North American News
US Equities Hold Steady for Second Consecutive Day, Cap Off Strong Week
- Closing changes for the main North American equity markets
Closing changes:
- S&P 500 +0.2%
- DJIA +0.3%
- Nasdaq Comp flat
- Russell 2000 +1.0%
Weekly:
- S&P 500 +2.5%
- DJIA +1.4%
- Nasdaq Comp +3.2%
- Russell 2000 +3.6%
As the weekly chart sets the stage for a potential showdown, all eyes are on the July highs, promising an exciting battle of market forces. However, eager investors and traders will need to exercise patience, as North American markets are set to remain closed on Monday for a holiday. The anticipation grows as we await Tuesday’s trading session to gauge the outcome of this intriguing market moment.
US August non-farm payrolls +187K vs +170K expected
- August 2023 US employment data from the non-farm payrolls report
- Prior +187K (revised to +157K)
- Two-month net revision -110K vs -49K prior
- Unemployment rate 3.8% vs 3.5% expected
- Prior unemployment rate 3.5%
- Participation rate 62.8% vs 62.6% prior
- U6 underemployment rate 7.1% vs 6.7% prior
- Average hourly earnings +0.2% m/m vs +0.3% expected
- Average hourly earnings 4.3% y/y vs +4.4% expected
- Average weekly hours 34.4 vs 34.3 expected
- Change in private payrolls +179K vs +150K expected
- Change in manufacturing payrolls +16K vs 0K expected
- Household survey +222K vs +268K prior
- Birth-death adjustment +103K vs +280K prior
Atlanta Fed GDPNow steady at 5.6%
- GDP tracker from the Atlanta Fed unchanged today
The Atlanta Fed left its GDP tracker for Q3 unchanged today:
After this morning’s releases from the US Census Bureau, the US Bureauof Labor Statistics, and the Institute for Supply Management, an increase in the nowcast of third-quarter real gross private domestic investment growth from 11.8 percent to 12.3 percent was offset by decreases in the nowcasts of third-quarter real personal consumption expenditures growth and third-quarter real government spending growth from 4.3 percent and 2.5 percent, respectively, to 4.2 percent and 2.3 percent.
US August final S&P Global manufacturing PMI 47.9 vs 47.0 prelim
- Final August US PMI from S&P Global
- Prelim 47.0
- Prior was 49.0
US August ISM manufacturing PMI 47.6 vs 47.0 expected
- ISM manufacturing PMI for August 2023 highlights
- Prior report 46.4
- Prices paid 48.4 vs 43.9 expected. Last month 42.6
- Employment 48.5 vs 44.2 expected. Last month 44.4
- New orders 46.8 vs 47.3 prior
Comments in the ISM report:
- “Further reductions in customer orders due to the economic situation and also their working down of own inventories. Backlog is dwindling, but still showing robust revenue.”[Computer & Electronic Products]
- “Demand still weak.Customer inventories are getting depleted; however, we are not seeing a real uptick in demand. General supply conditions are softening.” [Chemical Products]
- “Still seeing a slowdown in orders. We’re continuing to ship to maxcapacity, with supply constraints still a real part of our day-to-daybusiness operations.” [Transportation Equipment]
- “Customer orders have softened. This is likely due to customers’ increased confidence in the supply chain, (which) has them reducing their inventories. Customers are also being pinched with higher interest rates.Additionally, consumers are feeling their purchasing powereroded by stubbornly high inflation, so they are purchasing less.” [Food, Beverage & Tobacco Products]
- “Fourth quarter orders falling short of projection and indicating a slowdown in customer demand, though the first quarter forecast remains solid. Unclear if this is an inventory correction. Logistics stabilized and costs are matching 2019. Shortages limited to only a few items now, but suppliers are hesitant to add or replace labor needed in light of slowing demand.” [Fabricated Metal Products]
