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Dentalfloss · Oct 31, 2019

cantagril · Oct 31, 2019

Gratings and Good Morn!

Much appreciating your Dax charting analysis service - have given up on BEB since Carl dun a runner. Am still slogging away with the Cac but you've saved me loads of effort so it's an enormous "ta" from moi.

Dentalfloss · Oct 31, 2019

Dentalfloss · Oct 31, 2019

Good Morning: The Long & the Short of it and The Bigger Picture - 31 October 2019 - ADM ISI

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Ostwald, Marc

08:53 (37 minutes ago)

to Marc

- Digesting Fed & BOJ policy messages, weak China PMIs and better than
expected Japan Indsutrial Production; awaiting Eurozone CPI & GDP, US
Q3 ECI, perosnal Income & PCE, Chicago PMI and Canada monthly GDP;
another raft of earnings, smattering of ECB & SNB speakers

- Fed clearly shifting to holding pattern, but retaining easing bias;
signals OMO & POMO moves may not be enough to avoid further repo market
liquidity issues

- BoJ: more emphatic easing bias, but still talking the talk and not walking
the walk

- Bank of Canada sanguine on slower economy, underlines in no hurry to move
on rates in either direction

- Eurozone GDP; better French outturn not enough to offset drag from
Germany, slower pace of activity in many other countries

- Eurozone CPI: lower than expected French HICP to balance out slightly
stronger than forecast German CPI; but inflation still very, very low

- US ECI: wages likely to push up vs Q2, Personal Income/PCE already
pre-empted by yesterday's Q3 GDP report

- Audio preview:
https://www.mixcloud.com/MOstwaldADM/adm-isi-morning-call-31-october-2019/

..........................................................................

********************
** EVENTS PREVIEW **
********************

With this week's run of BoC, Fed and. BOJ policy meetings behind us, attention turns to a typically busy end of month rush of economic data, along with another raft of corporate earnings, all of which may end up very much subordinate to month end flows and political news, above all US China trade related. Topping the statistical run are Eurozone and a number of national CPI and Q3 GDP reports (also due from Hong Kong & Taiwan), having digested the soft overnight China official NBS PMI's and Australia Building Approvals, with Canada looking to monthly GDP and the US awaiting PCE and Personal Income, Q3 Employment Cost Index, weekly jobless claims and Chicago PMI. It is Draghi's last day at the helm of the ECB, and there is an interim Inflation Report update from Turkey's TCMB.

While the Fed cut rates as expected, it made it clear that the economic outlook will have to deteriorate a lot further for it to consider another rate cut, and dropping the phrase 'act as appropriate' from the statement, even if Powell noted in the press conference that 'Current stance of monetary policy likely to remain appropriate ... We would respond if outlook materially changes." It does clearly retain an asymmetric bias to easing, with Powell putting an even higher bar on a rate hike, noting: "I think we would need to see a really significant move up in inflation that’s persistent before we even consider raising rates to address inflation concerns.” So for the time being markets have all but priced out the chance of a Dec rate cut (current probability 21.0%), and is erring to the side of no cut in January (40.4%), while seeing March as 50/50, and end 2020 as a 72.6% probability. On the US money market woes, Powell said that he does not think the Fed will revisit capital or liquidity requirements in light of the repo market turmoil, but that they are looking at things like intra-day liquidity. He admitted that banks may run into "liquidity issues" (in Q4) even with the expanded repo facilities.

The message from the Bank of Canada (which now has the 'honour' of having the highest rates in the G7) was also fairly unequivocal, stating that while it cut its growth forecasts, inflation is "very close to target", and that it has not considered an 'insurance' rate cut at this meeting, adding that 'given the amount of uncertainty due to trade tensions, the best approach is to hold firm and watch things develop'.

As for the Bank of Japan, it tweaked its language to emphasize as Kuroda said at the press conference that its current policy stance leans towards easing, with Kuroda adding the rather less credible observation that there is 'lots of room for Japan to deepen negative rates... if needed'. As I observe in the next edition of the Ghost In The Machine (due to be published in next 10 days), "leaving aside the issue of the side effects of zero or negative rates, monetary policy is an ineffective tool in the face of trade tensions or a trade war. It also can do little to mitigate the impact of major structural shifts in key industries (e.g. autos and telecoms/tech at the current juncture, energy in the longer run), and most importantly needs help from governments in terms of fiscal policy measures and structural reforms, most abundantly evident in the Eurozone. By extension, the myth of central bank supremacy in the face of any challenge, which has been allowed to flourish in financial markets since the GFC, has in no small part been due to the all too frequent tendency for financial markets to indulge in ‘wishful seeing’ and ‘wilful blindness’."

** Eurozone - Q3 GDP / October CPI **
- Expectations for Q3 GDP look for every tepid 0.1% q/q that would see the y/y rate dip to 1.1% from Q2's 1.2%, with the slightly stronger than expected French 0.3% q/q and as expected 0.4% q/q in Spain probably not sufficient to offset the drag from Germany (likely to be -0.1%/-0.2%) and a rather tepid profile elsewhere (e.g. Austria & Lithuania both at 0.1% q/q). But as with today's CPI data, this really is more than well discounted, the only major question is if there will be any modest improvement in Q4, but the signals thus far suggest not. On CPI, German HICP was slightly higher than expected, but this is likely to be offset by an unexpected setback in France -0.1% m/m 0.9% y/y (vs. forecast 1.1% y/y), and as such the consensus for 0.1% m/m 0.7% y/y (vs. Sep 0.9%) and an unchanged 1.1% for CPI seem reasonable.

** U.S.A. - Q3 ECI, Sept Personal Income/PCE **
- The Q3 Employment Cost Index is expected to rebound modestly to 0.7% q/q vs. Q2 0.6%, with the relatively robust pace of Average Hourly Earnings suggest that Wages should account for most of the pick-up. Personal Income & PCE data are for September and were thus already included in yesterday's Q3 advance GDP report, which saw a modestly stronger than expected 2.9% SAAR for PCE predicated on strength in auto sales, but as much of that strength was in July/August, the upside risks relative to forecasts look to be very modest. The Chicago PMI is expected to pick up to 48.0 from September's 47.1, with the end of the GM strike perhaps given a larger uplift, particularly as this is a notoriously volatile series.

========================== ** THE DAY AHEAD ** ===========================

Dentalfloss · Oct 31, 2019

cantagril said:
Gratings and Good Morn!

Much appreciating your Dax charting analysis service - have given up on BEB since Carl dun a runner. Am still slogging away with the Cac but you've saved me loads of effort so it's an enormous "ta" from moi.

🆒 🆒 🆒 🤪 🤪 🤪 👄👄👄