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US-China trade talks concluded after a “good few days”

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    ActionForex.com
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    US and China delegations ended the prolonged three-day trade negotiation meeting in Beijing with some positive signs. Ted McKinney, U.S. Under Secretary of Agriculture for Trade and Foreign Agricultural Affairs, said there were a “good few days” in China, and the meeting “went just fine”. He added that “It’s been a good one for us.”

    Chinese Foreign Ministry spokesman Lu Kang said “extending the consultations shows that the two sides were indeed very serious in conducting the consultations.”

    German ZEW dropped to 39 in Nov, worries over recession

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      ActionForex.com
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      German ZEW Economic Sentiment dropped to 39.0 in November, down from 56.1, slightly below expectation of 40.0. Current Situation index dropped to -64.3, down form -59.5, slightly above expectation of -65.0. Eurozone ZEW Economic Sentiment dropped to 32.8, down from 52.4, missed expectation of 43.3. Current Situation indicator rose slightly by 0.2 pts to -76.4.

      ZEW President Achim Wambach: “Financial experts are concerned about the economic impact of the second wave of COVID-19 and what this will entail. The ZEW Indicator of Economic Sentiment has therefore once again significantly decreased in November, indicating a slowdown of economic recovery in Germany. There is also the additional worry that the German economy could head back into recession. According to the assertions made by the experts, neither the Brexit negotiations nor the outcome of the US presidential election currently are having an impact on the economic expectations for Germany.”

      Full release here.

      NIESR forecasts 1.0% growth in UK GDP in Q1

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        ActionForex.com
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        NIESR forecast growth of 1.0% in UK GDP in Q1. It said that economic impact of Omicron was “far smaller than” previous two waves. The -0.2% fall in December GDP was also better than consensus forecasts, suggesting the “possibility of a positive reading in January.

        “The economic impact of Omicron was far smaller than that of either of the two previous major waves of Covid-19: a mere 0.2 per cent fall in December was even stronger than consensus forecasts, but in line with NIESR’s January GDP tracker, suggesting the possibility of a positive reading in January. Unsurprisingly, retail and hospitality contributed the most to December’s fall, with the healthcare sector providing the largest positive contribution.” – Rory Macqueen Principal Economist, NIESR

        Full release here.

        Eurozone PMIs: Overall growth remains subdued, pace restricted by uncertainty and risk aversion

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          ActionForex.com
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          Eurozone PMI Manufacturing rose to 47.8 in June, up from 47.7 but missed expectation of 48.0. It’s also staying well below 50 level. PMI Services rose to 53.4, up from 52.9 and beat expectation of 53.0. It’s the highest level in 7 months. PMI Composite rose to 52.1, up from 51.8, also the highest in 7 months.

          Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

          “The eurozone economy picked up further momentum in June, with the headline PMI rising from the lows seen earlier in the year to hint that the worst of the current slowdown may be behind us. However, the overall rate of expansion remains weak, with the survey data indicative of eurozone growth of just over 0.2% in the second quarter.

          “However, growth trends between the core and the periphery have widened. Germany and France are both showing improved performances compared to earlier in the year as one-off factors (such as the political unrest in France) continue to drop out of the picture, but the data highlight a growing concern that the rest of the region is sliding closer towards stagnation.

          “Growth also remains very much dependent on the service sector, which in turn largely reflects the relative strength of domestic consumer demand and improving labour markets. Manufacturing, in contrast, remains in a steep downturn which is only showing tentative signs of moderating.

          “The overall rate of growth consequently remains subdued, and a further deterioration in business confidence about the year ahead suggests the pace of expansion will continue to be restrained by uncertainty and risk aversion. Concerns about weaker economic growth at home and in export markets, rising geopolitical risks and trade wars continue to dominate the picture and dampen business spending, investment and sentiment.”

          Full release here.

          BoJ Amamiya: Global risks warrant most attention, domestic demand to decelerate temporarily

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            ActionForex.com
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            BoJ Deputy Governor Masayoshi Amamiya said in a speech that “Japan’s economy is likely to continue on an expanding trend, albeit at a moderate pace.” Currently, downside risks, “mainly regarding developments in the global economy” require the “most attention”. “Exports and production are projected to continue showing some weakness for the time being, with a pick-up in the global economy being delayed.”