- “General slowdown in business at the end of the third quarter. Forcapital equipment additions, our customers are buying only what theyneed for specific jobs and not adding any capital fleet material for potential future work.” [Machinery]
- “There is additional softening in the market. Customers are hesitant to provide extended forecasts with today’s economic uncertainty.” [Electrical Equipment, Appliances & Components]
- “Business continues to remain strong with sales and profits both ahead of plan. The bookings were below what we planned, but that was expected due to fewer working days and summer vacations.” [MiscellaneousManufacturing]
- “The manufacturing sector continues to be slow, and the low marketprices make it difficult to stay profitable. On the positive side, laborers are showing enthusiastic employment interest. Rising energy and fuel prices are of concern to our company.” [Paper Products]
- “Business is beginning to improve moderately. Still well below 2022 levels, but it appears that the ‘great inventory rebalancing’ is finally coming to fruition.” [Plastics & Rubber Products]
- “Automotive volume remains strong in preparation for the United AutoWorkers’ potential strike at Ford, General Motors and Stellantis.Contingency plans in place for sub-tiers. Continue to have issues recruiting general labor employees. Operational efficiency suffering due to a lack of human resources. Order book remains strong and ahead of 2022.” [Primary Metals]
- “(The Federal Reserve’s) actions to increase borrowing costs has dampened demand for residential investment. Recently, this slowdown plateaued somewhat, with demand stabilizing. The outlook for 2024 remains uncertain, and we continue to be cautious about building inventories.” [Wood Products]
The inventories metric is an interesting one as it makes new lows:
Goldman Sachs now expect only a 20% chance of a US recession in the next 12 months
Goldman Sachs preface their expectation with “We see a below-consensus”
GS have been consistently below consensus with this expectation.
- We see a below-consensus 20% probability of entering a recession over the next year
- as we think taming inflation will not require a recession
- we expect the unemployment rate to end the year at 3.5% and remain there for the next few years
JP Morgan revise their Q3 US real GDP forecast to 3.5% (from 2.5%)
JP Morgan have lifted their economic growth projection based on a ‘strong start for consumer’.
Citing (in summary):
- The main details of the July personal income and spending report came out pretty close to our expectations.
- Real consumption jumped 0.6% in July, nominal income rose 0.2%, and the headline PCE price index rose 0.2% (3.3% oya) while the core PCE price index increased 0.2% (4.2%oya).
- While there weren’t big surprises in today’s report, we are now revising our 3Q real GDP growth forecast from 2.5% to 3.5% saar. We had been noting upside risk to our earlier estimate for a while and we now have almost the full set of relevant source data for the first month of the quarter in hand. Furthermore, the downward revision to 2Q inventories released yesterday also was supportive of 3Q growth.
US July construction spending +0.7% vs +0.5% expected
- US construction spending for July 2023
- US construction spending for July 0.5% expected
- total construction spending $1,938.4 billion last month
- Construction spending year on year +3.5% prior
- private construction +0.5% prior
- residential construction +0.9% prior
- nonresidential construction 0.0% prior
Fed’s Mester: Inflation still too high, but sees progress
- Comments from the Cleveland Fed President
- Job market still strong amid signs of rebalancing
- 3.8% jobless rate is still low
- Main Fed debate is how restrictive policy needs to become and for how long.
