Archives of “September 2019” month

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Ifo sees a German recession this year

  
Analysis, Economy

Ifo cuts its GDP forecast for the German economy

Germany
  • Sees 2019 GDP growth forecast at 0.5% (previously 0.6%)
  • Sees 2020 GDP growth forecast at 1.2% (previously 1.7%)
  • Expects Q3 GDP to fall by 0.1% q/q; possible slight recovery in Q4
This feeds into the other growth forecast cuts we saw yesterday here. Ifo also notes that the industrial weakness is starting to spread to other sectors and that’s pretty much a warning sign in my view that things may get worse before they get better for Germany.

Chinese commerce ministry says that US, China mid-level trade teams to meet soon

  
  Analysis

Comments by China’s commerce ministry

China
  • Hopes that US can create favourable conditions for trade talks
  • Mid-level trade teams to meet soon to prep for high-level talks
  • Trade teams are in effective communication
  • Will roll out supportive measures to stabilise trade at appropriate time
  • Says that possible purchases of US agriculture may include soybeans, pork
This will continue to keep risk assets more buoyed on the day although we are seeing gains level out and hold only slightly firmer since the start of the session.
Markets are still largely cautious in anticipation of the ECB and the price action of gold and bonds clearly reflect that sentiment.

Saudi oil minister: Every OPEC+ country should pull its weight

  
Analysis, Crude

Comment by Saudi oil minister, Prince Abdulaziz

OPEC+
  • OPEC+ must maintain high degree of cohesion
  • Every country should comply with oil output cuts
  • Will share our course of action for the future after today’s meeting
Some cautionary words before the OPEC+ JMMC meeting begins later today in Abu Dhabi. Expect there to be plenty of talk and discussion on production cuts (current and future) but there shouldn’t be any firm consensus or decision reached in the meeting today.

ANZ oil strategy – expect prices to rise

  
Analysis, Crude

A snippet from ANZ’s latest on oil,

  • replacement of Saudi Arabia’s Energy Minister, Khalid Al-Falih, with Prince Abdulaziz al Salman …  We don’t see the move as a prelude to significant change
  • As OPEC and its allied producers (such as Russia) meet in Abu Dhabi, they face unprecedented uncertainty. 
  • … tension between the US and Iran/Venezuela continues to impact the market. 
  • trade tensions are now also weighing on manufacturing activity
  • Global vehicle sales, a key determinant of gasoline demand are on track to fall 6% in 2019
  • PMIs remain weak across the world
  • We have subsequently reduced our forecast oil demand growth to 1mb/d this year (from 1.2mb/d)
  • Even so, we see sizeable stock drawdowns in Q4. With crude oil well below Saudi Arabia’s target of USD80/bbl, we feel they have no choice but to continue the current production cut agreement to help support current prices. However, the ability to push prices higher looks limited.
A snippet from ANZ's latest on oil,  
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ANZ mention the meeting in Abu Dhabi today. Its a monitoring committee meeting bute yeah, there will be discussion of price, you can coutn on it.

Its European Central Bank policy meeting day – preview

  
  Analysis
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ECB monetary policy decision is coming later on Thursday 12 September 2019

  • announcement due at 1145gmt
  • ECB President Draghi’s press conference (his last one!) is at 1230 GMT
Various previews have been posted in past days, I’ll collate them all for easy reference a little later. But for now, BNZ have a handy summary:
  • consensus among economists is for a 10bp cut to the ECB’s deposit rate and the announcement of a resumption to QE, with the median estimate for a €30b per month pace of bond buying. 
  • The market prices 14bps of rate cuts in for this meeting, implying an almost 50% chance that the ECB could cut by 20bps. 
  • The ECB is widely expected to accompany any rate cut with the adoption of a “tiering” system for bank reserves, whereby some portion of banks’ reserves will be exempted from the negative deposit rate, in order to mitigate the negative financial impact on the banking sector. 
  • The bond market’s focus is likely to be on whether the ECB restarts its QE programme and, if so, what the size of such a programme might be. Despite the recent rise in European and global rates, expectations for the ECB are still high (as evidenced by a 30 year German yield of 0%) and were it to disappoint market expectations on QE, the risk is for an extension in the recent bond sell-off.
ECB monetary policy decision is coming later on Thursday 12 September 2019 

Deutsche Bank forecasts four Fed interest rate cuts … by January!

