Global bond bull run has reached historic levels
Archives of “September 2019” month
rssTrump will meet with advisors today on cutting capital gains
Trump to meet economic team today
Dow Jones reports that Trump will once again meet with advisors today on the topic of cutting capital gains taxes by indexing them to inflation. The move would be a massive boon to long-term investors but punch a huge hole in the deficit over time. It would also face court challenges from Congress.
The meeting will also focus on broader proposals to cut taxes, according to the report which cities unnamed sources.
German research institutes lower 2019 GDP forecast amid weakening economic outlook
IfW and DIW slash their 2019 GDP forecasts for the German economy
- IfW now sees German economy expanding by 0.4% this year (previously 0.6%)
- Sees 2020 GDP at 1% (previously 1.6%)
- Notes that German economy likely shrank by 0.3% in Q3
- Therefore, falling into a technical recession
- DIW now sees German economy expanding by 0.5% this year (previously 0.9%)
- Sees 2020 GDP at 1.4% (previously 1.7%)
- Further risk next year comes from no-deal Brexit
- If that happens, it would slash a further 0.4% off 2020 economic growth
Looking at both the downgrades, it pretty much reaffirms the negative growth outlook seen in the German economy in the second-half of this year. A technical recession isn’t confirmed just yet but the signs and data released so far are suggestive of one.
Notably, DIW says that Germany needs a long-term government investment program to help lift economic confidence and the growth outlook. Yeah, that doesn’t look like one is coming any time soon after yesterday’s budget announcement.
The 3 reasons EUR has bottomed against the USD and yen
A quick snippet from Mizuho in Japan on the euro. Citing three reasons it has bottomed out:
- European Central Bank’s easing options are limited
- Brexit uncertainties a negative for GBP against EUR
- Chatter of fiscal stimulus
On the ECB:
- to hold back from restarting asset purchases on Thursday
- likely to cut negative policy rate further, to -0.5%, but room for further cuts is limited
Forecast:
- 1.15 possible by year-end
Last one for Dr. DJP Morgan think progress in US-China talks is unlikely
JP Morgan on the upcoming talks between the US and China.
- We are more sceptical
- still see risks to our growth outlook for 2H 2019 skewed to the downside
JPM that a deal could be struck at the ministerial level talks in mid-Oct and “activity get a cyclical bounce into year end”. But:
- “Are either likely? No.”
—
Based on what we have seen come out of US-China talks so far I find it difficult to disagree with JPM.
Time to dust off the ‘hawkish cut’ outlook – September FOMC to lift the USD
Morgan Stanley expect the sept September meeting of the Federal Open Market Committee to cut
- by 25bp
- But the dot plot published alongside is unlikely to show more rate cuts for the balance of 2019 and into next
- expects confusing dots reflecting diversity of views on the committee
More:
- ” …. FOMC materials are likely to be insufficiently dovish to meet the market’s lofty expectations”
- “USD is likely to outperform on the day, particularly against risk-sensitive currencies like high-yielding EM FX and the dollar bloc”
US stocks flat amid tech slide, Treasury yields climb
Wall Street closed mostly flat on Tuesday with a decline in tech shares weighing on stocks, as investors await updates on stimulus measures from major central banks in the coming days. The S&P 500 closed fractionally higher, erasing earlier losses in the final minutes of trading, as the tech sector fell 0.5 per cent and energy shares jumped 1.3 per cent Meanwhile, the Nasdaq Composite ticked about three points lower. Robust gains for Boeing and Caterpillar helped the Dow Jones Industrial Average notch a 0.3 per cent rise.
The decline in tech comes as investors reacted to Apple’s annual hardware event on Tuesday, where the company revealed details of its latest iPhone models and its upcoming TV+ streaming video service. Apple was up 1.2 per cent, but shares in Netflix and Roku suffered in response to a cheaper-than-expected price point for TV+. Investors sold off US government debt, sending yields higher. The yield on the benchmark 10-year Treasury note was up 11.8 basis points at 1.7402 per cent. Meanwhile, in Europe, the Stoxx 600 was up 0.1 per cent, the Xetra Dax was up 0.4 per cent, and the CAC 40 advanced 0.1 per cent. 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 at its monetary policy meeting. In the UK, Boris Johnson lost his second attempt to hold a snap general election to break Britain’s Brexit impasse. While the prime minister has vowed not to delay Brexit beyond October 31, the anti-no-deal legislation agreed by parliament received royal assent from the Queen at her Balmoral castle retreat in Scotland on Monday. Sterling fluctuated and recently rose modestly to $1.2355, while the FTSE 100 close with a 0.4 per cent gain.
Thought For A Day
Oil hit by double-whammy as Bolton turfed and EIA cuts demand forecast
Oil drops $1 fast
WTI crude oil fell to $57.30 from $58.50 in a quick move after Trump announced he was firing national security advisor John Bolton. It’s since bounced back 40 cents.
Bolton has long favored military solutions everywhere, but particularly in the Middle East. The news diminishes the chances of bombs falling on Iran.
Minutes after that news, the EIA lowered its forecasts for world oil demand this year and next. They saw a rise of an 890,000 barrel per day rise compared to 1 million barrels previously for this year. For 2020, they trimmed the forecast by 30,000 bpd to a rise of 1.4mbpd.
Offsetting that somewhat is a lower forecast for US production next year at 13.23 mbpd compared to 13.26 mbpd.
China ready to sweeten deal by buying American goods – report
Officials discussing text of the deal
This has been doing the rounds for the past 15 minutes. It outlines what would be a broad deal on trade and it highlights that officials are already working on a text.
They cited an anonymous source.
As part of the discussions, China has offered to buy American products in exchange for a delay in a series of US tariffs and easing of a supply ban against Chinese telecommunications giant Huawei Technologies.
The source said China could also offer more market access, better protection for intellectual property and to cut excess industrial capacity, but would be more reluctant to compromise on subsidies, industrial policy and reform of state-owned enterprises.
This sounds like an interim deal while they work out more, something that has been rumored. But it could also be read as a broad deal.
Ominously, the report also notes that Beijing increasingly believes that any deal now is simply a ceasefire and that the US is committed to curbing China in the long term.
In Beijing, the leadership is putting the focus on the longer term, suggesting that a trade deal with the US would be just a trade war truce.
In a speech last Tuesday, Chinese President Xi Jinping urged the Communist Party to embrace a long-term struggle against a range of risks.
This is beginning to get some traction and helping risk trades.