- Future policy decisions will be based on incoming data
- Fed must balance risks when setting rate policy
UBS forecasts the S&P 500 to 5200 if AI proves to be a game changer (& 2 other factors)
Equity analysts at UBS have raised their June 2024 price forecasts for the S&P 500 benchmark index to 4700 citing an expectation that earnings growth will gather pace in 2024:
- expects S&P 500 EPS of $220 (0% YoY, +4% YoY ex-energy) for 2023 and $240 (+9% YoY) for 2024
- “The more resilient economic activity is having a favorable impact on corporate profits. With second quarter earnings season largely complete, the results give us conviction that S&P 500 EPS growth has likely troughed,”
- 2023 year-end target for the S&P 500 is 4,500
- “Stocks should be able to climb a bit higher in 2024 as earnings growth improves and the market begins to anticipate eventual Fed rate cuts if inflation continues to trend to the Fed’s target”
UBS says that if AI really proves to be a game-changer, and economic growth proves to be resilient, and inflation “cools quickly” the index could hit 5200:
- U.S. recession and high inflation could see it drop to 3,500
Canada Q2 GDP -0.2% vs +1.2% expected
- Second quarter Canadian GDP data, quarter-over-quarter annualized
- Q1 was +3.1% (revised to +2.6%)
- Q/Q not annualized 0.0% vs +0.8% prior (revised to +0.6%)
- GDP + vs +2.21% y/y in Q1
- Implicit price +0.7% q/q vs +0.2% prior
- Exports +0.1% vs +2.4% prior
- Imports +0.5% vs +0.2% prior
- Household spending on goods +0.1% vs +1.5% prior
- On services 0.0% vs +1.3% prior (revised to +1.1%)
- June monthly GDP -0.2% vs -0.2% expected
- July advance GDP 0.0%
Canada August S&P Global PMI 48.0 vs 49.6 prior
- Canadian August manufacturing data
- Prior was 49.6
- Fourth month below 50
- Lowest since June 2020
- Fifth straight decline in new orders; lowest since March
Commenting on the latest survey results, Paul Smith, Economics Director at S&P Global Market Intelligence said:
“Canada’s manufacturing sector continued to struggle during August, with output and new orders falling at solid rates. Firms responded by cutting purchasing and utilising existing inventories, and signalled some worries over the potential for demand weakness to linger in the months ahead.
“Despite further signs of product supply stability and a further drop in demand for inputs, inflationary pressures picked up as firms throughout the supply chain continued to push higher operating expenses onto their clients.
“Such persistence in inflation, albeit at much lower levels than typically seen since the onset of the pandemic, will naturally be a concern for policymakers. However, such worries are somewhat offset by the news that job shedding continued in August – and to the greatest degree since June 2020. This latest sign of weakness in the labour market may well therefore be enough for the Bank of Canada to take a pause in its monetary policy tightening cycle.”
Commodities
Gold’s advance was held down by strong US ISM PMIs
- XAU/USD rose to a daily high of $1,952 and then got rejected by 100-day SMA, retreating to $1,940.
- US yields initially dropped after mixed US NPFs but recovered after strong US ISMs from August.
At the end of the week, the Gold spot price XAU/USD erased daily gains, retreating towards the $1,940 area. After initially retreating, the US yields recovered during the American session, but still the yellow metal will set a winning week of more than 1%.
The highly anticipated US Nonfarm Payrolls report from August showed mixed figures. On a positive note the headline’s NFPs rose to 187,000, higher than the 170,000 expected and the previous 157,000. Average Hourly Earnings came in soft, increasing by 0.2% MoM vs. the 0.3% expected. Unemployment rose to 3.8% in the same month, against all forecasts.
Russia’s Novak will announce his crude oil output plans next week
ANZ on further cuts:
- Crude oil prices rose amid a broad risk-on tone across markets.However, news that Russia agreed further OPEC+ cuts amplified the move.Deputy Prime Minister Alexander Novak is expected to announce the plans next week.He said earlier this week Russia was in discussion with OPEC+ partners about extending its oil export cuts in October.It had already committed to a cut of 300kb/d for September.
- This comes amid signs of tightening in the physical market. US commercial inventories fell 10.6mbbl last week. Signs of stronger demand were also evident in the product market, with implied gasoline demand (on a four-week basis) pushing higher for the first time in three weeks.
Baker Hughes US oil rig count unchanged this week
- Baker Hughes US oil rig count falls for the eighth week in a row
- Oil rigs unchanged at 512
- Gas rigs down 1 to 114
- Oil rigs down 16% from the peak
WTI crude oil breaks the August high touches $85 for the first time since November
- Oil could be breaking out
Today is the seventh straight day of gains for oil and it’s broken out to the highest levels of the year. The $85 level has been a barrier for crude this year but yesterday Russia’s Novak said that next week OPEC+ will announce a new supply agreement. He didn’t say whether that would entail deeper or prolonged cuts but it’s set off some speculation. The subtext is also that Russia and Saudi Arabia continue to work hand-in-hand, which suggests a floor at $70 for crude.
In addition, the latest rounds of stimulus from China suggest that tail risks around a sharp slowdown in the Chinese economy are receeding. At the same time, the odds of a recession in the US and Europe are rising so the demand side could be a problem as well.However at the moment, the market is somewhere around 2 million barrels per day undersupplied so inventories are being drawn down. So long as OPEC stays united and shale operators remain disciplined, the bulls are in charge.
