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Good Morning: The Long & the Short of it and The Bigger Picture - 11 February 2020 - ADM ISI
- Digesting sluggish UK BRC Sales, Australia Housing Finance surge and China
Coronavirus updates; awaiting UK Q4 GDP and gamut of monthly activity
indicators, US NFIB survey and JOLTS Job Openings; Powell, Lagarde &
Carney top busy run of Fed, ECB & BoE speakers; US 3-yr, Netherlands 6-yr
- Australia: mortgage lending surge clearly key in RBA's less dovish turn
- UK Q4/Dec GDP: seen flat lining, but rebounding from Nov drop, but very
historical, extent of Q1 rebound key to outlook
- US NFIB: further gain expected, paced by strong labour market indicators
- Powell likely to trot out familiar upbeat Fed narrative on economy, but
underline concerns on inflation; money market ops comments also in focus
- Audio preview:
https://www.mixcloud.com/MOstwaldADM/adm-isi-morning-call-11-january-2020/
..........................................................................
********************
** EVENTS PREVIEW **
********************
The volume of central banker speakers is very large today, though it is debatable whether they will offer any genuinely policy outlook changing insights. Fed's Powell heads up with 'Episode One' of what used to be call the "Humphrey-Hawkins testimony on monetary policy", with Bullard, Daly, Kashkari & Quarles also on hand, from the BoE there are carney, Cunliffe and Haskel, and from the ECB there are Lagarde, Lane & Schnabel. The UK dominates the data schedule with provisional Q4 GDP and the usual run of monthly activity indicators following the soft BRC Retail Sales report, with the overnight Australia Housing Finance data requiring attention; with the US looking to NFIB Small Business Optimism and JOLTS Job Openings. Hilton Worldwide may be the pick of the day's corporate earnings as attempts are made to gauge the fall-out on tourism globally from the Coronavirus, which will remain the key overarching theme. Government bond supply sees the Netherlands sell 2026 DSL, and the USA kick off its quarterly refunding with $38.0 Bln of 3-yr. Of that overnight data, the stand out item was the 4.4% m/m surge in Australia's Housing Finance (vs. expected 1.6%, Nov 1.9%), which underlines why the RBA has taken a less dovish turn, with governor Lowe opining last week "If people borrowed too much now it could introduce a vulnerability that could come back to hurt us". Given Australia is amongst the worst countries in terms of household debt to income ratios (189%), Lowe's push back in light of these lending numbers are wholly unsurprising!
** U.K. - Q4 GDP, Dec Index of Services, Industrial Production & Trade **
- Today's rash of data largely predates December's election and per se has little relevance to the BoE policy outlook, though it will be recalled that the unexpectedly sharp fall 0.3% m/m fall in November monthly GDP was the prompt for markets to partially discount a rate cut at the January MPC meeting. Eminently BoE 'guidance' at said meeting leaned quite heavily against the probability of a rate cut, and if today's readings turnout around or above the consensus for 0.2% m/m for December GDP and Index of Services (Q4 prov. seen flat q/q) and a (modest) 0.5% m/m recovery in Manufacturing Output, following a steep -1.7% m/m in December, then there may be some further push back on rate expectations. In the detail of Q4 GDP, Private Consumption is seen up just 0.1% q/q (vs. Q3 0.3%), with Govt Spending seen bouncing back from -0.6% in Q3 to +0.5% in Q4, with a more modest positive contribution expected from trade (Exports 1.8% q/q vs. Q3 7.9%, Imports -0.1% q/q vs. Q3 -0.3%).
** U.S.A. - Powell testimony, Jan NFIB Small Business Optimism **
- NFIB Small Business Optimism is forecast to pick up to 103.3 from December's 102.7, on the assumption of a modest from a the signing of the 'phase on' US / China trade deal, and no impact (as yet) from the Coronavirus outbreak. The already published Plans to Hire Index was unchanged at 19%, though this disguised a jump in Net Compensation (36 vs 29) and Positions Hard to Fill (37 vs. 33). But ws with any upside surprises in today's Dec JOLTS Job Openings, this is likely to be seen as overall rather moot to the Fed's policy plans. Powell's written testimony, the so-called 'Monetary Policy Report' published on Friday https://www.federalreserve.gov/monetarypolicy/2020-02-mpr-summary.htm was wholly unsurprising and echoed the recent post Fed meeting press conference, sounding an upbeat note on the economic outlook, despite some uncertainties around the coronavirus outbreak, while emphasizing dissatisfaction with below target inflation, which most commentators see pointing to some adjustment to policy implementation (effectively running inflation / growth a little hot to achieve some "symmetry" on inflation) in the upcoming review. The other key issue will of course relate to the Fed's operations to smooth the functioning of US money markets, following September's repo debacle, which demand at last week's term operations suggest remain extant, if currently 'below the surface'. Quarles speech last week offered a solution, and is very well reviewed by FT Alphaville's Claire Jones here: https://ftalphaville.ft.com/2020/02...e--money--Treasuries-would-calm-repo-markets/
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| 08:43 (6 minutes ago) |
|
- Digesting sluggish UK BRC Sales, Australia Housing Finance surge and China
Coronavirus updates; awaiting UK Q4 GDP and gamut of monthly activity
indicators, US NFIB survey and JOLTS Job Openings; Powell, Lagarde &
Carney top busy run of Fed, ECB & BoE speakers; US 3-yr, Netherlands 6-yr
- Australia: mortgage lending surge clearly key in RBA's less dovish turn
- UK Q4/Dec GDP: seen flat lining, but rebounding from Nov drop, but very
historical, extent of Q1 rebound key to outlook
- US NFIB: further gain expected, paced by strong labour market indicators
- Powell likely to trot out familiar upbeat Fed narrative on economy, but
underline concerns on inflation; money market ops comments also in focus
- Audio preview:
https://www.mixcloud.com/MOstwaldADM/adm-isi-morning-call-11-january-2020/
..........................................................................
