Bond markets have been supported by some market-friendly data and while Fed speakers were again mixed, it was the more dovish remarks that captured attention.
Fed's Waller inches open the US rate cut door
US and European markets have begun the new week a subdued mood. But core global bond yields are showing some life, lower across the board while the USD is a tad softer too
Insights, Trends & Case Studies
The Aussie dollar came within kissing distance of 66 US cents on Friday
Global inflation slowed in September, including a softening in advanced economy inflation to its lowest level since September 2021. For Australia, we have revised up our forecasts for growth and inflation (in the near-term) while lowering our expected peak in the unemployment rate.
UK best Eurozone on the PMI front in Thanksgiving- thinned markets
Todays podcast US data not supportive of Fed’s inflation quest US Jobless claims fall well below expectations Final U of Michigan inflation expectations revised up UST curve bear flattens. 2y up 6bps to 4.93% US equities ignore data and keep marching higher Oil slips on news OPEC + meeting delayed. Saudis not happy USD […]
Global growth resilient in Q3 but set to slow going into 2024
The FOMC Minutes out 6am Sydney time didn’t do much to excite markets. The euro is a little weaker over the past 24 hours, while the equity market rally has lost some steam.
US equities start the new week in a positive mood, the USD has remained under pressure and after initially edging higher, longer dated UST yields edge lower supported by a well-received 20y Bond auction.
Another choppy night on bond markets with 10yr yields on net little changed and the curve twist flattening slightly.
A choppy session with softer-than expected second-tier US data seeing yields fall, while the USD gained smalls and commodity currencies underperformed
It was a busy 24 hours for data flow globally. Yields partially retraced yesterday’s post-CPI bond rally, while equities have held onto gains.
Bond-fuelled lending to support near-term growth but challenges remain unaddressed
US CPI came in a tenth below consensus on both the headline and core rates, leaving yields sharply lower, the USD weaker, and equities higher.
Subdued start to the week ahead of US CPI tonight
Two events late in the session dominated price action. The first was a poorly received US 30yr Treasury auction. The second was not dovish comments by Powell who sounded still hawkish.
Oil prices down again as demand pessimism deepens
Quiet data wise, but some notable moves in markets.
Homebody investors may love ASX blue-chip stocks and franked dividends, but could be missing out on opportunities in sectors such as artificial intelligence and renewables by ignoring offshore markets.
It was a quiet start to the week for news flow, which was mostly reflected in market movements, though yields are generally higher.
Risk assets had a solid end to the week with softer US economic data releases fuelling the notion that the Fed is done with the current tightening cycle. Front end yields led a rally in UST yields while the USD extended its decline to a third consecutive day.
Risk-on continues in the wake of Wednesday’s FOMC meeting as investors price the aggressive monetary hiking cycle as being closer to the end.
Challenging conditions (particularly in Office and Retail markets) weighed further on commercial property market sentiment in Q3…
The FOMC was on hold as expected. Yields are lower, though most of the moves came ahead of the Fed with soft US data.
Despite everything happening in the world, the AUD’s October trading range was extraordinarily low.
Japanese Yen slumps after only minor BoJ policy tweaks
Risk sentiment started the week on firmer footing. Equities are higher, the US dollar is lower, and US yields were higher. Brent oil lost 3%, back below $88 a barrel.
European and US equities ended the week with a cautious tone. The S&P 500 extended its weekly decline to 2.53% and entering correction territory in the process. Weekend news that Israel has begun a ground invasion of Gaza suggest markets are likely to retain a cautious tone at the start of the new week.
Risk sentiment remained fragile overnight with equities extending recent losses with disappointing earnings outlooks from major tech companies, despite mostly beating on current quarter earnings.
US equities are lower led by the tech heavy NASDAQ index and not helped by a new surge in UST yields. The USD extended yesterday’s gains with the AUD at the bottom of the G10 board, reversing its post CPI gains.
Weaker European PMIs, and potentially some unwind of yesterday’s move, have seen a stronger US dollar the main mover overnight, up 0.7% on the DXY.
A quiet night for data, but a big night for bonds.
Close but no cigar – US 10 year bonds traded to as high as 4.99% on Friday
Fed Chair Powell’s remarks have seen a choppy market response and a steeper curve, but against a backdrop of weak risk sentiment
Global inflation again picked up in August. A key contributor to recent inflation trends has been energy prices, with oil prices increasing since June. For Australia, our forecasts are unchanged. Recent data all point to continued resilience but the ongoing pass through of higher rates and high inflation still suggest consumption growth will soften in H2 2023.