EU News
European equity close: UK stocks make gains but Germany slumps
- Closing changes for the main European bourses
It was a round trip in the DAX as it started soft, recovered and then finished on the floor.
On the day:
- Stoxx 600 flat
- German DAX +0.6%
- Francis CAC -0.3%
- UK’s FTSE 100 +0.4%
- Spain’s Ibex -0.6%
- Italy’s FTSE MIB -0.6%
On the week:
- Stoxx 600 +1.5%
- German DAX +1.3%
- Francis CAC +0.9%
- UK’s FTSE 100 +1.8%
- Spain’s Ibex +1.2%
- Italy’s FTSE MIB +1.6%
Eurozone August final manufacturing PMI 43.5 vs 43.7 prelim
- Latest data released by HCOB – 1 September 2023
- Prior 42.7
HCOB notes that:
“These numbers aren’t as terrible as they might look at first glance. Obviously, the overall PMI manufacturing index, sitting at 43.5, suggests pretty noticeable weakness in this sector. However, all of the twelve subindices have moved upwards or remained practically unchanged, showing that the downward trend from the past few months is starting to lose steam across the board.
“Businesses are still holding back from making big staff cuts, even with a substantial drop in output over five months. This does not bode well for productivity or output per head, but provides some stability for the economy as a whole as people do not lose their income.
“Looking at the PMI price indices, companies were able to keep part of the reductions of input costs for themselves since spring of this year, thereby increasing their profit margins. However, the experience of 2020 and 2021 shows, that on the way up this development tends to reverse and margins suffer.
“The driver of the downturn has been the destocking cycle. There are tentative signs, however, that this process is nearing its end as companies took their foot off the gas when it came to reducing the stock of purchases in August.
“Germany remains a negative outlier among the big euro countries.This will fuel the discussion about Germany being the sick man of Europe, even though the nation continues to be among the most diversified economies.”
Spain August manufacturing PMI 46.5 vs 48.8 expected
- Latest data released by HCOB – 1 September 2023
- Prior 47.8
HCOB notes that:
“Manufacturing output took another hit in August, shrinking for the fourth straight month and a bit faster than last month. We are pretty sure, that Spain’s manufacturing sector has entered recession, starting in the second quarter. Our expectation is that the industry’s slide has gotten worse, reaching about -1% this quarter. This is the result of our GDP nowcast which takes among other things the PMI figures into consideration.
“Weakness stems above all from domestic demand. While new export orders took a dive at about the same pace as in July, the downturn in total new orders picked up notably. In a similar way, companies quickened the pace of trimming down material purchases. Thus, in the short term it will get worse before it gets better.
“While the big picture isn’t all that positive, manufacturers are keeping their spirits up in a way. An increased share of respondents were confident about an increase in output in 12 months from now. This fits into the observation that employers ceased to cut staff, after two months of modest reductions.
“Deflationary pressures eased somewhat. Input prices are still declining, but not dropping as much as they did in July. Correspondingly, the pressure to cut output prices softened too.”
France August final manufacturing PMI 46.0 vs 46.4 prelim
- Latest data released by HCOB – 1 September 2023
- Prior 45.1
HCOB notes that:
“France’s manufacturing sector could now enter a recession in the third quarter. The intermediate goods sector is the main drag on the industry, comfortably offsetting the marginal growth seen in the consumer goods segment. There are not many signs that suggest an improvement in manufacturing lies ahead in the coming months.
“Manufacturers are still having a tough time getting new orders. The HCOB PMIs for new orders overall and new orders from abroad remain in deep contraction territory. The meagre order situation is affecting companies’ expectations, as they are becoming more pessimistic about the future.
“The manufacturing industry’s struggles are also evident in the jobs market. The HCOB employment PMI stands at its lowestlevel since the start of the COVID-19 pandemic in 2020, with the pace of job cuts increasing from the previous month.The pessimistic outlook of companies, caused by the poor order situation, plays a major role here.
