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Japan Q2 prelim GDP +0.3% q/q vs +0.2% expected

  
Analysis, Economy

Japanese second quarter growth data

  • Q1 final reading was -1.0%
  • Annualized sa +1.3% vs +0.7% expected
  • Q1 final reading was -3.9% annualized
  • Private consumption +0.8% vs -0.1% expected (-1.5% prior)
  • External demand -0.3 pp vs -0.1 pp expected (-0.2 pp prior)
  • Capital expenditures +1.7% q/qvs +1.7% expected (prior -1.2%)
  • Exports +2.9% q/q
  • Domestic demand contribution +0.6 pp
The domestic economy held up better in Q2 despite covid restrictions. It’s another data point that shows that the global consumer is holding up better to lockdowns than previously and increasingly learning to live with restrictions. Meanwhile, external demand is struggling with two quarters of declines.

Some background if you find useful:

  • state of emergency curbs to combat the coronavirus pandemic are sapping GDP growth, weighing on consumption.
  • Export growth is robust, which is a positive
  • rising energy and commodities prices could worsen terms of trade (Japan is heavily reliant on raw material imports)

Fed’s Kashkari wants to see “a few more” solid employment reports before tapering

  
  Analysis

No surprise that Kashkari isn’t in a rush

The battle lines on Fed tapering are somewhere between September and January. It’s no surprise that Kashkari is on the dovish end of the spectrum and said he wants to see “a few more” solid jobs reports before advocating for a taper.
He said the objective is to restore the labor market to at least pre-covid levels.
The tricky read through on US employment is that so many people aren’t participating the jobs hunt. After Sept 6, special benefits will end but the pandemic won’t. Is it that people are collecting government money or that people who can afford to stay home (or retire) aren’t planning to return any time soon?
No surprise that Kashkari isn't in a rush

What the rout in Afghanistan means for markets

  
Analysis, Politics
#  #  #  #

Not much impact

Not much impact
The swift fall of Afghanistan caught the world off guard with President Ashraf Ghani fleeing the capital as it fell.
It will certainly be the major geopolitical story this week but I don’t see any angles where it will affect markets. Afghanistan’s economy is tiny by any standard (except perhaps the opium trade). For example, Afghanistan uses only 30,000 barrels per day of oil.
What will happen is a human tragedy and an embarrassment for the US and the coalition that fought for 20 years to overthrow it but I don’t see how it moves the needle in markets in any way.
Some point to potential gold demand with people fleeing but even there, the minuscule wealth of Afghanistan is negligible.
The UN security council will meet on Monday.
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