China’s third quarter growth beat expectations; 2023 forecast edges back above target
Higher US yields and 'risk-off' tone see AUD's hard-fought gains undone
Inflation yet to be defeated – policy rates could stay high for longer
Strong US retail sales sees yields rocket – 10yr yield +14bps to 4.84%
Todays podcast Positive risk appetite to kick off the new week Equities higher, S&P500 +1.1% Yields higher, US 10yr +9bp to 4.70% Dollar loses 0.4% on the DXY with AUD an outperformer, +0.8% to 0.6344 Coming up: NZ CPI, RBA Minutes, US Retail, CA CPI, UK Wages, FED & ECB speakers Events round-up NZ: Performance […]
US CPI reverses much of the earlier week market moves
Global markets were relatively stable overnight ahead of tonight’s key risk event of US CPI.
Lower US bond yields and softer US dollar lift AUD back above 0.64
Reaction to the Israel-Hamas conflict triggers a spike in energy prices while German Bunds lead a rally in European bonds with US Treasury futures also pointing to a decline in US Treasury yields. Not all the initial moves have been sustained. The USD is little changed, AUD is up, after being down with Fed speakers favouring holding rather than hiking rates, helping US equities rally while European shares fall.
Stronger than expected payrolls data initially saw yields sharply higher, equities lower, and the USD stronger, though with the unemployment rate steady and earnings growth moderating, those moves were retraced.
Markets mark time ahead of payrolls tonight. Core global yields trade in narrow ranges, the USD loses a bit of altitude while US equities end the day little changed.
The bond sell-off that dominated the early part of the week has been put on pause. Why? NAB’s Taylor Nugent says there are a number of factors, but it’s tomorrow’s non-farm payrolls that will really set the direction for early next week.
A better-than-expected US JOLT report provided rattled markets. US Treasuries led a rise in core global bond yields, equities traded lower and the USD was stronger. USD/JPY gapped lower ( official intervention?) and AUD was the notable underperformer.
The AUD/USD’s 1.9 cents range in September was the narrowest since the 1.74 cents October 2019 range. Still, the USD was in the driving seat, fuelled by “higher for longer” Fed messaging.
The sell-off in global bonds continued with fresh cycle highs being set for longer-term yields. The
Global inflation was higher in July, although this uptick was not broad based – concentrated in a few key emerging markets. For Australia, our forecasts for GDP growth have strengthened marginally, reflecting a slightly stronger than expected result for Q2.
Central banks may be at their peaks, but energy prices pose a risk to disinflation trend
Bond markets are a little feisty ahead of the FOMC meeting tomorrow. NAB’s Taylor Nugent says a hold is still expected tomorrow but there are more signs that inflation isn’t beaten yet.
US equities start the new week in a sedated manner while European counterparts record sharp declines. Front end yields have a led a bear flattening of the UST curve and the USD is a tad softer
The Fed isn’t the only central bank making a call this week. There’s also that expected hike from the Bank of England, plus the central banks of Japan, Switzerland, Sweden and Norway.
Todays podcast ECB opts to hike, but taken as dovish with guidance read as a peak in rates Euro -0.8% and European yields are lower US Retail Sales data stronger in August, though offset by revisions AU Employment bounced in August Coming up: China Activity & MLF rate, NZ Manufacturing PMI, US UMich confidence […]
It was a subdued market reaction to the highly anticipated US CPI print.
Ahead of US CPI tonight, oil prices have ratcheted higher as OPEC+ cuts continue to bite
Todays podcast Tesla leads gains within in US equities Core global yields tick higher USD broadly weaker with JPY and CNY the notable movers JPY gains following Ueda’s interview suggesting openness to policy move this year CNY gains on PBoC strong fix, push against speculators and better data AUD and NZD benefit from spill over […]
US equities manage a marginal gain on Friday, but lower over the week and yields edge higher.
Yields are generally lower globally after a boost to US 2-year yields from lower jobless claims proved short-lived while equities declined.