“There’s a ray of sunshine on the price front. Input prices continued to fall sharply, with the companies surveyed reporting falling raw material and energy prices. Companies in the intermediate goods sector in particular reported falling costs. Output prices fell again, too, although at a much slower pace than input prices. Against the background of a historically highinflation rate, this is encouraging news overall, so inflation can be expected to fall further.”
Germany August final manufacturing PMI 39.1 vs 39.1 prelim
- Latest data released by HCOB – 1 September 2023
- Prior 38.8
HCOB notes that:
“The darkest hour is just before dawn. This may be the situation the German manufacturing sector is in. To be sure, output falling at the steepest rate since 2020 doesn’t seem to provide hope in any way. However, the pace of destocking of inputs has slowed a little bit and the deterioration of new orders has stabilised. At the same time, companies continued to be reluctant to make substantial job cuts. It looks as if the manufacturing sector is starting to bottom out, even though this process will take a while.
“Our GDP nowcast for manufacturing, which considers the HCOB PMI indicators, suggests that output should shrink by almost 1% in the third quarter. Nevertheless, we are confident that the destocking cycle will come to an end during the fourth quarter and that should set a good tone for 2024.
“The backlog of work is still shrinking at a fast pace, and so are export orders. Having said this, the rates of contraction have slowed down a bit, which fits into the picture of global manufacturing bottoming out. “There is some good news for companies, as a softer downturn in factory gate charges suggests that their erosion of pricing power seems to have lost some momentum.”
Italy August manufacturing PMI 45.4 vs 46.0 expected
- Latest data released by HCOB – 1 September 2023
- Prior 44.5
HCOB notes that:
“The manufacturing recession, which started mid-last year continues to stretch out, extending most likely into the third quarter. The HCOB Manufacturing PMI Index for July registers at 45.4, reflecting a 0.9 index point increase from the previous month.
“Once more, overall orders felt the squeeze, mostly due to overseas demand. The continued slump in purchases of materials is further evidence of the weak demand situation. This trend appears to be exerting influence on the hitherto resilient Italian labour market as well. For the first time since August 2020, manufacturers are trimming their workforce numbers.
“Supply chain issues and high input costs are history now, owing mainly to the global slump in demand. Suppliers’ delivery times continue to shorten markedly, while the descent in input costs is presently occurring at a more gradual pace. This state of affairs seemingly confers no exploitable advantage upon enterprises. The surveyed companies divulge an excess of manufactured goods compared to those in demand, thereby exerting detrimental effects on stocks of finished goods.
“It remains remarkable how sanguine producers are about the future, with confidence about prospective output again above its long-term average. Companies are pinning their hopes on a resurgence in goods demand in the upcoming year.”
Italy Q2 final GDP -0.4% vs -0.3% q/q prelim
- Latest data released by Istat – 1 September 2023
UK August final manufacturing PMI 43.0 vs 42.5 prelim
- Latest data released by S&P Global – 1 September 2023
- Prior 45.3
S&P Global notes that:
“August saw a further deepening of the UK manufacturing downturn. The PMI sank to a 39-month low as output and new orders contracted at rates rarely seen outside of major periods of economic stress such as the global financial crisis of 2008/09 and the pandemic lockdowns.
“Manufacturers reported a weakening economic backdropas demand is hit by rising interest rates, the cost-of-livingcrisis, export losses and concerns about the market outlook. While this is being felt across the manufacturing industry, business-to-business companies are especially hard hit.Intermediate goods producers saw the steepestdrops in output, new orders and employment as a result.
“The downturn is also forcing companies into a more defensive posture. Purchasing activity, inventory holdings and staffing levels were all cut back in August as manufacturers strived to control costs, protect margins and operate in a much leaner and efficient manner.
“The ‘plus’ side of the downturn is that input costs are now falling at the quickest pace since January 2016and inflationary supply chain issues are abating, whichshould help feed through to lower goods price inflationin the coming months. The survey data therefore suggest policymakers will become increasingly focused on concerns over the economy’s health as they mull the need for further rate hikes.”
