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Eurozone April industrial production -17.1% vs -18.5% m/m expected

Latest data released by Eurostat – 12 June 2020

  • Prior -11.3%; revised to -11.9%
  • Industrial production WDA -28.0% vs -28.8% y/y expected
  • Prior -12.9%; revised to -13.5%
Those are some horrific numbers but again, it isn’t surprising at this stage since we know that April is the worst month in terms of economic activity due to the widespread lockdown measures in the region and the peak fallout from the virus outbreak.
This all just serves to reaffirm that Q2 economic conditions are set to be the worst in history for the euro area – much like most parts of the world.

ECB: Euro area GDP could shrink by 5% to 12% this year

ECB notes in a pre-release of its economic bulletin

ECB
  • Euro area real GDP could fall by around 5% (mild scenario), 8% (medium scenario), and 12% (severe scenario) this year
  • Under the severe scenario, Q2 quarterly real GDP growth could be -15%, followed by a protracted and incomplete recovery; +6% in Q3, +3% in Q4
  • Under the severe scenario, real GDP is expected to remain well below the level observed at the end of 2019 until the end of 2022
The headline isn’t so much of a surprise since it is the same as what Lagarde has already highlighted in her press conference yesterday. This just adds more colour to it. In case you missed Lagarde’s remarks, you can check them out here and here (Q&A).

EU’s Centeno says he expects finance ministers to agree fiscal measures “much larger” than €27bn

Financial Times with the report on a prediction from Mário Centeno, President of the Eurogroup

  • Eurozone finance ministers will agree a “very large” policy response to fight the economic fallout of coronavirus, the president of the eurogroup has predicted
  • bloc will unleash the “full flexibility” of its budget rules to boost spending
  • expected fiscal measures that together add up to a boost “much larger” than the €27bn aggregate level that was mentioned by Christine Lagarde
Centeno speaking with the FT Link 

Singapore Q4 GDP 1 % y/y (vs expected 0.8 %) – lowers outlook for GDP ahead

Singapore MTI downgrades 2020 GDP growth forecast to -0.5% to 1.5% (previous forecast 0.5% to 2.5%)

  • Singapore MTI says 2020 GDP expected to come in at around 0.5%, the mid-point of the forecast range
  • Singapore says revising down 2020 growth, exports forecasts due to coronavirus outbreak

More:

  • Q4 manufacturing -5.9% % q/q at annualised, seasonally adjusted rate
  • Q4 services 2.2 % q/q at annualised, seasonally adjusted rate
  • 2019 non-oil domestic exports contract 9.2%
  • Singapore lowers 2020 non-oil domestic exports forecast to -0.5%-1.5% from 0%-2% previously

EUR/CHF threatens a three-year low as some risk aversion creeps in

The euro is soft on all fronts

The euro is the laggard today as the pain trade continues for euro bulls.
EUR/CHF is no exception as the pair threatens the low of the year at 1.0663. We’re just 5 pips from there now and if that breaks, the next big support level is the 2017 low of 1.0632.
The euro is soft on all fronts

More risk aversion is creeping in today as the minutes tick by. Stocks in the US are holding up but Treasury yields are sliding and gold is climbing.

US President Trump says US farmers will receive another round of cash subsidies

The U.S. Department of Agriculture announced back on Friday that it’ll be making a scheduled subsidy payment to US farmers in the week ahead.

  • the payments will be the second part of a three part $16 billion aid package announced in May to compensate farmers for the U.S.-China trade war
Trump claiming credit:
  • “Our great Farmers will recieve (sic) another major round of ‘cash,’ compliments of China Tariffs, prior to Thanksgiving” 
  • “The smaller farms and farmers will be big beneficiaries. In the meantime, and as you may have noticed, China is starting to buy big again. Japan deal DONE. Enjoy!”
The U.S. Department of Agriculture announced back on Friday that it'll be making a scheduled subsidy payment to US farmers in the week ahead.

Economic data coming up in the European session

Eurozone October final inflation reading in focus today

Comic 15-11

Happy Friday, everyone! Hope you’re all doing well as we look to get things going in the session ahead. Risk trades are in a better mood today with some recovery seen in yen pairs and gold is also lower to start the day.