A rise in Services activity last month confirms the US economy still sits firmly on top of the world
In this Weekly, we take stock of progress rebalancing labour markets in the US and Australia, finding significant progress has been made on a range of indicators even without a sizeable lift in unemployment rates
A softer Caixin Services PMI soured the mood yesterday, with the USD broadly stronger and the AUD the worst G10 performer
It has been a quiet start to the week in Europe and the US with the latter out celebrating Labor Day. US equity futures closed little changed while US Treasury futures are pointing to some small upside pressure on yields.
Neither the Fed nor President Biden could have scripted Friday’s US payrolls report any better had they tried
Overnight, the BoE’s Pill references ‘Matterhorn’ versus ‘Table Top Mountain’ approaches to monetary policy
US equities extend their positive run to a fourth consecutive day with softer US economic data fuelling expectations of a Fed on hold over coming months. UST yields edged lower while European yields rose following stronger than expected German and Spanish inflation data releases. The USD lost ground against EU pairs while the AUD is little changed.
Powell affirmed the Fed will ‘keep at it’ on inflation, but what else happened at Jackson Hole? In the weekly, we pull out some of the key insights, including on the outlook for government debt and the ‘friendshoring’ dynamic.
Aussie retail sales were stronger than expected in July, but World Cup fever was a factor says NAB’s Ray Attrill
Fed Chair Powell’s speech at Jackson Hole did not break new ground. US equities closed the day in positive territory with both the S&P 500 and the NASDAQ recording their first positive week since July. The UST curve flatten with front end yields ticking higher while the USD closed a tad stronger.
Caution prevails in front of Jackson Hole; stocks down, bond yields back up, AUD back lower
Yields were generally lower globally as PMI data came in softer than expectations, with deterioration most pronounced in German Services. The AUD was stronger, as were US equities, with tech leading once again ahead of much anticipated earnings from Nvidia.
US equities traded in and out of positive territory, essentially marking time ahead of NVIDIA’s reporting tomorrow and Fed Chair Powell’s speech on Friday. It was also a quiet FX session while in rates 10y UST yields printed a fresh 16-year high before consolidating.
US yields resumed their grind higher to start the new week, though there was little news to speak of, while US equities where higher.
Yields lower on Friday, but still close to recent cycle highs
It’s been onwards and upwards for global bond yields overnight, and AUD has spent time below 64 cents
Hopes have been raised of a soft landing for the global economy, although a number of headwinds remain. For Australia, our forecasts for GDP growth have strengthened marginally but we continue to expect growth to be well below trend in 2023 and 2024 as the impact of rate rises flows through.
Todays podcast FOMC Minutes show concern about upside risks to inflation US yields higher led by 5bp rise in 10yr Equities were lower, S&P500 -0.8% with declines late in the session Asia equities weighed by China concerns AUD -0.5% against a broadly stronger dollar at 0.6421 Coming up: AU Employment, NZ PPI, JN Machinery Orders, […]
Recent US CPI prints have shown good progress on disinflation. In this Weekly, we look at where those gains have occurred, and what to be careful of when drawing implications for Australia
Soft landing hopes rise but headwinds remain
A stark contrast Tuesday between strong US retail sales and very weak China data
Soft start to Q3 signals a growing chance that China could miss its annual growth target
US equities started the new week on a positive note, notwithstanding a negative lead from Asia. Core global yields have continued their ascendancy while the USD is broadly stronger with negative China sentiment weighing on the AUD and NZD
A higher-than-expected US PPI print contributed to higher yields, while equities ended the week on a muted note.
US Core CPI just 0.160% m/m and 3m annualised rate now 3.1%
Ahead of the July US CPI release tonight US equities closed on the back foot. Oil prices extend recent gains while LNG prices surge following news Australian workers vote to strike. Quiet night in FX land.
Risk appetite has been weighed over the past 24 hours by a trio of soft China data, a surprise ‘windfall’ tax on bank profits in Italy, and a downgrade of a number of small and mid-sized banks by Moody’s.
Northern hemisphere summer holidays and a lack of data has seen markets treading water ahead of US CPI figures on Thursday.
Bond sell-off reverses on softer US payrolls
BoE lifts Bank Rate by 25bps to 5.25% as expected, to limited market reaction. US payrolls tonight
Yields rise, US 10yr hits 4.12% before easing back to 4.08%, highest since Nov 2022
The US Treasury curve bear steepened following news the US government will increase its bond issuance by more than previously thought. US equities recorded small declines and the USD is stronger across the board with the AUD the notable underperformer, RBA on hold and underwhelming China data not helpful.