UK August Nationwide house prices -0.8% vs -0.2% m/m prior
- Latest data released by Nationwide Building Society – 1 September 2023
- Prior -0.2%
Switzerland August manufacturing PMI 39.9 vs 40.0 expected
- Latest data released by Procure – 1 September 2023
- Prior 38.5
Switzerland August CPI +1.6% vs +1.5% y/y expected
- Latest data released by SECO – 1 September 2023
- Prior +1.6%
- Core CPI +1.5% y/y
- Prior +1.7%
BOE’s Pill: We have not seen a downturn in core inflation which would reassure us
- Remarks by BOE chief economist, Huw Pill
- Need to be particularly wary about letting an inflation persistence dynamic set in
The BOE still needs to hike rates again, so the headline remark definitely sides with that. The OIS market is pricing in ~76% odds of a 25 bps rate hike for later this month currently.
ECB’s Vujčić: We won’t know in Sept, October or even November where the terminal rate is
- Remarks by ECB policymaker, Boris Vujčić
- Economic activity is slowing faster than we forecast
- Softening of economy may help bring down inflation faster
- But labour market resilience still an upside risk to inflation
ECB’s Villeroy: Our options are open at the next and upcoming rate meetings
- Remarks by ECB policymaker, Francois Villeroy de Galhau
- Underlying inflation has peaked since April and appears to have begun its decline
- But this encouraging sign is still far from sufficient
- Our options are open at the next and upcoming rate meetings
- We are very close to a peak in interest rates
- But far from a point where we could consider rate cuts
- Keeping rates high long enough matters more than the level
Forecast for the European Central Bank to pause hiking in September
Nordea’s assessment remains that the Bank has finished hiking rates:
- The monetary policy account from the ECB’s July meeting did not offer much guidance on what the ECB would do at its September meeting
- “The activity data since the July meeting has been weak, while inflation has proved to be sticky. In fact, stagflation risks were mentioned twice in the account. A few of the more hawkish Governing Council members have talked in favour of another hike lately, while most, including Executive Board member Schnabel today, have kept an open mind
- “We stick to our long-held baseline that rates have peaked at 3.75%, and think the ECB will pause hiking in September, while retaining a tightening bias. It will be a close call, though, and there may be an intense battle ahead between those in favour of hiking and the ones wanting to keep rates unchanged at the ECB’s September meeting
Other News
China to cut home-buyers’ minimum down payment, and mortgage rates
A joint statement from the People’s Bank of China and National Administration of Financial Regulation on Thursday China time that homebuyers’ minimum down payment will be reduced and banks will be allowed to lower rates on existing mortgages.
- first-time homebuyers’ minimum down payment will be 20%
- second-time buyers at least 30%
- mortgage interest rate for first-time buyers should be no less than the level of 20 bps over the loan prime rate (LPR)
- lowest mortgage interest rate limit for second-time homebuyers should be no less than 20 basis points (bps) over the LPR
Chinese media with the report, saying:
- The optimization aims to fit the major changes in supply and demand in China’s housing market, while better meeting inelastic housing demand and promoting the stable, healthy development of the real estate market, read the notice.
- It stressed that the country is sticking to the position that houses are for living in, not for speculation.
China data: Caixin/S&P Global August 2023 Manufacturing PMI: 51.0 (expected 49.3)
Caixin/S&P Global August 2023 Manufacturing PMI
- expected 49.3, prior 49.2
China reportedly to take more action in order to try and revive property sector
- Reuters reports, citing four people familiar with the matter
The additional measures will include relaxing home-purchase restrictions and removing price caps on new homes. It is said that these measures will be implemented in the coming weeks and that they have been under consideration over the past few months now. The sources say that the call to action comes as existing policies have failed to sustain the property sector rebound earlier this year.
The lifting of home-purchasing restrictions will be for non-core districts of major cities like Beijing and Shanghai. Meanwhile, the removal of price caps will allow developers to basically raise or lower home prices moving forward.
People’s Bank of China to cut FX RRR from 6% to 4% from September 15
People’s Bank of China said it will cut the amount of foreign exchange reserves that financial institutions must hold, a move seen as aimed at slowing the yuan’s recent depreciation.