            But the impact of global slowdown on domestic demand “has been limited so far”, with growth in all three sectors of corporate, household and public sectors. While growth in domestic demand would “decelerate temporarily” due to global slowdown and consumption tax hike, it will remain firm in “somewhat longer-term perspective”.

            Nevertheless, Amamiya reiterated BoJ’s usual message. “In a situation where downside risks to economic activity and prices, mainly regarding developments in overseas economies, are significant, the Bank will not hesitate to take additional easing measures if there is a greater possibility that the momentum toward achieving the price stability target will be lost.”

            Full speech here.

            France FM Le Maire on trade war: we don’t want an escalation, but we are the ones being attacked

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              ActionForex.com
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              French Finance Minister Bruno Le Maire warned yesterday that “if the United States hits us again with a 20 percent increase on cars we will respond again..” And he emphasized that “we don’t want an escalation, but we are the ones being attacked.”

              Harley Davidsons plans to move production of motorcycles shipped to EU from US to other international facilities to avoid the tariffs. Regarding that news, Le Maire said “whatever allows jobs to be created in Europe goes in the right direction. We don’t want a trade war, but we will defend ourselves.”

              France, Germany and the UK have requested for exemptions from sanctions on their companies for doing businesses with Iran. Le Maire said there was no positive signs from the US. And “for the moment, our requests remain unanswered”.

              BoE revised down growth forecasts notably, despite lower conditioned rate path

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                ActionForex.com
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                In the latest BoE quarterly inflation report, GDP growth was revised quite notably low for 2019 and 2020. Four-quarter GDP growth to Q3 2019 was revised down from 1.2% to 1.0%. That for Q3 2020 was revised down from 1.7% to 1.4. Though, that for Q3 2021 was revised up from 2.1% to 2.4%. CPI inflation for Q3 2019 was revised down from 1.8% to 1.7%. That for Q3 2020 was revised up from 1.7% to 1.9%. And that for Q3 2021 was revised up from 2.1% to 2.2%.

                Bank rate projection was unchanged for Q3 2019, at 0.7%. For Q3 2020 and 2021, Bank Rate forecasts were both revised to 0.5%, down from 0.8% and 0.9% respectively. The path for Bank Rate was implied by forward market interest rates.

                Full Inflation Report here.

                US initial jobless claims dropped to 229k, slightly below expectations

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                  ActionForex.com
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                  US initial jobless claims dropped -3k to 229k in the week ending June 11, slightly better than expectation of 230k. Four-week moving average of initial claims rose 3k to 219k.

                  Continuing claims rose 3k to 1312k in the week ending June 4. Four-week moving average of continuing claims dropped slightly by -750 to 1317.5k, lowest since January 10, 1970, when it was 1311k.

                  Full release here.

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

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                    ActionForex.com
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                    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.

                    WH Kudlow: Won’t lift tariffs during trade talks with China

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                      ActionForex.com
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                      White House Economic Adviser Larry Kudlow said US-China trade negotiations will “continue in earnest this coming week”. The teams are “on the phone” and are “going to be on the phone this coming week”. He doesn’t know “precisely when” but the teams will be scheduling face-to face meeting.

                      Meanwhile, Kudlow emphasized that “We’ve been accommodative. We will not lift tariffs during the talks” He added, “we are hoping that China will toe its end of it by purchasing a good many of American imports.”

                      Japan Tankan large manufacturing index dropped to 9 in Q2

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                        ActionForex.com
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                        Japan Tankan survey showed that large manufacturer sentiment dropped to lowest in more than a year. But note improvement was seen in the non-manufacturing sector. Also, the strong capital expenditure plan was a big surprise, showing that corporate spending was still robust despite increasing uncertainty.

                        Large manufacturing index dropped from 14 to 9 in Q2, below expectation of 13. That’s the lowest level since Q1 2021. Large manufacturing outlook improved from 9 to 10, below expectation of 14.

