Archives of “May 20, 2019” day

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Japan GDP (preliminary) Q1 2019: 0.5% q/q (vs. expected -0.1%)

  
Analysis, Economy

First reading for first quarter 2019 economic growth in Japan. These numbers seem rather bizarre ….

GDP (seasonally adjusted) for Q1, preliminary, 0.5% q/q: BEAT
  • expected -0.1%, prior +0.4%, revised from +0.5%
GDP Annualized (seasonally adjusted) for Q1, preliminary 2.1% y/y: HUGE BEAT
  • expected -0.2%, prior +1.6%, revised from +1.9%
GDP Nominal (seasonally adjusted) for Q1, preliminary 0.8% q/q:
  • expected 0.1%, prior 0.4%
GDP Deflator y/y for Q1, preliminary 0.2%:
  • expected 0.2%, prior -0.3% (deflator is an inflation indicator)
GDP Consumer Spending y/y for Q1, preliminary -0.1% q/q,  – Miss
  • expected -0.2%, prior was 0.2%, revised from 0.4%
GDP Business Spending y/y for Q1, preliminary -0.3% q/q – Miss
  • expected -1.9%, prior was 2.5%, revised from 2.7%
The consumer is a miss, as is capex. Positives from trade(!!!):
  • net exports positive (first time in a year) despite exports -2.4% q/q … biggest fall for these since Q2 2015
  • Imports shrunk rapidly, -4.6% q/q, biggest fall since Q1 of 2009
As far as good GDP results go these are pretty bad is my take.
Mustn’t complain though, if the focus is the headline its a ripper!

Weekend China press hints at currency intervention

  
Analysis, Forex

The Global Times, admittedly a fairly strident sort of source ….

But the concerns they express on the impact of a rapidly falling yuan are those we’ve been aware of and highlighting since the trade war took a turn for the worse in the recent week or so.
The piece is titled: Defending exchange rate China’s top priority
Begins with some background (do note this is from China’s perspective):
  • US-China trade talks haven’t broken down
  • negotiations appear to have ground to a halt 
  • there remain three core concerns of China that must be addressed. The first is to remove all the additional tariffs, which must be totally revoked if the two sides are to reach a deal. The second is that the amount of purchases should be realistic. The two sides reached consensus on the volume in Argentina and should not change it spontaneously. The third is to improve the balance of the wording of the text. Every country has its dignity, and the text must be balanced.
And goes on (bolding mine … to add to the stridency 😀 ):
  • The biggest challenge facing China in the future comes from the exchange rate problem, and it is necessary to be prepared for the upcoming war defending the yuan exchange rate. 
  • It can even be said that no other problems are important compared with the exchange rate issue.
  • The most worrying issue is the yuan exchange rate. Once the yuan continues its depreciation against the dollar, it will trigger a series of chain reactions. Currency depreciation leads to asset price drops, which prompts capital flight overseas. Intensified capital flight will continue to weaken the yuan, which inevitably dents China’s foreign reserves. If such a vicious cycle takes shape, it will have a broad impact on China’s financial market, asset market and real economy.
Full article is here from the weekend
Offshore yuan:
offshore yuan cnh chart china trade war

DJ on OPEC – closer to continuing existing production targets through end 2019

  
Analysis, Crude

The Wall Street Journal with a wrap up of the weekend meeting of the Joint Ministerial Monitoring Committee (JMMC)

  • OPEC and allies moved closer to continuing existing production targets through the end of the year
  • the group has also been looking at a handful of scenarios, some of which would involve easing production curbs
“Today, we are looking at various options [for the second half of 2019] including softening the production levels,” Russia’s energy minister Alexander Novak told reporters. “If there is a growth in demand, we are ready to consider and mitigate those parameters, a partial recovery of production,” he said.
—
Background to the weekend meeting:
  • OPEC and allies agreed last December to cut output by a collective 1.2 million barrels a day
  • The agreement expires in June
  • There is a full OPEC+ meeting next month to finalise production options
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