********************
** EVENTS PREVIEW **
********************
The volume of central banker speakers is very large today, though it is debatable whether they will offer any genuinely policy outlook changing insights. Fed's Powell heads up with 'Episode One' of what used to be call the "Humphrey-Hawkins testimony on monetary policy", with Bullard, Daly, Kashkari & Quarles also on hand, from the BoE there are carney, Cunliffe and Haskel, and from the ECB there are Lagarde, Lane & Schnabel. The UK dominates the data schedule with provisional Q4 GDP and the usual run of monthly activity indicators following the soft BRC Retail Sales report, with the overnight Australia Housing Finance data requiring attention; with the US looking to NFIB Small Business Optimism and JOLTS Job Openings. Hilton Worldwide may be the pick of the day's corporate earnings as attempts are made to gauge the fall-out on tourism globally from the Coronavirus, which will remain the key overarching theme. Government bond supply sees the Netherlands sell 2026 DSL, and the USA kick off its quarterly refunding with $38.0 Bln of 3-yr. Of that overnight data, the stand out item was the 4.4% m/m surge in Australia's Housing Finance (vs. expected 1.6%, Nov 1.9%), which underlines why the RBA has taken a less dovish turn, with governor Lowe opining last week "If people borrowed too much now it could introduce a vulnerability that could come back to hurt us". Given Australia is amongst the worst countries in terms of household debt to income ratios (189%), Lowe's push back in light of these lending numbers are wholly unsurprising!
** U.K. - Q4 GDP, Dec Index of Services, Industrial Production & Trade **
- Today's rash of data largely predates December's election and per se has little relevance to the BoE policy outlook, though it will be recalled that the unexpectedly sharp fall 0.3% m/m fall in November monthly GDP was the prompt for markets to partially discount a rate cut at the January MPC meeting. Eminently BoE 'guidance' at said meeting leaned quite heavily against the probability of a rate cut, and if today's readings turnout around or above the consensus for 0.2% m/m for December GDP and Index of Services (Q4 prov. seen flat q/q) and a (modest) 0.5% m/m recovery in Manufacturing Output, following a steep -1.7% m/m in December, then there may be some further push back on rate expectations. In the detail of Q4 GDP, Private Consumption is seen up just 0.1% q/q (vs. Q3 0.3%), with Govt Spending seen bouncing back from -0.6% in Q3 to +0.5% in Q4, with a more modest positive contribution expected from trade (Exports 1.8% q/q vs. Q3 7.9%, Imports -0.1% q/q vs. Q3 -0.3%).
** U.S.A. - Powell testimony, Jan NFIB Small Business Optimism **
- NFIB Small Business Optimism is forecast to pick up to 103.3 from December's 102.7, on the assumption of a modest from a the signing of the 'phase on' US / China trade deal, and no impact (as yet) from the Coronavirus outbreak. The already published Plans to Hire Index was unchanged at 19%, though this disguised a jump in Net Compensation (36 vs 29) and Positions Hard to Fill (37 vs. 33). But ws with any upside surprises in today's Dec JOLTS Job Openings, this is likely to be seen as overall rather moot to the Fed's policy plans. Powell's written testimony, the so-called 'Monetary Policy Report' published on Friday https://www.federalreserve.gov/monetarypolicy/2020-02-mpr-summary.htm was wholly unsurprising and echoed the recent post Fed meeting press conference, sounding an upbeat note on the economic outlook, despite some uncertainties around the coronavirus outbreak, while emphasizing dissatisfaction with below target inflation, which most commentators see pointing to some adjustment to policy implementation (effectively running inflation / growth a little hot to achieve some "symmetry" on inflation) in the upcoming review. The other key issue will of course relate to the Fed's operations to smooth the functioning of US money markets, following September's repo debacle, which demand at last week's term operations suggest remain extant, if currently 'below the surface'. Quarles speech last week offered a solution, and is very well reviewed by FT Alphaville's Claire Jones here: https://ftalphaville.ft.com/2020/02...e--money--Treasuries-would-calm-repo-markets/
