Archives of “Economy” tag

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China announces plans for the economy

  
  Analysis
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Some plans from the China government to support the economy

  • Plans to deepen medium and small lenders reforms, and to improve their governance and internal risk control
  • To deepen state owned enterprise reforms, support medium and small firms to develop
  • To improve legal environment that supports private economy and foreign entities
  • to prevent various kinds of risks and to keep a stable economy
  • to support capital replenishment of small to medium banks via multiple channels
  • to strengthen financial infrastructure supervision and development
  • to make financial institutions, local governments and financial regulators to carry out their responsibilities
  • China is set a punitive compensation system for intellectual property infringement (is that internally in China or does it include compensation to foreign companies that are subject to IP infringement?)
A list of “to do’s” as the US -China trade talks continue toward a Phase I fnish line (which is not yet reached).

Nikkei reports: China is doubling down on demands that may threaten trade deal

  
  Analysis
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Cold feet again?

The Nikkei is reporting that Beijing has double down on demands that may threaten to delay a preliminary trade agreement with the US.
The report says that China is digging in on insisting that US withdrawal all tariffs levied since summer of last year before entering an agreement.  Pres. Trump is likely not thinking along those lines in Phase I of what will be a drawn out process.
Phase 1 is intended to focus on expanding American imports into China, but does not address the key structural issues like IP theft.
Trade deals sound good on paper but once the rubber meets the road and both parties dig in a bit more, the risks of a deal break down are real.
The US stock market is taking it in stride. The major indices are trading little changed on the day.
Gold meanwhile is down $25 or -1.67% which suggests no worries/be happy.
If the rhetoric becomes more pervasive, however, we could see a reversal of the market forces going forward.
CLICK HERE for the story

Powell Q&A: It would take a ‘material reassessment’ of outlook to shift stance

  
  Analysis
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Powell comments to reporters:

Powell
He emphasized ‘material’ 3-4 times.
  • Risks to the outlook have shifted more positively
  • Says he was generally referring to less uncertainty on trade
  • Consumer facing companies say consumers doing well
  • Economy has been resilient to winds blowing this year
  • Today’s business investment in GDP was weak
  • We generally hike because we see inflation moving up, we don’t see that now
  • Inflation expectations are quite central to its framework
  • If we were to have a sustained reduction in trade tensions, it would bode well but I wouldn’t expect immediate effects; it would take time
  • Significant inflation rise needed before any rate hike
  • There is a big and growing difference in rural and urban outcomes
  • GM strikes likely too ‘a couple tenths’ off growth this quarter but is likely to return
  • Policy is ‘somewhat accommodative’ in my estimation
  • Not seeing asset bubbles, monitoring
  • We think liquidity in the financial system is ample but we’re working to make it move more-freely
The dollar initially rallied but everything reversed when Powell said that it would take a significant rise in inflation before they start hiking again. That was a strong message they’ll be on the sidelines.

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

  
  Analysis
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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

Argentina to limit USD purchases for individuals to $200 a month (down from $10,000)

  
Analysis, Economy
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Argentina’s central bank has adjusted its currency controls to limit dollar purchases for individuals

  •  to $200 a month, down from $10,000
The President of the central bank to speak Monday
  • at 8:30 am local time
Headlines via Reuter.
This is one way to attempt to control capital flight. The controls come as Argentina elects Alberto Fernandez its new president. Voters tired of economic austeity.

Next week brings the FOMC and BOJ meetings – forecast range for USD/JPY

  
Analysis, Forex
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A note via MUFG on the yen for the week ahead, analysts looking for 107/111 for USD/JPY.

On the Federal Open Market Committee meeting:
  • USD/JPY has already priced in a rate cut by the FOMC to some degree, so would not react much to a cut. If the Fed does defer on cutting rates, then the initial reaction would likely be USD buying, but stock price weakness would likely cap a rise by USD/JPY
And, on the Bank of Japan:
  • BoJ will maintain current monetary policy
  • BoJ Governor Kuroda commented in an interview that he expects a rate cut, so if the BoJ stands firm on policy, JPY may strengthen slightly but probably not continue. But if the BoJ does make some sort of policy change, JPY would initially weaken but not continue to do so because of concerns about side effects and continuity, and at some point USDJPY would lose steam. 
And, of course on a big driver:
  • Ultimately Brexit continues to loom and there will likely be little sense of direction despite some volatility.
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FOMC on the 30th, Wednesday next week.
BOJ on the 31st, Thursday next week.

Here is what’s on the economic calendar in Asia today – almost bare

  
  Analysis
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2350GMT will bring data on weekly flows of securities (stocks/bonds bought/sold) from Japan.

Upon release these tend to have a negligible impact on forex (unless there is some reason for the market to be focused on them at the time).
Apart from some info due from South Korea and Singapore that’s about it.

US stocks end the session lower and near session lows

  
Analysis, US Market
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S&P index back below the 3000 level. NASDAQ loses -0.72%

The major stock indices slid in the afternoon trading after being higher earlier in the day. The major indices are ending the session in the red, led by the NASDAQ composite index which fell -0.72%
The closes are showing:
  • the S&P index -10.65 points or -0.35% at 2996.07. The high reached 3014.57, while the low extended to 2995.04
  • the NASDAQ composite index fell 58.69 points or -0.72% at 8104.29. The high extended up 28194.62 while the low reached 8101.98
  • The Dow industrial average is closing down -39.27 points or -0.15% at 26788.32.  The high reached 26946.64.  The low extended to 26782.61

After today’s close Chipotle, snap, Texas Instruments, and Whirlpool will be releasing their earnings.

Tomorrow will be 1 of the bigger earnings day’s so far with Microsoft, Boeing, Caterpillar and others expected to release:

Wednesday, October 23

  • Boeing, BA
  • Blackstone Group, BX
  • General Dynamics, GD
  • Owens Corning, OC
  • Ford, F
  • Caterpillar, CAT
  • Celgene, CELG
  • Microsoft, MSFT
  • eBay, EBAY
  • PayPal holdings, PYPL
  • Tesla, TSLA

CFTC Commitments of Traders: Pound shorts haven’t been squeezed…yet

  
Analysis, Forex
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Forex futures positioning data from the CFTC for the week ending October 15, 2019:

Forex futures positioning data from the CFTC for the week ending October 15, 2019:
  • EUR short 75K vs 75K short last week. Unchanged
  • GBP short 73K vs 73K short last week. Unchanged
  • JPY short 7K vs 11K long last week. Longs switch to shorts in an 18K drop
  • CHF short 13k vs 11k short last week. Shorts trimmed by 1K
  • AUD short 48k vs 46k short last week. Shorts increased by 2K
  • NZD short 40K vs 38K short last week. Shorts increased by 2K
  • CAD long 13K vs 5K long last week.  Longs trimmed by 1K
  • Prior week

The big moves in sterling came last week and I’m surprised there wasn’t any covering through Tuesday. That’s good news if you’re long GBP because it leaves lots of juice to squeeze.

China September activity data: Industrial Production 5.8% y/y (expected 4.9%)

  
Analysis, Economy
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IP, retail sales and investment data

Industrial Production 5.8% y/y  big beat
  • expected 4.9%, prior was 4.4%
industrial production YTD 5.6% y/y
  • expected 5.5%, prior was 5.6%
Fixed Assets (excluding rural) YTD 5.4% y/y small miss
  • expected 5.5%, prior was 5.5%
Retail Sales 7.8% y/y inline
  • expected 7.8%, prior was 7.5%
Retail Sales YTD 8.2% y/y
  • expected 8.1%, prior was 8.2%
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