Weekly Market Recap (11-15 September)

Monday: BoJ Governor Ueda interviewed by Japanese media Yomiuri over the weekend said that his focus is on a “quiet exit” to avoid significant impact on the market: We could have enough data by year-end to determine whether we can end negative rates. Once we’re convinced Japan will see sustained rises in inflation accompanied by

کد خبر : 403293
تاریخ انتشار : یکشنبه ۲۶ شهریور ۱۴۰۲ - ۱۴:۴۶
Weekly Market Recap (11-15 September)


Monday:

BoJ Governor Ueda
interviewed by Japanese media Yomiuri over the weekend said that his focus is
on a “quiet exit” to avoid significant impact on the market:

  • We could have enough
    data by year-end to determine whether we can end negative rates.
  • Once we’re convinced
    Japan will see sustained rises in inflation accompanied by wage growth,
    there are various options we can take.
  • If we judge that
    Japan can achieve its inflation target even after ending negative rates,
    we’ll do so.
  • The BOJ will
    patiently maintain ultra-loose policy.
  • While Japan is
    showing budding positive signs, achievement of our target isn’t in sight
    yet.
  • Wage rises are
    beginning to push up service prices. The key is whether wages will keep
    rising next year
    .
  • “There are some
    things we cannot see, including overseas economies” and expressed his
    cautious approach.

BoJ Governor Ueda

BoE’s Mann (hawk –
voter) said that she prefers to err on the side of overtightening:

  • If I am wrong and
    inflation and economy drop more significantly, I wouldn’t hesitate to cut
    rates
    .
  • It’s a risky bet
    that inflation expectations are sufficiently well-anchored, and we can
    wait for core inflation to ease.
  • We need to prepare
    for a world where inflation is more likely to be volatile.
  • The idea that 3%
    inflation is ‘close enough’ can’t be the BOE’s guide
    .

BoE’s Mann

The NY Fed released its
August inflation expectations survey:

  • Survey of consumers in
    August puts one-year ahead expected inflation at 3.6% vs. July reading of 3.5%.
  • August three-year ahead
    expected inflation at 2.8% vs. July 2.9%.
  • August five-year ahead
    expected inflation at 3.0% vs. July 2.9%.
  • August expected home
    price rise moves to 3.1% from July 2.8% (highest since July 2022).
  • Record number of
    consumers said credit now harder to get.
  • Households more downbeat
    on current and future finances.
  • Income growth
    perceptions declined to 2.9 percent, the lowest reading since July 2021.
  • The mean perceived probability of losing one’s job in the next 12 months
    rose by 2.0 percentage points to 13.8%, its highest reading since April 2021.

New York Federal Reserve

Tuesday:

BoJ offered to buy an
unlimited amount of JGBs after the yield on the 10yr bond surged to the highest
level since 2014 (around 0.70%).

BoJ

The UK August Payroll change printed at -1K vs. 30K
expected and -4K prior (revised from 97K!):

  • July ILO
    unemployment rate 4.3% vs. 4.3% expected and 4.2% prior.
  • July employment
    change -207k vs. -185k expected and -66K prior.
  • Average weekly
    earnings incl. Bonus 3M/YoY 8.5% vs. 8.2% expected and 8.4% prior (revised
    from 8.2%).
  • Average weekly
    earnings ex-Bonus 3M/YoY 7.8% vs. 7.8% expected and 7.8% prior.

UK Unemployment Rate

German September ZEW survey fell to a new cycle low:

  • Current conditions
    -79.4 vs. -75.0 expected and -71.3 prior.
  • Expectations -11.4
    vs. -15.0 expected and -12.3 prior.

German ZEW

BoE’s Breeden (neutral – non voter) will replace Jon
Cunliffe in November:

  • The risks to
    inflation around August forecast are to the upside
    .
  • Sees balanced risks
    to growth and unemployment in both directions.
  • Expects inflation to
    be around the 2% target in two years.

BoE’s Breeden

The US NFIB Small
Business Optimism Index missed coming in at 91.3 vs. 91.6 expected and 91.9
prior.

US NFIB Small Business Optimism Index

Wednesday:

The Japanese PPI slowed more in August on a year over
year basis:

  • PPI M/M 0.3% vs.
    0.1% expected and 0.1% prior.
  • PPI Y/Y 3.2% vs.
    3.2% expected and 3.4% prior (revised from 3.6%).

Japan PPI YoY

The UK Monthly GDP missed expectations:

  • Monthly GDP -0.5%
    vs. -0.2% expected and 0.5% prior.
  • GDP 3M/3M 0.2% vs. 0.3%
    expected and 0.2% prior.
  • Services -0.5%.
  • Industrial output -0.7%.
  • Manufacturing output -0.8%.
  • Construction output -0.5%.