  
  Analysis

Scanning some of the overnight notes, this via DB (via CNBC)

  • “We anticipate 25 [basis] point rate cuts at each of the September, October, December, and January policy meetings”
On the trade war:
  • “If the conflict picks up, the U.S. risks zero rates and a mild recession”
  • expect economic growth to fall to below 1.5% by mid-2020, assuming the trade tensions between the U.S. and China ease or maintain the status quo
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Four cuts would make the Prez happy!
But … nah.

Overnight :Tech and healthcare help S&P 500 to highest close since July

  
Analysis, US Market

Wall Street advanced on Wednesday with the S&P 500 closing above 3,000 for the first time since late July as a rally in tech and healthcare boosted US stocks and investors kept an eye on trade developments. The S&P 500 was up 0.7 per cent, edging closer to a fresh record high, led by healthcare and tech which were both up more than 1 per cent. The Dow Jones Industrial Average rose 0.9 per cent, its sixth consecutive daily rise and its longest winning streak since June. Meanwhile, the Nasdaq Composite gained 1.1 per cent, eyeing its first advance in four days. Apple shares gained more than 3 per cent with the tech company’s market capitalisation climbing back above the $1tn mark on Wednesday as investors cheered its lower-priced iPhone 11 and Apple TV+ subscription. Investors are also looking ahead to key central bank meetings. 

The European Central Bank is expected to cut interest rates and detail plans for stimulus measures when it concludes its meeting on Thursday. Next week, investors expect the Federal Reserve to deliver a 25 basis-point rate cut. President Donald Trump on Wednesday renewed his attack on the Fed, calling for the “boneheads” at the central bank to cut interest rates to zero or lower. Trade was also on the agenda as China on Wednesday moved to exempt 16 types of US-exported goods from import tariffs ahead of the latest round of trade talks. The State Council’s tax regulator will next look to further expand exemptions on US goods and release follow-up lists when they are ready, it said.

The moves in US markets followed gains in Europe, where the Stoxx 600 rose 0.9 per cent and the Frankfurt-based Dax added 0.7 per cent, while London’s FTSE 100 climbed 1 per cent. Overnight in Asia, the Topix climbed 1.7 per cent, extending the Japanese benchmark’s positive streak into a fifth day. Hong Kong’s Hang Seng gained 1.8 per cent, lifted by a strong showing from banks including HSBC and Standard Chartered and local developer stocks. In commodities markets, oil prices fell sharply after a report that Mr Trump discussed easing sanctions against Iran. Brent, the international oil marker, reversed its gains and fell 2.1 per cent to $61.08 a barrel, while West Texas Intermediate, the US benchmark, was down 2.4 per cent to $56.03 a barrel. Sovereign bonds extended their sell-off, with the yield on the US 10-year up 4.2 basis points to 1.7437 per cent. The German Bund rose 0.5 basis points to minus 0.562 per cent. Yields move inversely to price.

The Trump-Bolton rift may have been about easing Iran sanctions – report

  
Analysis, Crude

Oil drops

WTI crude fell another $1 after Bloomberg reported that Trump discussed easing Iran sanctions in order to restart talks. Bolton ‘forcefully’ argued against the move while Mnuchin supported it. Later in the day, Trump fired his national security advisor.
Trump may meet Iran’s Rouhani on the sidelines of the UN during the week of Sept 23.
WTI is down $1.27 on the day to $56.15. USD/CAD also ran to a session high, hitting 1.3197
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