US, China and local inflation news drove much of the AUD volatility in July
Markets were generally quiet to start to week ahead of key risk events later in the week (BoE Thursday, US ISM Services Thursday, US Payrolls Friday).
Friday’s BoJ announcements made a bigger initial impression on global bond markets than FX
Not much reaction to the ECB, says NAB’s David de Garis, but a big reaction in currencies and Treasurys to the latest US GDP numbers. With a lot of European data today and early next week, things could stay quite ‘whippy’.
Calling a US recession has been a bit like “Waiting for Godot”, the title of the 1953 play by Samuel Beckett.
The US FOMC hiked rates by 25bps to 5.25-5.50% as universally expected.
AUD approaches 0.68, buoyed by China stimulus news and RMB gains
Weak European PMIs have seen yields fall, though moves in US Treasuries retraced latter in the day.
Commercial property market sentiment and confidence moderates in Q2 amid growing economic uncertainty…
US equities closed the week little changed with the S&P 500 in consolidation mode ahead of a new week that includes the FOMC meeting and a busy earnings calendar. UST were little changed and the USD continued its recovery.
US yields higher with Jobless Claims lower than expected
Our forecasts for the global economy are largely unchanged this month we expect growth of around 2.8% in 2023 before slowing to 2.7% in 2024. For Australia, we continue to expect quarterly GDP growth to be flat over the next three quarters, with growth of just 0.5% over 2023 and 0.9% in 2024 as the impact of rate rises flows through.
Another bond rally, this time in the UK with inflation coming in softer than expected.
China’s weak Q2 growth presages weaker global growth
Central bankers globally seem to have switched to a more measured tone recently. Overnight tapas
Underwhelming China economic data has weighed on sentiment, mostly in Asia and Europe with a decline in CNY also spilling over to NZD and AUD. Core global yields are a tad lower while US equities have resumed their upward trajectory.
China’s recovery lost momentum in Q2 and the outlook for the second half remains cloudy
A bear flattening of the UST curve post a better than expected University of Michigan survey so the S&P 500 closed marginal lower while the USD found some support.
After the softer US CPI print on Wednesday the cooling US economy narrative was further supported overnight by a softer than expected US PPI print. Megacaps have led gains in US equities while front end bonds have led a decline in UST yields. The USD is broadly weaker with several FX pairs breaking through key support/resistant levels.
Any significant change to global supply chains will take time
Yields tumbled and risk assets soared as US CPI came in much softer than expected
Ahead of the all-important US CPI release tonight, US equities edged higher again overnight while the UST curve flattened driven by an uptick in front end yields. The USD is broadly weaker, but the AUD has been unable to perform.
Payrolls failed to deliver the upside surprise feared following strong data earlier in the week, seeing some pullback in the USD and short-end yields on Friday.
The RBA met yesterday and held rates steady. Other than that, it was a very quiet 24 hours characterised by thin trading alongside the US 4 July holiday.
A quiet night overnight given shortened pre-holiday trade in the US ahead of Independence Day today.
The AUD/USD price action in June was a story of two halves. Soft US data and a cash rate hike by the RBA helped propel the currency to an intra-month high of 69c, but then concerns over China’s growth outlook and better than expected US data releases weighed in the second half of the month.
Friday capped a risk positive end to the week and the month of June with softer US economic data releases treated as good news. Weaker US consumer spending and inflation boosted US equities with gains over 1%, US Treasury yields traded lower after the data release and the USD closed the week broadly weaker.
The string of positive US data surprises continued overnight with a big drop in Jobless claims and a decent upward revision to Q1 GDP. US Treasuries led a jump in core global bond yields and US equities closed in the green, unperturbed by the move up in yields. Positive US data surprises help the USD reverse earlier losses, but the AUD/USD held its ground aided by yesterday’s stronger than expected retail sales figures.
Fed, ECB, BoE heads reiterate hawkish views; BoJ reiterates dovish stance
Better than expected US data releases and hawkish ECB talk are two main macro themes from the price actions overnight. US equities embraced the positive vibes from Asia and then better than expected US data releases provided an additional tail wind. In contrast, European equities were little changed with hawkish ECB talk dampening the mood. The belly of the curve led a rise in UST yields while the USD lost a bit of ground.