UK Monthly GDP

Eurozone Industrial Production missed expectations:

  • Industrial
    Production M/M -1.1% vs. -0.7% expected and 0.4% prior (revised from 0.5%).
  • Industrial
    Production Y/Y -2.2% vs. -0.3% expected and -1.1% prior (revised from -1.2%).

Eurozone Industrial Production YoY

The US CPI came basically in line with expectations
with the 3-month annualised Core CPI standing now at 2.4%:

  • CPI Y/Y 3.7% vs.
    3.6% expected and 3.2% prior.
  • CPI M/M 0.6% vs. 0.6%
    expected and 0.2% prior.
  • Core CPI Y/Y 4.3%
    vs. 4.3% expected and 4.7% prior.
  • Core CPI M/M 0.3%
    (0.278% unrounded) vs. 0.2% expected and 0.2% prior.
  • Shelter M/M 0.3% vs.
    0.4% prior.
  • Shelter Y/Y 7.3% vs.
    7.7% prior.
  • Services less rent
    and shelter M/M 0.5% vs. 0.2% prior.
  • Real weekly earnings
    -0.1% vs. 0.0% prior.

US Core CPI YoY

Thursday:

The Australian August Jobs report beat expectations
but most of the jobs added were part-time:

  • Employment change
    64.9K vs. 23.0K expected and -14.6K prior.
  • Full-time
    employment 2.8K vs. -24.2K prior.
  • Part-time
    employment 62.1K vs. 9.6K prior.
  • Unemployment rate
    3.7% vs. 3.7% expected and 3.7% prior.
  • Participation rate
    67.0% vs. 66.7% expected and 66.7% prior.
  • Hours worked M/M
    -0.5%.

Australia Unemployment Rate

The PBoC cut the RRR by 25 bps. The weighted average
RRR for financial institutions will be around 7.40% after the latest cut. The
central bank adds that it will keep prudent monetary policy and ensure
liquidity remains reasonably ample.

PBoC

The ECB hiked interest rates by 25 bps as expected
bringing the deposit rate to 4.00% vs. 3.75% prior and signals the peak:

  • Inflation continues to decline but is still
    expected to remain too high for too long.
  • Past rate hikes continue to be transmitted
    forcefully.
  • Financing conditions have tightened further
    and are increasingly dampening demand.
  • ECB considers that key rates have reached
    levels that, maintained for a sufficiently long duration, will make a
    substantial contribution to the timely return of inflation to the target.
  • Future decisions will ensure that the key
    rates will be set at sufficiently restrictive levels for as long as necessary.
  • ECB will continue to follow a
    data-dependent approach to determining the appropriate level and duration of
    restriction.

Growth and Inflation forecasts:

  • 2023 GDP at 0.7% (previously 0.9%).
  • 2024 GDP at 1.0% (previously 1.5%).
  • 2025 GDP at 1.5% (previously 1.6%).
  • 2023 inflation at 5.6% (previously 5.4%).
  • 2024 inflation at 3.2% (previously 3.0%).
  • 2025 inflation at 2.1% (previously 2.2%).

ECB

Moving on to the press conference, President Lagarde didn’t
say anything hawkish and highlighted the slowing in the Eurozone economy:

  • Higher inflation
    forecasts mainly reflect higher energy.
  • Rates will remain at
    sufficiently restrictive levels for as long as necessary
    .
  • Rates were hiked to
    ‘reinforce commitment to our target’.
  • The economy is
    likely to remain subdued in the coming months.
  • The services sector,
    which had been resilient, is now slowing
    .
  • Recent indicators
    suggest a weak Q3.
  • Labour market remains resilient.
  • In the coming months
    inflation will fall.
  • Most measures of
    underlying inflation are starting to fall.
  • The risks to
    economic growth are tilted to the downside
    .
  • We will continue to
    follow a data dependent model and stand ready to adjust all our
    instruments.
  • Some governors would
    have preferred to pause and wait on more data.
  • A ‘solid majority’
    agreed with the decision
    .
  • Three quarters of
    the rise in the 2024 rise in inflation is due to carry-over from 2023.
  • We didn’t discuss
    how long we will leave rates at these levels; we will continue to be data
    dependent.
  • We are not saying
    that we’re now at the peak, we can’t say that now.
  • The focus is
    expected to move towards duration
    .
  • Policy transmission
    is faster than previous cycles.
  • We are going through
    a phase of very sluggish growth.
  • We see weak signs.

