Archives of “May 12, 2021” dayrss
Latest data released by Eurostat – 12 May 2021
- Prior -1.0%; revised to -1.2%
- Industrial production +10.9% vs +11.8% y/y expected
- Prior -1.6%; revised to -1.8%
Not much change in factory output towards the end of Q1 but the year-on-year reading shows a big jump though that owes mostly to base effect adjustments, considering the plunge seen at the start of the pandemic in March last year.
The EU expects the euro area economy to rebound more strongly
- Eurozone 2021 GDP growth forecast raised to 4.3% from 3.8% previously
- Eurozone 2022 GDP growth forecast raised to 4.4% from 3.8% previously
- Eurozone 2021 inflation seen at 1.7%
- Eurozone 2022 inflation seen at 1.3%
- Euro area economic output to reach pre-virus levels in Q4, sooner than expected
- Sees all EU economies returning to pre-virus GDP by the end of 2022
That despite cutting its demand forecast for India
- Demand recovery forecast assumes COVID-19 situation in India improves
- Extra supply is due from Canada, Brazil
- Under current OPEC+ scenario, supplies will not match expected demand recovery
- OPEC+ has pumped far below the call on its crude
- However, demand recovery is fragile amid India’s COVID-19 situation
That fits with conventional market wisdom for the most part but just continue to keep an eye on India as they are a major wildcard considering the virus situation. If that persists for many more months and well into 2H 2021, it could alter the landscape.
On the face of last week’s Bank of England rate decision it was very uneventful. Rates were kept the same & asset purchases the same. Some investors had been hoping for a repeat of the Bank of Canada’s hawkish shift by tapering bonds and bringing forward interest rate hikes. The only dissenter to the on hold narrative was Andy Haldane. However, he is on the way out shortly from the Monetary Policy Committee, so that didn’t register with investors.
Minutes paint a better picture.
However, looking at the minutes the BoE has adopted a more optimistic outlook for the UK economy. They are expecting the country’s GDP to fall by less than forecast back in February, with the low Covid case numbers and success of the vaccine rollout clearly playing a big part in this. Crucially, there is an expectation that the estimated £150 billion of savings that consumers have accumulated over the past 14 months or so will steadily be released into the economy in the months ahead. GDP is expected to rise sharply in 2021 Q2 and to recover strongly to pre-Covid levels over the remainder of this year in the absence of most restrictions on domestic economic activity. Demand growth is further expected to be boosted by a decline in health risks and a fall in uncertainty, as well as announced fiscal and monetary stimulus.
GBP & FTSE reaction
The GBP responded in a confused fashion with the meeting and chopped around before moving higher sharply this week helped by a very poor NFP report.
The FTSE 100 was far more confident and moved higher on the higher growth forecasts. However, the general sell off in stocks this week has since brought in lower.
This look like a June taper can be expected now as there has been two upbeat MPC meetings in a row now.One approach would be to look for suitable technical areas to buy the GBP into the next BoE meeting. The key risk, as always,is on some kind of vaccine resistant COVID-19 variant.
March quarter economic growth in the UK -6.1% y/y
- expected -6.1%, prior -7.3%
- expected 1.5%, so a solid beat
- prior 0.4%
Coming up at 1230 GMT, CPI numbers from the US for April.
- expected 0.2%, prior 0.6% m/m
- expected 3.6%, prior 2.6% y/y
- expected 0.3%, prior 0.3% m/m
- expected 2.3%, prior 1.6% y/y
- Base effects on their own would drive inflation from 2.6% to 3.3% y/y and core from 1.6% to 2.1%.
- Supply chain pressures and seasonal influences on month-over-month price changes account for the rest.
uN Special Envoy to the Middle East Peace Process Tor Wennesland urged both sides to de-escalate.
The Organization of the Petroleum Exporting Countries (OPEC) released its monthly report on Tuesday.
- It left its prediction of a strong recovery for global world oil demand in 2021 intact.
- Said growth in the US & China will counter the demand slump in India
- significant uncertainties surrounding the pandemic
- “India is currently facing severe COVID-19-related challenges … face a negative impact on its recovery in the second quarter …. is expected to continue improving its momentum again in the second half of 2021”
- OPEC forecasts 2021 world economic growth at 5.5% (from 5.4% projected in the previous month’s report)