZDUSD and NZDJPY spike lower after RBNZ cut, more downside ahead

                                      Both NZD/USD and NZD/JPY spike lower after RBNZ rate cut even though they quickly pare back some losses. For NZD/USD, breach of 0.6551 support further affirms a bearish case. That is, consolidation pattern from 0.6422 has complete with three waves to 0.6938. And, larger down trend from 0.7558 (2017 high) might be ready to resume. For now, near term outlook in NZD/USD will stay bearish as long as 0.6629 resistance holds. 0.6422 low is next target.

                                      NZD/JPY’s sharp fall solidifies that case that corrective rebound from 69.18 has completed at 76.78 already. Near term outlook will stay bearish as long as 0.7340 resistance holds. Deeper decline should be seen back to retest 69.18 low. However, this level is close to a key long term fibonacci level. That is 50% retracement of 44.19 (2009 low) to 94.01 (2014 high) at 69.18. We’ll pay attention to bottoming signal there.

                                       

                                      UK: A negotiated Brexit outcome is still our preference

                                        According to his spokesman, UK Prime Minister Boris Johnson was updated by chief Brexit negotiator David Frost that negotiations were still stuck over fisheries and level playing field competition guarantees. But the spokesman reiterated, “we look forward to hearing the outcome of the European Council and would reflect on that before setting out the UK’s next steps. We’ve always been clear that a negotiated outcome is our preference.”

                                        On the other, according to a draft of the EU summit conclusion, “the European Council invites the Union’s chief negotiator to continue negotiations in the coming weeks, and calls on the UK to make the necessary moves to make an agreement possible”.

                                        China’s Caixin PMI services dips to 52.5, weak expectations a major hurdle

                                          China’s Caixin PMI Services for April, while dipping slightly from 52.7 to 52.5 as expected, maintains a growth streak for the 16th consecutive month. The sector sees robust expansion in new business, marking its fastest pace in nearly a year. Business confidence also reaches its peak for the year so far. PMI Composite, which edged up from 52.7 to 52.8, reached its highest level since May 2023

                                          “The growth in supply and demand in the manufacturing and services sectors picked up pace, with outstanding export growth,” notes Wang Zhe, Senior Economist at Caixin Insight Group. However, Wang cautions, “the pressure on the job market should not be overlooked,” with employment metrics experiencing a sharper decline compared to the previous month.

                                          Furthermore, Wang highlights the persistent challenges in pricing dynamics, stating that “input and output prices remained relatively low, particularly due to the drag from manufacturing factory gate prices.”

                                          Wang noted, “Weak expectations remain one of the major hurdles facing economic development, leading to increasing pressure on employment and a greater risk of deflation.”

                                          Full China Caixin PMI services release here.