- PBoC to lower its FX Reserve Requirement Ratio by 200 basis points (bps) to 4% from September 15th
This will free up some dollar liquidity and support the yuan. The PBOC previously cut the FX reserve requirement ratio for financial institutions by 200 basis points in September 2022 in a bid to rein in a weakening yuan and make it less expensive for banks to hold dollars.
ICYMI: China’s State Council announced an income tax reduction aimed at consumption boost
Chinese state media, Xinhua, had the news that the State Council issued a statement that China will further reduce individual income tax for those who have children to raise or elderly to support.
- the measure includes higher additional deductions for individual income tax
- special additional reductions for children’s education and caring for babies under the age of 3
- while those for tending to elders were also raised
The Ministry of Finance and the State Taxation Administration added that the deductions will “ease financial burdens for families to raise children and care for the elderly, improve livelihoods and raise residents’ consumption capacity”.
Japan data: Q2 Corporate Capital spending +4.5% y/y (vs. expected +5.4%)
Business capex data from Japan for the April, May & June quarter of 2023
+4.5% y/y
- expected +5.4%, prior +11%
- for the q/q -1.2%
Sales for the quarter +5.8% y/y while profits rose 11.6%
Japan Jibun final August PMI: Manufacturing 49.6 (prior 49.6)
Japan S&P Global / Jibun Bank final Manufacturing PMI for August 2023
Japan finance minister Suzuki says sudden FX moves are undesirable
Japan finance minister Suzuki with comments crossing – nothing much new from him.
- Forex moves should be set by the market
- Sudden FX moves are undesirable
- FX rates should reflect fundamentals
South Korea August exports dropped 8.4% y/y, imports down also
Trade data from South Korea for August 2023:
Exports -8.4% y/y
- expected -11.6%, prior -16.4%
Imports -22.8% y/y
- expected -23.2%, prior -25.4%
Australia Manufacturing PMI final for August: 49.6 (prior 49.6) & strongest since February
From the report today:
- “The PMI index, which incorporates a range of sub-indexes to capture the cyclical position of the manufacturing sector was unchanged at 49.6 in August, the strongest since February and pointing to recovery in recent months.
- “The demand for staff across Australia’s manufacturing sector has not abated despite the slowdown in activity earlier in the year. At no point has the employment index dipped below 50 in 2023 so far and is now moving higher in expansionary territory.
- “Australia’s manufacturers are not shedding labour to any great extent and would be expected to add to their staffing levels if a genuine recovery in activity is established into 2024. As we are seeing overseas, the unique element of the current economic cycle appears to be the resilience of labour demand.
- “It is hard to forecast a major slowdown for an economy that continues to generate jobs. Even though the Australian manufacturing sector is treading water in 2023, there are no indications of a major downturn in overall activity which implies very little chance of a broader recession in the economy over the next six months.
- “The price indicators point to on-going cost and inflation pressures in the new financial year.
Australian data: July home loans -1.9% m/m (expected -1.0%)
Australia Home Loans for July -1.9% m/m
- expected -1.0% prior -3.0%
Invest Housing loans -0.1% m/m
- prior +1.3%
RBA to keep cash rate unchanged next week – poll
- The latest from Reuters’ poll on economists about the RBA outlook
- 34 of 36 economists see the RBA leaving the cash rate unchanged next week
- 21 of 35 economists see the RBA hiking to 4.35% or higher by year-end
- The remaining 14 economists forecast no more rate hikes for the year
New Zealand data – August consumer confidence 85.0 (vs. prior 83.7)
The latest from the ANZ-Roy Morgan Consumer Confidence Index, for August 2023.
Up 1.6% m/m to 85.0 and still deeply pessimistic
- July was -2.1% to 83.7
ANZ note two key points:
- Consumer confidence rose 1 point in August to 85.0, with the lift driven by an increase in the question of whether it’s a good time to buy a major household item, which rose from -39% to -31%.
- Inflation expectations were virtually unchanged at 4.6%.
More on those inflation expectations in the survey:
- inflation expectations remain stuck at levels inconsistent with the inflation target, but are at least pointing in the right direction.
- Consumers get the forecasting prize for picking the surge in CPI inflation well before anyone else did, so it’s worth paying attention to what they think on the way down as well.