This week we examine some possible budget assumptions for Australian growth, inflation, wages, interest rates and the $A for 2023-24 as well as the context, thinking behind and risks to the forecasts
Quiet start to week with no market fall-out from weekend Russia news. Weaker Yuan a focus.
PMIs on Friday showed Eurozone output growth close to stalling, seeing Europe lead yields lower and the euro fall.
The BoE surprises market with 50bps, Norges Bank less so with its 50bps. SNB opts for a ‘hawkish' 25bps
After relatively robust growth in Q1, global activity looks set to slow in the near term. For Australia, we are seeing increasing signs that activity is slowing sharply after a very strong period of growth in 2022.
Powell added little new information in House testimony, but the US dollar was weaker and equities were lower. UK CPI data surprised higher ahead of the BoE later today
Global growth set to slow as monetary policy bites
Australia’s population growth has surged over the past year. The surprise has been how quickly it has rebounded after borders were re-opened from November 2021.
Soft risk sentiment overall last night which was mostly China driven.
European equity markets have started the new week on the back foot following a negative lead from Asia. Investors are seemingly disappointed by the lack of new news on China’s stimulus, US equities are closed for a holiday with futures contracts pointing to small dips for the S&P 500 and NASDAQ 100.
AUD ends a big if short local week at the top of the G10 currency pile, AUD/USD +2% w/w
Fed pauses in June, but another hike is likely
Weakness in domestic demand led to underperformance in May
US equities have pushed on yet again, shrugging off a string of soft US data releases. The ECB hiked its deposit rate as expected, lifted its inflation forecast and delivered a hawkish guidance. Core European yields climb on the back ECB news with the euro gaining over 1% while soft US data triggers a decline in UST yields with the USD weaker across the board.
Fed pauses as expected but ‘dot plot’ adds two, not one, more rate rises to 2023
Is China finding new markets for its exports?
US CPI was in line with expectations, adding to confidence the FOMC will skip at tomorrow’s meeting even as yields pushed higher. Strong UK labour market saw UK yields surge.
After closing modestly higher on Friday, US equities have started the new week with modest gains, led by big tech. 10y UK Gilts, up 10bps to 4.33%, are the notable movers within core global bond yields on the back of hawkish BoE talk. The USD is a tad higher with AUD retaining its upward trend that has been in place since the start of the month. Oil prices tumble on supply-demand dynamics and another downgrade by GS.
Jump in US jobless claims supports lowers US yields and US$; S&P500 back in bull market
The BoC shocked markets overnight, hiking by 25bps to 4.75%.
In our latest Weekly, Taylor Nugent explores the impact of pandemic swings in population and housing demand to explain the current acute rental market tightness and rapidly increasing rents, as well as when these pressure may ease
It has been a quiet 24 hours in markets with generally small market movements, while the Australian dollar held onto its gains following yesterday RBA rate hike, 0.8% higher against the US dollar.
Markets go into today’s RBA decision ascribing a roughly 65% chance to a pause
A combination of a US debt ceiling resolution alongside a mixed US jobs report, still favouring a June Fed pause, and news that China may be considering further support to its beleaguered property sector boosted risk sentiment (VIX sub-15), major equity indices closed the week with solid gain.
A positive night for risk sentiment with equities up (S&P500 +1.0%; Eurostoxx50 +0.9%), USD down (DXY -0.7%), and yields lower (US 10yr -3.8bps to 3.60% and 2yr -6.4bps to 4.34%).
The AUD fell below 65 cents in May, in doing so re-establishing a more ‘normal’ monthly trading range after two months of highly compressed volatility.
The AUD had fallen to a new post November 2022 following more disappointing China data
Activity – and inflation – resilience continues
After enjoying a long weekend, the US is back with mixed signals coming from equities and bond markets. US Treasuries have led a move lower in core global bond yields while the S&P 500 is unchanged. Oil prices fall over 4% with OPEC + meeting looming large, the USD is little changed, but AUD and NZD struggle, not helped by Yuan weakness.
Public Holidays in the US, UK and Germany made for a very quiet night as far as market moves are concerned.
US equities were higher on Friday as hopes grew of a debt ceiling deal, ahead of news on the weekend that an agreement in principle had indeed been found. US data was strong and Fed tightening expectations firmed.
The US dollar extended its positive streak and yields globally were higher despite mixed economic data as AI-related tech saw US equites higher
Still no sign of breakthrough on US debt ceiling talks, souring risk sentiment.
