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Reuters Tankan – Japan manufacturers sentiment index -6 (unchanged from December)

The monthly Reuters Tankan is more timely than the quarterly report of the same name from the BOJ.

  • January manufacturers’ sentiment index comes in at -6 (unchanged from Dec)
  • Service-sector index +14 in January vs. flat vs Dec
  •  Manufacturers’ mood seen up ahead, service sector down
Pessimism amongst Japanese manufacturers persisted in January, usual suspects cited:
  • China-U.S. trade tension
  • sluggish global demand
Looking ahead though,  some believed conditions will improve in the next few months
  • seen to 0 in April
Service-sector outlook sees 13 in April (slight fall)

Iran believed to have deliberately sought to avoid US military casualties in strikes – report

Reuters report, citing US and European gov’t sources

It looks more and more like they dropped a few bombs in the nearby desert and may have even sent out warnings ahead of time.
If Trump chooses to de-escalate this looks like a sly move to save face without going to war. Then again, many wars have been started by a slight miscalculation.
Trump is set to speak at the top of the hour.

Reports that China will not increase its annual import purchase quotas of farm goods from the US

Reuters report on senior agriculture official Han Jun speaking with Caixin

  • China will not increase its annual import quotas for corn, wheat and rice to accommodate stepped-up purchases of farm goods from the United States,
There are no further details, Straits Times with the info
If so then there is no phase one trade deal. Weird report, but here we are ….
Reuters report on senior agriculture official Han Jun speaking with Caixin

The UN Security Council will meet this week to discuss North Korea

Reuters (citing diplomats and a request from the United States) report the council will meet on Wednesday

  • it will discuss North Korea’s recent missile launches
Over the weekend NK conducted an unspecified “very important test” at its Dongchang-ri satellite launch site
I wonder if we’ll see a yen response? NK issues have, in the past, prompted yen buying (a flight to liquidity response, the USD also a beneficiary) but this has diminished.
North Korea kim yen

Japan – Reuters Tankan poll shows manufacturer outlook less pessimistic, service-sector sentiment three-month high

The Reuters Tankan seeks to track the BOJ report. Reuters is monthly, BOJ Tankan is quarterly.

Japanese manufacturers’ business outlook was less pessimistic in October
service-sector sentiment rose to a three-month high
 manufacturers voiced worry about the protracted trade war and slowdown in China’s economy
some Japanese firms do not see the impact of the global slowdown immediately hurting the economy
Sentiment index for manufacturers minus 5,
  • up two points from the prior month’s 6-1/2-year low of minus 7
  • index is expected to minus 6 in January
service-sector index climbed to plus 25
  • from plus 19 in the previous month
  • led by retailers who have likely benefited from consumers rushing to beat the Oct. 1 sales tax which went up to 10% from 8%
Poll of 504 large- and mid-sized companies, in which 248 firms responded
  • conducted Sept. 26 to Oct. 7

Saudi Aramco lures sovereign funds to $2 trillion IPO valuation

Reuters, exclusive

Reuters, exclusive
This just out from Reuters
‘State-owned Saudi Aramco has approached Abu Dhabi Investment Authority (ADIA), Singapore’s GIC and other sovereign wealth funds to invest in the domestic leg of the oil giant’s listing at it seeks to achieve a $2 trillion (1.6 trillion pounds) valuation, sources said’

IPO process still carrying on, despite the drone attacks mid-month.

Further reports that majority of US House now backs impeachment proceedings against Trump

US media reporting, get this …. “breaking” news :

  • A majority of the House now backs impeachment proceedings against President Donald Trump: 218 lawmakers
Its not my intention to be the leader of the pack on impeachment reporting, I post whatever is relevant to markets. Maybe I just got lucky this time being so early with this news.
US media reporting, get this …. "breaking" news :

Bank of Japan’s Kuroda on the wires

Via Reuters

Kuroda
  • BOJ will ease without hesitation if chance that economy may lose momentum for achieving price goal heightens
  • Economy sustaining momentum for hitting BoJ’s price goal
  • BoJ must pay more attention than before to heightening risks, particular focus in on the output gap
  • If Oil prices continue to fall and clearly push down Japan’s inflation, that could impact inflation expectations
  • No preconception on what policy decision will be made in October
  • Investors risk aversion easing somewhat due to progress in US-China trade negotiations
  • BoJ can combine, enhance tools which are rate cuts increase in asset buying and acceleration of base money
  • Excessive fall in super-long yields could hurt consumer sentiment by lowering returns of pension, insurance funds
  • Our policy is stimulating economy, but increased scrutiny is needed on cost of prolonged ultra low rate environment
  • Overseas economic slowdown yet to affect Japan’s domestic demand
No hints on whether more QE is coming for October, which is what would have weakened JPY further on the current change in sentiment with China waiving some soybean tariffs.
Interesting line about scrutiny on ultra low rate environment. We are starting to see a move away from monetary policy towards fiscal policy. I think it is reasonable expect this to be the next driver in the FX markets now if conditions remain in an ultra low interest environment.

Here are the rate cut steps expected from the PBOC, perhaps as soon as next month

A report from Reuters outlines the likely path for People’s Bank of China interest rate cuts, maybe as early as September.

  • expected to first reduce their funding costs by lowering the rate on its medium-term lending facility (MLF)
  • That will open the door for a cut in the PBOC’s new benchmark lending rate, the loan prime rate (LPR), the next time it is set on September 20
  • he MLF forms the basis for the new LPR rate, but banks can add a premium to reflect funding costs and credit risks
  • In what was seen as a symbolic move, the revamped one-year LPR was set at 4.25% last week, down 6 basis points (bps) from 4.31% previously and 10 bps lower than the existing benchmark one-year lending rate, which will still apply to older loans
Article was overnight, so an ICYMI, link here for more.
PBOC Gov Yi Gang:
A report from Reuters outlines the likely path for People's Bank of China interest rate cuts, maybe as early as September. 

Japan – Reuters Tankan report – manufacturing index hits lowest since 2013

Reuters Tankan shows Japan manufacturers index -4 in August vs +3 in Jul.y

  • lowest reading since April 2013
  • and this is the first negative reading for the index in over 6 years

Non-manufacturers index +13 in August vs +25 in July

Manufacturers November index seen at +3, non-manufacturers seen unchanged

Commentary via Reuters …nails it:
  • Concerns about weakening global demand intensified
  • growing risk of a U.S. recession
  • Germany’s economy in contraction
  • China’s economy was worsening
  • further soured the outlook for export-reliant economies such as Japan’s
More:
  • “The U.S.-China trade war, Japan’s export curbs to South Korea and the recent yen rises have formed a bottleneck for sales” 
  • “The selling price remains in a downtrend due to expansion of e-commerce markets, while a scheduled sales tax hike keep shoppers on guard against price increases”
The Reuters monthly poll, tracks the Bank of Japan’s (BOJ) tankan quarterly survey
  • conducted July 31-Aug 14
  • total of 258 firms responded