ECB’s President Lagarde

The US Jobless Claims beat expectations across the
board:

  • Initial Claims 220K
    vs. 225K expected and 217K prior (revised from 216K).
  • Continuing Claims
    1688K vs. 1695K expected and 1684K prior (revised from 1679K).

US Initial Claims

The US Retail Sales beat expectations with some
downward revisions to the prior figures:

  • Retail sales M/M
    0.6% vs. 0.2% expected and 0.5% prior (revised from 0.7%).
  • Retail Sales Y/Y
    2.5% vs. 2.6% prior (revised from 3.2%).
  • Retail Sales Ex-autos
    0.6% vs. 0.4% expected and 1.0% prior.
  • Control group 0.1% vs.
    -0.1% expected and 0.7% prior (revised from 1.0%).
  • Retail sales ex gas
    and autos 0.2% vs. 0.7% prior (revised from 1.0%).

US Retail Sales YoY

The US August PPI surprised to the upside on the
headline readings, but the core measures were in line with forecasts:

  • PPI Y/Y 1.6% vs. 1.2%
    expected and 0.8% prior.
  • PPI M/M 0.7% vs.
    0.4% expected and 0.4% prior (revised from 0.3%).
  • Core PPI Y/Y 2.2%
    y/y vs. 2.2% expected and 2.4% prior.
  • Core PPI M/M 0.2% vs.
    0.2% expected and 0.4% prior (revised from 0.3%).

US PPI YoY

Friday:

The New Zealand Manufacturing PMI for August fell
further into contraction:

New Zealand Manufacturing PMI

The PBoC kept the MLF rate unchanged at 2.5% as
expected but cut the 14-day reverse repo rate by 20 bps from 2.15% to 1.95%.

PBoC

Chinese activity data surprised to the upside:

  • Retail Sales Y/Y
    4.6% vs. 3.0% and 2.6% prior.
  • Industrial
    Production Y/Y 4.5% vs. 3.9% and 3.7% prior.
  • Unemployment rate
    5.2% vs. 5.3% expected and 5.3% prior.

Comments from the National Bureau of Statistics (NBS):

  • In August, major indicators showed marginal
    improvement.
  • National economy showed good momentum of
    recovery.
  • Domestic
    demand remains insufficient.

China Industrial Production YoY

ECB’s Lagarde (neutral – voter) didn’t push back on
yesterday’s hint on the end of the tightening cycle:

  • We
    will return to 2% inflation target.
  • To set rates at restrictive level as long as needed for that.
  • Eurozone
    will not grow as much as expected earlier but should pick up in 2024.
  • Weaker
    growth does not mean recession.
  • What
    we do next on rates will be on a data-dependent basis.
  • We
    have not discussed rate cuts.

ECB’s President Lagarde

ECB’s
Kazaks (hawk – voter) basically confirmed that the ECB has reached its terminal
rate:

  • Latest monetary
    policy move was not a ‘dovish hike’.
  • It does not preclude
    future decisions.
  • Comfortable with
    current level of rates
    .
  • Sees inflation
    target being reached in 2H 2025.
  • April rate cut would
    be inconsistent with ECB’s macro scenario.

ECB’s Kazaks

The US Industrial Production for August beat
expectations:

  • Industrial
    Production M/M 0.4% vs. 0.1% expected and 0.7% prior (revised from 1.0%).
  • Industrial Production
    Y/Y 0.2% vs. 0.0% prior (revised from -0.2%)
  • Capacity utilization
    79.7% vs. 79.3% expected and 79.5% prior (revised from 79.3%).

US Capacity Utilization

The University of
Michigan Consumer Sentiment survey missed forecasts across the board with
inflation expectations falling even after the rise in energy prices:

  • Consumer Sentiment 67.7
    vs. 69.1 expected and 69.5 prior.
  • Current conditions
    69.8 vs. 75.3 expected and 75.7 prior.
  • Expectations 66.3 vs
    66.0 expected and 65.5 prior.
  • 1-year inflation 3.1% vs. 3.5% prior.
  • 5-10 year 2.7% vs. 3.0% prior.

University of Michigan Consumer Sentiment

The highlights for next week
will be:

  • Monday: NZ
    Services PMI, US NAHB Housing Market Index.
  • Tuesday: RBA
    Meeting Minutes, Canada CPI, US Building Permits and Housing Starts.
  • Wednesday: PBoC
    LPR, UK CPI, BoC Summary of Deliberations, FOMC Policy Decision.
  • Thursday: NZ GDP,
    SNB Policy Decision, BoE Policy Decision, US Jobless Claims.
  • Friday: Japan CPI,
    BoJ Policy Decision, UK Retail Sales, Canada Retail Sales, Flash PMIs for AU,
    JP, UK, EZ, US.

That’s all folks, have a great weekend!



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