The absence of a debt ceiling deal weighs on risk sentiment even as Biden calls talks ‘productive,’ while global PMIs reaffirm the stark divergence between services and goods.
A quiet start to the week with little in the way of significant market moves.
Reports of a property rebound appear premature
In this Weekly we explore two key US themes we are tracking closely for the trajectory of rates and inflation, in both Australia and the US
US equities struggled for direction on Friday, ending the day marginally lower. After a choppy session, UST yields closed higher across the curve with the USD broadly weaker, ending a three-day winning streak. Debt impasse did not helping sentiment while Fed Chair Powell expressed a bias for pausing rate hikes in June.
Hopes for a deal on the debt ceiling improved.
Global economic data point to a bounce in growth in Q1, with China providing around 40% of this total. For Australia, we continue to expect growth to be well below trend at 0.7% and 1.2% in 2023 and 2024 respectively – though we have reverted to our previous expected rate call of a peak of around 4.1% and see a material risk that rates reach 4.35%.
Positive soundbites from Biden and McCarthy give hope a debt deal can be reached.
Global growth set to slow from robust Q1 results
Base effects inflate growth in April; still waiting on demand to recover
A flurry of global economic data but relatively modest market movements.
A quiet start to the week with little in the way of new news or top-tier data.
Markets were spoked on Friday by an unexpected rise in US consumer inafltion expectations
The Bank of England raised rates by 25bp as expected, while softer data out of China and the US weighed on risk sentiment
Markets are showing relief that the key US CPI release overnight was not higher than expected
Markets are treading water as we await the outcome from the Biden-McCarthy debt ceiling meeting and the US CPI data release tonight. US and EU equities have ended the day lower while core yields have edged a little bit higher. Fiscal updates revealed contrasting AU and NZ fortunes while cautiousness in the air has favoured the USD.
The Australian budget Tuesday night is likely to feature a small surplus for the current financial year...
US and EU equities have closed with modest gains while core yields extended Friday’s rise. The Fed Senior Loan Officer revealed a modest deterioration in lending standards alongside a drop in demand for loans, so no evidence of an imminent credit crunch. The USD is little changed with NZD leading a modest outperformance by pro-growth currencies.
Payrolls more than solid enough, challenging views of imminent rate cuts
Latest US yield curve movements are giving an even stronger signal of imminent US recession
The NAB Commercial Property Index improved a little further in Q1 but economic uncertainty seems to be weighing on confidence.
US yields were lower and the dollar stronger with the FOMC increasing rates by 25bp as expected and dropping the expectation for further hikes.
Big moves in markets overnight as US regional bank worries reignited, signs of catering in European loan demand, and a sharp fall in US job openings.
Q1 GDP slowdown driven by inventories
US yields are higher and the dollar stronger with little fallout from the failure of First Republic, being acquired by JP Morgan in an FDIC-supported deal.
The last trading day of April had a lot to digest with BoJ policy decision alongside market moving data both in Europe and the US. Equities ended the month on a positive move, core yields drifted lower amid growth concerns while the USD was little changed. JPY was the big underperformer and AUD starts the new week at 0.6601.
Softer US growth but stubbornly sticky prices has seen US yields higher, while US equities recorded their biggest gain since January.
The US share market is split between tech majors, doing well on the back of strong earnings versus Financials (and the rest) which are buffeted by banking uncertainty and recession fears. Core global yields are higher and the USD is weaker largely reflecting EU FX outperformance while the AUD has led a commodity linked FX decline.
Us equities haven fallen sharply, bond yields are lower and AUD/USD is back near 0.66, ahead of CPI this morning.
A quiet end to a choppy week, with some intra-day volatility following stronger than expected PMIs.
Weaker second-tier US data has helped push global yields lower, while disappointing earnings by Tesla (-9.7%) and talk of margin compression dragged down equities.
We continue to anticipate a sharp slowdown in global growth in 2023, while for Australia, there are signs that consumption is plateauing ahead of a likely slowdown later in the year.
We expect CPI on Wednesday to confirm that inflation is past its peak in Q1 but remains well above the RBA’s target. In this Weekly, we outline our detailed forecasts.
The RBA ‘Fit for the future’ review out this morning, with media saying Treasurer Chalmers accepts all 51 recommendations
Bounce in global growth in Q1 won’t last
A quiet overnight session despite the plethora of earnings reports.