- Consumer expectations will also matter for wages, though to what extent depends on labour market tightness.
- Overall, consumer inflation expectations are consistent with our belief that while a fall in CPI inflation to 4-5% is pretty much baked in at this point, ongoing progress from there remains very much a matter of conjecture and debate.
New Zealand’s main opposition party wants to quickly remove the RBNZ’s dual mandate
Nicola Willis is the finance spokesperson for New Zealand’s main opposition party.
Willis spoke in an interview with Bloomberg TV and said that if her party won power it’d quickly remove the employment mandate from the Reserve Bank of New Zealand, leaving only the inflation mandate.
In 2017, the NZ Labour Party won office. The new government overhauled the Reserve Bank, and in doing so expanded its mandate to include both stable prices and maximum sustainable employment. Its this second part that Willis wants to remove, effectively reinstating the RBNZ’s previous sole mandate on inflation targeting.
Willis:
- this “would build confidence that the Reserve Bank will be focused on that inflation mandate”
Willis cites that including employment in the mandate hasn’t had much impact on the RBNZ’s policy decisions since the change, so removing it won’t make much difference. But doing so will bring more clarity to monetary policy.
Cryptocurrency News
Bitcoin Faces Downward Pressure, Nears Critical Support Levels
- ETF Hype Fizzles Out as Bitcoin Faces Short-Term Challenges
Bitcoin Wraps Up a Wild and Volatile Week on a Sour Note, Tumbling $570 (2.2%) to $25,445, Teetering Close to August Lows
The cryptocurrency market has experienced a week filled with twists and turns, culminating in Bitcoin’s unfortunate 2.2% drop to $25,445, perilously close to revisiting its August low of $25,350.
Earlier in the week, Bitcoin witnessed a sudden surge, largely attributed to the unexpected outcome of a legal battle between the SEC and Grayscale. The court ruled against the SEC, finding improper dismissal of a spot ETF proposal. This development fueled optimism among investors, as it hinted at the possibility of a future Bitcoin ETF approval.
However, the optimism has since given way to uncertainty, as the SEC seems to be in no rush to make a decision on Bitcoin ETFs. Their recent decision to delay judgments on several Bitcoin ETF proposals that were set for this week has injected a sense of caution into the market. This slow-moving regulatory approach is generating apprehension among traders and investors alike.
Adding to the market’s concerns is the potential for significant Bitcoin sales, with speculation arising about Sam Bankman-Fried, a prominent figure in the crypto space. It was reported that his shares in Coinbase were bought back today, leading to speculations that he may consider selling Bitcoin holdings, further increasing selling pressure.
The cryptocurrency market, characterized by its volatility, appears to be in a state of flux as participants grapple with the interplay of regulatory developments, market dynamics, and key players’ actions. As the week concludes, market observers are closely watching for signs of stability or further turbulence in the days ahead.
In any case, there’s some support through $25,000 then down to $24,750 but if that cracks, look out below.
China softens stance as court declares crypto cannot be “seized”, is legal-and-civil property
- The People’s Court in China has approved crypto as legally-protected property, despite a ban by Beijing.
- In crypto-related crimes authorities cannot simply seize crypto assets because they are banned.
- Owners still enjoy individual property rights as funds involved cannot be seized.
China local media has reported a recent development in the crypto realm, marking a watershed moment for crypto holders in the country.According to the report, the People’s Court in China has declared, “Virtual currency is legal property and protected by law.”This comes despite Beijing’s ban of cryptocurrencies two years ago.
China recognizes crypto as legal property
China’s court has classified cryptocurrencies as legal property, recognized under property law and rights.The announcement, was first featured in the Chinese People’s Court Newspaper Article.This explores how the court defines the legality of digital assets in relation to criminal law.
Despite China banning cryptocurrencies and digital assets in 2021, the court determined that digital funds in crypto-related crimes cannot be “seized” since they enjoy the same legal status as other property. The article clarifies that the law should strike a balance between the interests of the “public and individual property rights.”
The development comes two years after Beijing banned cryptocurrencies, a detrimental move that sent mining firms out of the country, and flocking to the US.
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