Archives of “August 2019” month

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Trump says Fed should cut by 100 bps and restart QE

  
  Analysis

Trump says economy doing well

Trump tweet:
Our Economy is very strong, despite the horrendous lack of vision by Jay Powell and the Fed, but the Democrats are trying to “will” the Economy to be bad for purposes of the 2020 Election. Very Selfish! Our dollar is so strong that it is sadly hurting other parts of the world. The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well. If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone!
Nothing says a “very strong” economy like cutting rates by 100 basis points and launching quantitative easing.
The question to ask is: How will Trump react if they Fed doesn’t cut rates that aggressively and the US dollar continues to strengthen?
Back in 2011 when unemployment was at 9%.
Trump

Wilbur Ross: US will delay Huawei ban by 90 days

  
  Analysis

Comments by US commerce secretary, Wilbur Ross

  • Will delay ban for some businesses
  • But US had added more than 40 Huawei subsidiaries to entity list
The headlines here is giving an added push to risk assets on the day with USD/JPY now climbing to a session high of 106.70. Treasury yields are still sharply higher across the curve with 30-year yields up by nearly 8 bps at 2.112% currently.
I don’t see this as being game-changing to be honest. This just reaffirms reports seen from over the weekend. In the big picture, this won’t do much to resolve the differences faced by both parties in trade talks either.

Bundesbank sees risk of the German economy entering a recession

  
Analysis, Economy
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Comments by Bundesbank via its monthly report

Germany
  • Euro area economy growing at a subdued pace in Q3
  • Sees first signs of downturn in the labour market
  • German economic outlook remains unclear, hinges on exports
  • Economic activity could shrink over the summer (Q3) due to weak industrial activity
  • It is unclear if exports will regain their footing before the domestic economy becomes more severely affected
Given the way things are going, another economic contraction wouldn’t be surprising.
As mentioned over the last few weeks, the dichotomy of Germany’s economy (manufacturing and services performance) will eventually settle on one path and the likelihood of negative spillovers from the manufacturing to services sector grows with each passing day.
Thursday’s PMI data may give us a glimpse of that but lawmakers and policymakers will be certainly be hoping that the services sector will continue to bolster the economy through these tough times.

Eurozone July final core CPI +0.9% vs +0.9% y/y prelim

  
  Analysis

Latest data released by Eurostat – 19 August 2019

  • CPI +1.0% vs +1.1% y/y prelim
  • CPI -0.5% vs -0.4% m/m expected
  • Prior +0.2%
The preliminary figures can be found here. The release was initially scheduled for 0900 GMT but has been released (not sure if accidental) via Bloomberg. Nonetheless, besides the softer headline reading, there isn’t much else of note as core inflation matches initial estimates.

Eurozone June current account balance €18.4 billion vs €29.7 billion prior

  
Analysis, Economy

Latest data released by the ECB – 19 August 2019

  • Prior €29.7 billion; revised to €30.3 billion
Slight delay in the release by the source. The surplus shrinks below €20 billion for the first time since 2017 as we see a drop in goods, services and primary income for the month of June. That’s not encouraging but at this point in time, this is still a minor data release.
The data is a general indication of flows in/out of the euro area economy. EUR/USD holds steady at 1.1101 currently still.

Eurostoxx futures +0.5% in early European trading

  
Analysis, Global Indices

The more upbeat tone extends to Europe in early trades

  • German DAX futures +0.6%
  • French CAC 40 futures +0.4%
  • UK FTSE futures +0.5%
This largely reflects the mood seen in Asian stocks and US equity futures, which are roughly up 0.6% as we begin the session.
The franc is a tad weaker as such but so far there hasn’t been much response among other major currencies – notably the yen – despite higher bond/Treasury yields as well. USD/JPY holds flat at 106.38 currently, little changed over the past few hours.
Looking ahead, I reckon we’ll have to see if the positive risk mood here can last the course or extend more. Otherwise, trading should be rather choppy and a bit disinterested as the ebb and flow continues to dictate market sentiment for now.

Nikkei 225 closes higher by 0.71% at 20,536.16

  
Analysis, Global Indices

Asian equities lifted by the better risk sentiment

Nikkei 19-08

For Japanese stocks, the trade and Tankan reports take some shine off the more positive day but risk sentiment in markets is still pointing towards being more optimistic so far.

Other Asian equities are faring better with the Hang Seng up by 2.1% while the Shanghai Composite is up by 1.8%. Sentiment there is also helped by more policy support from Chinatowards small and medium business owners.
European stocks are also set to open more firm amid higher bond yields so that sets the tone as we begin the session, though currencies are still little changed for the most part.

Japan – Reuters Tankan report – manufacturing index hits lowest since 2013

  
  Analysis
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Reuters Tankan shows Japan manufacturers index -4 in August vs +3 in Jul.y

  • lowest reading since April 2013
  • and this is the first negative reading for the index in over 6 years

Non-manufacturers index +13 in August vs +25 in July

Manufacturers November index seen at +3, non-manufacturers seen unchanged

Commentary via Reuters …nails it:
  • Concerns about weakening global demand intensified
  • growing risk of a U.S. recession
  • Germany’s economy in contraction
  • China’s economy was worsening
  • further soured the outlook for export-reliant economies such as Japan’s
More:
  • “The U.S.-China trade war, Japan’s export curbs to South Korea and the recent yen rises have formed a bottleneck for sales” 
  • “The selling price remains in a downtrend due to expansion of e-commerce markets, while a scheduled sales tax hike keep shoppers on guard against price increases”
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The Reuters monthly poll, tracks the Bank of Japan’s (BOJ) tankan quarterly survey
  • conducted July 31-Aug 14
  • total of 258 firms responded
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