Services sector supports growth rebound in Q1, as base effects boost consumption
The uplift in US bond yields continued overnight, supporting the US dollar but not hurting equities
Stronger than expected US data pushed US yields higher and supported a broadly stronger US dollar on Friday.
Todays podcast Soft US PPI helps drive a risk-on rally Adds to views the US Fed is almost done USD falls, and AUD and NZD outperform Yields mixed, equities up ahead of earnings Coming up: US Retail Sales, US Bank Earnings “Love is in the air, everywhere I look around; Love is in the air, […]
US treasuries retraced most of their post-CPI rally overnight with core CPI coming in as expected.
It was a quiet session overnight ahead of key risk events later in the week (US CPI is on Wednesday and bank earnings are on Friday, including Wells Fargo, Citigroup and JP Morgan).
There were no major surprises in Friday’s US NFP report, unlike the prior days weekly jobless claims data.
Tentative recovery: Chinese outbound tourism continues to face constraints
Softer US data saw recession concerns to the fore, with yields lower over the day but some safe-haven dynamics supporting the USD.
Late on Friday, the Treasurer formally received the independent review into the RBA, which has 51 recommendations.
A softer than expected JOLT report shook the market overnight, triggering a bull steeping in the UST. The USD fell with JPY along with European currencies outperforming. Commodity linked currencies lagged the move with AUD the notable underperformer, following yesterday’s RBA decision to pause it tightening cycle. US equities ended a four day rally with pro-cyclical sectors underperforming.
Weak US Manufacturing survey data overnight reversed the impact of higher oil prices, leaving bond yields lower and the AUD higher. It’s all about the RBA today
Following two months of well above-average ranges, the AUD/USD range reduced to just 2.2 cents in March, though the currency did hit a 4-month low of 0.6565.
A softer than expected US Core PCE Deflator (0.3% m/m vs. 0.4% expected) helped push yields lower on Friday (US 10yr -8.1bps to 3.47%).
It’s a third successive day of relative calm across markets, though an upside surprise to German CPI has seen European yields push higher.
The positive vibes evident during our trading session yesterday have extended overnight with European and US equity indices higher on the day. Movements in rates and FX markets have been more subdued. The USD is a tad stronger in index terms with JPY the notable underperformer. AUD and NZD are also lower with the former not helped by a yesterday’s softer than expected monthly CPI print.
There has been little top-level news flow over the past 24 hours, which has seen markets relatively calm by the standards of recent weeks.
Bond yields are sharply higher overnight, improved sentiment towards the banking sector one key driver
Deutsche Bank woes weighted on European equities and on US equities at the open, but the latter enjoyed a decent rebound before the close. Core global yields ended Friday lower across the board , the USD was broadly stronger , but still fell for a third consecutive week, AUD and NZD were the week’s underperformers.
After a positive start, US equities struggled for direction amid lingering banking stability concerns. Front end tenors have led a decline in UST yields with similar price action seen in European curves. BoE, SNB and Norges Bank deliver on expected rate hikes. AUD gives back earlier gains as equities struggle.
Our global forecasts are little changed this month. Also, our outlook for the Australian economy is broadly unchanged.
The FOMC hiked rates by 25bps to 4.75-5.00%, continued QT, and kept the existing dot plot which pencils in one further hike to 5.00-5.25%. Market reaction was dovish, but was not risk on.
Bounce in Q1 2023; but bank stress highlights weaker outlook
Todays podcast VIX tumbles as investors see the glass half full ahead of FOMC early tomorrow morning Banks lead gains in Equities with HG bond issuance also signalling improvement in risk appetite UST and Bund curves bear flatten as market increases Fed and ECB rate hikes expectations 2y UST jump 20bps, 10y UST gain […]
This week, we update financial condition indices for Australia and the US and outline how central banks are likely to navigate financial stability and price stability priorities.
It was another fairly volatile day following the weekend deal for UBS to buy Credit Suisse, though overall the deal seems to have found some cautious acceptance.
A deal was struck over the weekend that sees UBS buying Credit Suisse for CHF3.0bn, a fraction of its value at Friday’s close. Iitial market response, in FX at least, has been (cautiously) favourable.
Fed caught between strong data & bank panic
The ECB delivered on its 50bps rate promise but scraps forward guidance. Meanwhile the US’ First Republic Bank gets a $30bn deposit injection from other banks
Modest reopening rebound in early 2023 with consumers yet to re-emerge
Banking sector turmoil is back to the fore driving all markets, today centred on Credit Suisse.