                        Non-manufacturing index rose from 9 to 13, below expectation of 14. Non-manufacturing outlook rose from 7 to 13, below expectation of 17.

                        Capex plans for big firms seen rising 18.6% yoy in fiscal 2022, well above expectation of 8.9%.

                        Consumer inflation expectations rose from 1.8% to 2.4%. Three years ahead, consumer prices are expected to rise 2%, up from 1.6%.

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

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                          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.”

                          New Zealand BusinessNZ manufacturing rose to 55.3, ending 2020 on a positive note

                            By
                            ActionForex.com
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                            New Zealand BusinessNZ Performance of Manufacturing Index rose to 55.3 in November, up 2.9 pts. Production rose 3.4 pts to 55.4. New orders surged 4.8 pts to 57.6. However, Employment dropped -0.9 pts to 51.5.

                            BusinessNZ’s executive director for manufacturing Catherine Beard said, “overall, the sector is shaping up to end 2020 on a positive note, which would be a considerable contrast to what was seen during the first half of the year.”

                            BNZ Senior Economist, Doug Steel said that “as a measure of change, the PMI suggests that the manufacturing sector continues to move in the right direction after getting hit hard earlier in the year by COVID related restrictions.”

                            Full release here.

                            U of Michigan dropped to 95.3, 11-month low, consumers have little tolerance for overshooting inflation

                              By
                              ActionForex.com
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                              US University of Michigan consumer sentiment dropped sharply to 95.3 in August, down from 97.9 and missed expectation of 98.1. That’s also the lowest level since last September.

                              Some quotes from Surveys of Consumers chief economist, Richard Curtin:

                              • Decline concentrated among households in the bottom third of the income distribution
                              • The dominating weakness reflected much less favorable assessments of buying conditions, mainly due to less favorable perceptions of market prices.
                              • Consumers have become much more sensitive to even relatively low inflation rates than in past decades.
                              • Some price resistance has been neutralized by rising wages
                              • Falloff in favorable price perceptions has been much larger than ever before recorded.
                              • Overall, the data indicate that consumers have little tolerance for overshooting inflation targets, and to the benefit of the Fed, interest rates now play a more decisive role in purchase decisions.

                              Full release here.

                              10-year yield heading back to 1.429 low as non-farm payrolls watched

                                By
                                ActionForex.com
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                                US stocks have been under tremendous pressure this week on intensified recession fears after poor ISM indices. Dollar also turned mixed after initial rally attempt. Focus will turn to non-farm payroll reports, which could be a make-or-break point for sentiments. Markets are expecting 140k job growth in the US in September. Unemployment rate is expected to be unchanged at 3.7%. Average hourly earnings is expected to grew 0.30% mom.

                                Other employment data from the US were generally disappointing. ISM manufacturing employment dropped from 47.4 to 46.3, deeper into contraction region. ISM non-manufacturing employment also dropped from 53.1 to 50.4, indicating almost no growth. ADP showed 135k growth in private sector jobs, which was not too bad. Four-week moving average of initial jobless claims was largely unchanged, down from 216k to 213k. Conference Board consumer confidence also dropped sharply from 134.2 to 125.1.

                                In case of downside surprises, 10-year yield would be also be one to watch, in additional to stocks and Dollar. TNX’s recovery from 1.429 has completed early than expected 1.903, ahead 2.123 fibonacci level. Further decline is now mildly in favor as long as 55 day EMA holds. Next target is a retest on 1.429 low. Break will resume medium term down trend. If that happens, USD/JPY could be a pair under most selling pressure.

                                China Caixin PMI manufacturing showed “marginal weakening” in March

                                  By
                                  ActionForex.com
                                  -

                                  China Caixin PMI manufacturing dropped to 51.0 in March, down from 51.6 and missed expectation of 51.7. That’s also the lowest level in four months.

