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Fitch Rating confirm Italy at BBB and leaves outlook unchanged also (at negative)

  
Analysis, Economy

Some late news from after hours in the US Friday, on Italian sovereign debt ratings from Fitch.

  • Fitch affirmed Italy’s credit rating unchanged at BBB
  • maintained its negative outlook
Fitch:
  • This week’s political developments reinforce our assessment at the previous review that the government was unlikely to see out a full term and there is an increasing risk of an early election from the second half of this year
  • There are downside risks to the fiscal outlook should a future government opt to disengage from EU fiscal rules and be more willing to risk financial market instability
That’s a bit of respite for Italy as political instability rises, with the likelihood of early elections soon. Prime Minister Giuseppe Conte is facing a no-confidence motion in Parliament from coalition member Matteo Salvini. Italian instability is a negative for the euro, this lifting it at least to some extent.
Salvini:
Some late news from after hours in the US Friday, on Italian sovereign debt ratings from Fitch.

IMF issues annual report on China

  
Analysis, Economy
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Risks tilted to the downside amid trade uncertainty

The IMF is out with its annual report on China. They say:

  • risks are tilted to the downside amid trade uncertainty
  • China should maintain flexible yuan  if tariffs rise
  • China could intervene to support one in adverse scenario
  • China GDP growth could slowed to 4% by 2030
  • escalating trade tensions could warrant China stimulus
  • China augmented government debt to top 100% of GDP in 2024
  • The yuan is not significantly overvalued or undervalued. In line with fundamentals
  • IMF has been pressing China for more exchange-rate flexibility, less intervention in currency markets
  • China should open up more sectors to foreign competition to put its economy in best position to deal with trade pressures

White House clarifies comments on Huawei

  
Analysis, Economy

Earlier said we will not be doing business with Huawei

Earlier today Pres. Trump while speaking to the press said that US would not be doing business with Huawei. That – along with comments that the September meeting with China might be canceled – sent stocks lower.
The White House is out with a clarification saying that Pres. Trump was referring to only the ban on federal departments buying from Huawei. They add that the process for special licenses is still going forward.
As a result, the stocks have rebounded with the NASDAQ down -81 points or -1.02% at 7957. The low reached 7910.348. The S&P is currently down -22.8 points at 2915.19. The low reached 2900.15.

Japan preliminary Q2 GDP: 0.4% q/q (vs. expected 0.1%

  
Analysis, Economy

Japanese economic growth data for the second quarter of 2019

GDP (seasonally adjusted) for Q2, preliminary,  0.4% q/q  … a big beat, at least on this early indication
  • expected 0.1%, prior 0.6%
GDP Annualized (seasonally adjusted) for Q2, preliminary 1.8% y/y
  • expected 0.5%, prior 2.2%
GDP Nominal (seasonally adjusted) for Q2, preliminary 0.4% q/q
  • expected 0.1%, prior 0.8%
GDP Deflator y/y for Q2, preliminary 0.4%, also higher than expected 9way short of the BOJ target of course)
  • expected 0.3%, prior 0.1% (an inflation indicator)
GDP Consumer Spending y/y for Q2, preliminary 0.6% q/q for a miss
  • expected is 0.7%, prior was -0.1%
  • up for the third quarter in a row, albeit not as strong as fprecasts
GDP Business Spending y/y for Q2, preliminary 1.5% q/q … beat
  •  expected 0.8%, prior was 0.3%
  •  capex up for the third quarter in a row
OK, much better than central forecasts for growth. Which should suggest the BOJ has room to pull back on the stimulus a little …. except of course the inflation indicator is not anywhere near the 2% target.
more to come

Bank of Japan leaves short-term interest rates at -0.1% as per expectations

  
Analysis, Economy

Bank of Japan interest rate decision

  • Keeps monetary policy steady
  • maintains a short-term interest rate target at -0.1%
  • maintains 10 year JGB yield target around 0%
  • leaves unchanged for guidance on interest rates, says will keep current extremely low rates for extended period time at least through spring of 2020
  • medium core CPI forecast for fiscal 2019 – 20 at 1.0% versus 1.1% in April forecast
  • risks are skewed to the downside on economy
  • Japan inflation is gradually to accelerate toward 2%
  • won’t hesitate to take extra action if needed
  • won’t hesitate to take additional easing of momentum to goal lost
  • CPI currently at around 0.5%
  • fiscal year 2019 GDP forecast is 0.7% versus 0.8% previously
  • fiscal year 2020 GDP forecast is 0.9% versus 0.9% previously
  • fiscal year 2021 GDP forecast 1.1% versus 1.2% previously
  • sees fiscal year 2019 core CPI including sales tax at 1.0% versus 1.1% previously
  • sees fiscal year 2020 core CPI including sales tax 1.3% versus 1.4% previously
  • sees fiscal year 2021 core CPI forecast 1.6 versus 1.6 previously

Japan industrial production MoM for June (P) -3.6% vs -1.7% estimate

  
Analysis, Economy

Japan industrial production

Industrial production year on year is down near lows going back to 2016
  • industrial production for June preliminary MoM -3.6% versus -1.7% estimate. Prior month +2.0%
  • industrial production for June YoY -4.1% versus -2.0% estimate. Prior month -2.1%
  • shipments MoM -3.3% versus +1.3% last month
  • inventories  MoM 0.3% versus 0.5% last month
  • inventory ratio MoM2.8% versus 1.7% last month
  • shipments year on year, -4.2% versus -1.8% last month
  • inventories year on year, 2.9% versus 1.5% last month
  • inventory ratio year on year, 6.3% versus 4.5% last month

Japan industrial production fell more than expected in June. The preliminary release is showing a -3.6% decline versus -1.7% estimate. Last month industrial production rose 2.0%.

For the year, industrial production fell -4.1% versus -2.0% estimate. The prior month was at -2.1%.

The numbers are not good and likely reflect the global slowing as a trade tensions.
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