This week, we consider the likelihood of further tightening by the RBA and what impact - if any - the recent failure of Silicon Valley Bank might have.
Bond yields rose sharply on the developing assessment of turmoil in US banking, helped by but largely overshadowing a stubbornly strong US CPI.
Reassurances from US authorities not enough yet to appease markets. Bank stocks remain under pressure with bond yields diving as the path of future Fed hikes comes into question. The USD is also weaker across the board.
The collapse of SVB, the 16th largest bank in the US with $209bn in assets (as at 31 Dec 2022), shook markets on Thursday and Friday. That
Jump in US jobless claims provides hope US labour market may be cooling while Challenger layoff data suggests there is more weakness ahead Softer US data triggers rally in UST and weakens the USD. AUD struggles to perform as US equities tumble with bank stocks leading the decline.
Step down: China’s cut its growth target to a multi-decade low
Markets broadly held onto Tuesday’s wild moves, which were driven by US Fed Chair Powell’s Senate Testimony. Overnight Powell spoke again to the House.
Is Australia different? We put the inflation and activity data in context and discuss why Australian rates might not need to go as high as elsewhere.
The market was not prepared for Powell’s hawkish remarks, sending short rates and the USD higher and equities lower.
Hawkish comments from ECB’s Holzmann send European yields higher in an otherwise quiet night for news flow
The US dollar and Treasury yields both fell back on Friday in what was a good day for equities everywhere – except Australia.
The run of worse than expected (global) inflation-related news continues to ripple through markets, the latest culprits being core Eurozone CPI and revised US Q4 unit labour costs.
The NAB Commercial Property Index improved in Q4, but is still negative overall and trending well below the survey average.
The US 10yr finally breached 4.00% for the first time since November, following five days of resistance. A hot German CPI and renewed price pressure in the Manufacturing ISM drove, while risk assets were mixed given the strong China PMIs yesterday
AUD performance in February was an almost exact mirror image of January, AUD/USD trading back down to near 67 cents from above 0.71 cents, having risen from sub-0.67 to above 0.71 in January.
Upside surprises to European inflation out of Spain and France have seen ECB pricing and European yields push higher, with some bleed through into the US. Elsewhere, US equities are little changed, shrugging off soft consumer confidence data, but are and on track for a monthly decline of more than 2%.
Overall clients on the Sunshine Coast and Noosa continue to report strong conditions and very tight labour markets. While only a microcosm, the themes from these clients are broadly reflective of what we are picking up in the NAB Business Survey, and it is clear the RBA is not yet in sufficiently restrictive territory to slow demand enough to be confident that inflation will return to the 2-3% target
A quiet start to the week with no top-tier data. The biggest piece of news was the EU and UK agreeing to a new Northern Ireland trade agreement, now termed the Windsor Agreement.
The US economy has started 2023 from a stronger position that many of us had expected and when looking at the Fed’s new preferred inflation reading that tries to exclude much of the noise in the data, the story doesn’t change.
US equities stage a late recovery, but remain edgy
A range of global indicators point to a more positive start to 2023 than we had previously anticipated, leading to an upward revision to our forecasts. For Australia the economy has remained resilient but we see growth slowing sharply later in 2023 and into 2024.
In Australia yesterday, WPI wages data showed less wages pressure than feared. WPI grew 0.8% q/q and 3.3% y/y, 0.2ppts below the market consensus and RBA expectations.
Inflation is slowing but is still yet to be tamed
The flow of economic data surprises has continued overnight and this time it was a uniformly stronger than expected performance of the services sector across major Developed Market economies.
President Biden visited Ukraine, where he pledged ‘unwavering support’ for the country as the Russia’s invasion nears the one-year mark.
It was mostly quiet on Friday and on the weekend, with an initial push higher in yields and sell-off in equities largely reversing later in the session.
US retail sales soared in January jumping 3% well above the consensus, 2.0% and Sales ex-autos jumped by 2.3%, more than double the consensus, 0.9%.
As for the data itself, US CPI was ever so slightly above consensus.
With many competing influences in the global macro backdrop, in this Weekly we take a step back and outline a framework for how we are making sense of the world.
The main takeaway being that Americans anticipate income growth to slow and inflation to stay elevated.
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