                                  Quotes from the release by Dr. Zhengsheng Zhong, Director of Macroeconomic Analysis at CEBM Group:

                                  • “The Caixin China General Manufacturing PMI fell to 51.0 in March. The sub-indices of output and employment both fell from the previous month, while new orders increased at a slightly slower rate, highlighting that the deceleration in the manufacturing sector was mainly driven by the supply side and that demand has remained relatively stable.
                                  • “Output prices rose at a faster pace in March than in the previous month while the increase in input costs weakened markedly, which will help shore up manufacturers’ profits.
                                  • “The willingness of companies to restock waned as, apart from a slower expansion in output, the growth rates in stocks of finished goods and stocks of purchases also declined in March.
                                  • “Overall, the manufacturing PMI reading in March showed that demand was not as strong as expected, leading to lower willingness of manufacturers to produce and restock. However, the ability of manufacturers to make a profit was beefed up by the stable increase in new orders and the much slower jump in input costs.
                                  • “The growth momentum of the Chinese manufacturing economy may have weakened in March, but at a marginal pace.”

                                  Released over the weekend, however, the official China PMI manufacturing rose to 51.5, up from 50.3. Official PMI manufacturing rose to 54.6, up from 54.4.

                                  UK May not thinking about general election, Hunt said it’s not time for leadership contest

                                    By
                                    ActionForex.com
                                    -

                                    UK Prime Minister Theresa May’s spokesman James Slack said today that she is not thinking about an election for the moment. The cross-party talk with Labour regarding Brexit will continue. The talks are now carried out in “smaller groups” which concentrate on “specific issues”. But there is no timetable for an agreement yet. Meanwhile, no-deal preparation would continue towards the new Brexit deadline on October 31.

                                    Foreign Minister Jeremy Hunt also insisted that Conservative party leader contest would only happen after Brexit Withdrawal agreement if voted through the parliament. Hunt added: “There will be a time for all those discussions about whether this shade of person or that shade of person is the right person to take over from the prime minister. But the time for that is when she has announced she’s going and there’s a formal leadership contest.”

                                    Hunt also said that “talks we are having with Labour are detailed and I think more constructive than people have thought. ” Also, “they are more detailed and more constructive than people had been expecting on both sides.

                                    US Ross: Trump was OK either way, with or without a China trade deal

                                      By
                                      ActionForex.com
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                                      US Commerce Secretary Wilbur Ross said yesterday that “we are optimistic we can get something done” on US-China trade deal. And, “if our negotiators felt there was no hope, they would have stopped.” Though, he also reiterated President Donald Trump was “OK either way” with or without a deal.

                                      Ross said “he likes the tariffs we’re collecting. It hasn’t hurt import prices — they’re actually down from a year ago — it hasn’t hurt consumer spending, so it doesn’t bother us.” Trump said earlier in a cabinet meeting that “China’s got to make a deal that I like, if they don’t, that’s it.”

                                      DOW in third leg of medium term correction after -6.9% fall

                                        By
                                        ActionForex.com
                                        -

                                        DOW tumbled sharply overnight by -1861.82 pts or -6.90% to close at 25128.17, near to day low. A short term top was formed at 27580.21 without a doubt. Our preferred view is that rebound from 18213.65 is the second leg of the medium term corrective pattern from 29568.57, which is likely completed.

                                        Immediate focus is now on support zone between 38.2% retracement of 18213.65 to 27580.21 at 24002.18 and 55 day EMA (now at 24886.88). Firm break there will affirm our view and argue that the third leg of the consolidation has started. Deeper fall should then be seen to 61.8% retracement at 21791.67 and below. Nevertheless, rebound from the support zone could retain near term bullishness, for another rise through 27580.21 before topping.

                                        WTI oil breaks 64, but strong resistance still expected from 66.49

                                          By
                                          ActionForex.com
                                          -

                                          WTI crude oil reaches as high as 64.48 so far as recent rally resumes. At this point, we’d still be expecting strong resistance inside 63.04/66.49 to limit upside to bring reversal. We’re not expecting break out from established range between 50.64/66.49 yet. However, firm break of 66.49 will bring upside acceleration to 100% projection of 42.05 to 66.49 from 50.86 at 75.29.

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