Meanwhile, equities have nudged higher while bond yields are also faring better as the Trump administration talk up hopes of a trade deal.

Looking ahead, there is little on the economic calendar in Europe to really shift the dial so we may be in for a more quiet one barring any major headlines to cross the wires.
1000 GMT – Eurozone October final CPI figures
The preliminary report can be found here. As this is the final release, it isn’t expected to have much – if any – impact on markets as a whole.
1000 GMT – Eurozone September trade balance data
Prior release can be found here. An indication of trade conditions in the euro area region but the data is a bit lagging as this pertains to Q3 economic performance.
1000 GMT – Italy October final CPI figures
The preliminary report can be found here. Focus is on the overall Eurozone release so the report here will matter little, and even more so since this is the final release.
That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading!

European mid-morning: Currencies remain little changed but big week lies ahead

Major currencies are <0.1% changed against the dollar so far today

EOD 28-10

The pound is arguably the only active mover as cable rose to a high of 1.2859 earlier in the session before settling back to near flat levels currently around 1.2820-30 levels.
Other major currencies are holding in narrow ranges against the dollar with little conviction to break stride so far today.
The risk mood is a bit mixed overall with European equities looking indecisive but bond yields are marked higher amid the fact that a Brexit extension was granted, with the move higher coming after France moved on their stance from last week.
Despite the slower start to currencies this week, fret not because it is going to be a crucial week ahead and here are some of the highlights to look forward to:
Monday, 28 October (still to come)
– UK parliamentary vote on Johnson’s election motion
Wednesday, 30 October
– Australia Q3 CPI data
– France Q3 preliminary GDP data
– US October ADP employment change
– US Q3 advanced GDP data
– Bank of Canada October monetary policy meeting
– FOMC October monetary policy meeting
Thursday, 31 October
– New Zealand October ANZ business confidence
– China October manufacturing, non-manufacturing PMI
– BOJ October monetary policy meeting
– Eurozone October preliminary CPI data
– Eurozone Q3 preliminary GDP data
– Canada August monthly GDP data
– US September PCE deflator data
Friday, 1 November
– China October Caixin manufacturing PMI
– US October non-farm payrolls, labour market report

Eurozone August unemployment rate 7.4% vs 7.5% prior

latest data released by Eurostat

unemployment eurozone
The latest unemployment figures from the eurozone are showing a continued steady decline in unemployment numbers. The worry here would have been if employment levels start to fall due to a slowdown in manufacturing etc. However, no concerns like that seen in the data and EURUSD at 1.0932 – remember there are some decent option levels at 1.0900 level on the EURUSD

India has limited room to ease fiscal policy due to high debt: Fitch

Fitch Ratings on Tuesday forecasted India’s economic growth at 6.6 per cent during the current year, down from 6.8 per cent in the previous year, and said the government has only limited room to ease fiscal policy because of high debt.

It said GDP (gross domestic product) growth is likely to rebound to 7.1 per cent next year.

Keeping India’s rating unchanged at BBB- with a stable outlook, it said the rating balances a strong medium-term growth outlook and relative external resilience with sturdy foreign reserve buffers, against high public debt, financial sector fragilities and some lagging structural factors.

In its Asia-Pacific Sovereign Credit Overview, Fitch said India’s GDP growth decreased for a fifth consecutive quarter in the April-June quarter to 5 per cent, the lowest in six years.

“Domestic demand is faltering, with both private consumption and investment proving lackluster, while the global trade environment is also weak,” it said.

The contribution of gross fixed capital formation (1.3 per cent) remained weak at the same level of the January-March quarter, when it dropped sharply, while the contribution of private consumption fell to 1.8 per cent in the April-June from an average of 4.6 per cent in the preceding four quarters.

Manufacturing grew by only 0.6 per cent, it said.

The government’s policy measures to stimulate the economy include support for the automobile sector, a reduction in capital gains tax, and additional liquidity support for “shadow” banks. Accompanying structural reforms include a further easing of the foreign direct investment (FDI) regime and consolidation of the public banking sector. (more…)