Markets have been calm overnight, in wait and see mode ahead of a series of far more essential events this week.
Overview: Going the distance
- Quiet evening ahead of important threat events beginning from Wednesday
- G10 FX small moved +.two%, ditto international yields with US 10yrs -1.4bps to 1.82%
- US Agri Secretary suggests Dec 15 tariffs will not go ahead ultimate selection even though rests with Trump
- Sparse information on the stronger side and supportive of the thesis of international development beginning to stabilise
- US ISM semi-annual survey also notes firms stay optimistic, producers even though stay beneath stress
- Coming up these days: NAB Survey, China CPI/PPI, UK Month-to-month GDP, US NFIB
A quiet start off to the week ahead of important dangers events that contain the FOMC (Wednesday), ECB (Thursday), UK Election (Thursday) and the December 15 tariff deadline (Sunday). There has been no additional improvement on US-China trade, while intriguingly the US Agriculture Secretary suggests the December 15 tariffs will not go ahead – the selection even though rests with President Trump. In that context G10 FX is small moved with the USD (DXY) broadly unchanged at 97.67, with most big pairs +.two% which includes the AUD -.1% to .6833. EUR is unchanged at 1.1065, whilst GBP is +.1% to 1.3148 ahead of the basic election with the polls pointing to a conservative majority. Yield moves have also been contained with US 10yr yields -1.4bps to 1.82%. Equities are slightly in the red with the S&P500 -.two% to three,138.
Information was sparse, but tended to be on the stronger side and supportive of the thesis of international development beginning to stabilise. Japanese Q3 GDP was revised up to .four% q/q from the initially reported .1% q/q driven by stronger organization investment (upgraded to 1.eight% q/q from .9% q/q). Eurozone investor sentiment rose to +.7 in December against the consensus of -five.three and possibly points to a stronger German ZEW survey later these days. The German Trade Balance rose to €20.6bn from €19.2bn, boosted by a 1.two% m/m jump in exports and coming following a 1.five% rise in September. NZ also saw powerful manufacturing production which was adequate for our BNZ colleagues to revise up their Q3 GDP estimate due subsequent week to .five% q/q from .three%. Some indicators then that stabilisation is beginning to emerge in the corners of the international economy.
On trade, news has been sparse
The 1 headline that caught your scribe’s eye was the US Agriculture Secretary who stated: “We have a deadline coming up on the Dec. 15 for yet another tranche of tariffs, I do not think these will be implemented and I believe we might see some backing away”. Secretary Purdue also noted “…there’s got to be some movement on their aspect to encourage him not to do that and hopefully the signal that they sent more than soy and pork reduction could possibly be that signal in that way”. On the weekend China granted additional waivers for US agricultural purchases. The selection regardless of whether or not to raise tariffs on December 15 rests with President Trump and he has continued his constructive ambiguity on the problem which is maintaining markets guessing.
A semi-annual survey by the US ISM Institute finds firms stay optimistic in spite of headwinds. The two caveats even though are that Producers are expecting to lower capex by two.1% in 2020, and stall hiring plans (.1% enhance). Non-manufactures in contrast anticipate to enhance capex by 1.three% and enhance employment by 1.two%. So it is clear that the manufacturing sector is in a recession, but non-manufacturing is far more resilient and explains why the US economy has been outperforming. Interestingly the survey also noted the US-China trade war is most likely to have permanent effects on international provide chains with “76.eight% of producers and 59.9% of non-producers reporting they had been either evaluating new provide sources and/or altering their current footprint as a outcome of each U.S. and counter-tariffs”. (see ISM Survey for particulars).
On provide chains and de-coupling the FT yesterday reported the Chinese government had ordered all government offices and public institutions to take away foreign computer system gear and computer software inside 3 years. The report notes the move is aspect of a broader campaign to enhance China’s reliance on household-created technologies, whilst it could also be noticed as a reaction to the US’ crimping of Huawei. It therefore appears a degree of de-coupling is baked into the cake even if a partial US-China trade deal had been agreed to.
Domestically markets will be searching at a speech by Governor Lowe and the NAB Organization Survey. Even even though Dr Lowe’s speech is on payments, there is Q&A with the possible he is drawn into the realm of monetary policy. Internationally it is pretty quiet with the only potentially industry moving pieces scheduled getting the Chinese CPI/PPI and UK Month-to-month GDP. Events heat up additional out in the week with the FOMC (Wednesday), ECB (Thursday), UK Election (Thursday), and US tariff deadline (Sunday).
- NZ: Truckometer (10.00am regional, eight.00am AEDT): Not industry moving, final month had the Truckometer up two.five% m/m.
- AU: RBA Governor Lowe (9.05am AEDT): Governor Lowe is speaking on “A Payments Method for the Digital Economy” at the AusPayNet Summit in Sydney. It is unlikely to be industry moving, but there is generally the possible offered there is Q&A.
- AU: NAB Organization Survey (11.30am AEDT): No hints right here apart from reiterating the survey is closely watched by Martin Location. Final month (October) situations had been +three and self-assurance was +two with each getting slightly under their extended-run typical. Capacity utilisation out of the survey can also give a six-7m lead on the trend for unemployment.
- AU: Residence Costs – ABS measure (11.30am AEDT): The ABS measure of property rates is anticipated to rise 1.five% q/q in Q3. Note we have currently had month-to-month property price tag information for November from Corelogic, so the information need to not be a surprise.
- CH: CPI/PPI (10.00am regional, 12.30pm AEDT): Pork rates are most likely drive headline inflation larger with consensus searching for a rise to four.three% y/y from three.eight%. Inflationary pressures outdoors of pork even though stay pretty subdued and the PPI is anticipated to stay in adverse territory at -1.five% y/y. Inflation remains no barrier to additional easing, even though Pork-driven inflation is seeing China lift its agricultural imports for each proteins and feed stock (such as soybeans).
- JN: Machine Tool Orders (three.00pm regional, five.00pm AEDT):
- GE: German ZEW Survey (11.00am regional, 9.00pm AEDT): Analyst sentiment is anticipated to enhance only slightly, even though dangers are to the upside following the greater than anticipated Sentix report yesterday. Consensus appears for ZEW Expectations at . from -two.1.
- UK: Month-to-month GDP and Industrial Production (9.30am regional eight.30pm AEDT): GDP development is anticipated to rise in October by .1% m/m, up from final month’s -.1% outcome. There is a big left tail in the distribution of forecasts and dangers seem to be to the downside – note 7/20 economists are tipping flat development in the month.
- US: NFIB Survey (six.00am regional, 10.00pm AEDT): Unlikely to be industry moving. Consensus appears for a modest rise to 103. from 102.four.
For additional FX, Interest price and Commodities details go to nab.com.au/nabfinancialmarkets