Krishen Rangasamy, an analyst at National Bank Financial (NBF), notes that China’s annual inflation rate jumped to 2.8% in July, the highest in a year and a half.
Josh Nye, the senior economist at Royal Bank of Canada (RBC), noted that Canada's housing starts remained robust at 222,000 in July.
Danske Bank' analysts note that the already-strained relationship between the US and China hit a new low point this week.
Canada announced on Friday that the value of building permits issued by the Canadian
municipalities dropped 3.7 percent m-o-m in June, following a revised 12.2
percent m-o-m tumble in May (originally a 13.0 percent m-o-m decline).
Economists had forecast a 1.5 percent advance in June from the previous month.
According to the report, the value of residential permits fell 3.1 percent m-o-m in June, as permits for multi-family dwellings plunged by 6.7 percent m-o-m, while single-family permits rose by 1.3 percent m-o-m.
At the same time, the value of non-residential building permits decreased by 4.6 percent m-o-m in June, due to declines in institutional (-17.4 percent m-o-m) and commercial (-1.1 percent m-o-m) permits, which however were somewhat offset by a gain in industrial permits (+1.7 percent m-o-m).
In y-o-y terms, building permits dropped 5.7 percent in June.
U.S. stock-index futures fell on Friday, a day after Wall Street recorded its biggest one-day rise in two months, as worries about global economic slowdown returned.
Today's Change, points
Today's Change, %
(company / ticker / price / change ($/%) / volume)
ALTRIA GROUP INC.
Amazon.com Inc., NASDAQ
Cisco Systems Inc
Citigroup Inc., NYSE
Deere & Company, NYSE
Exxon Mobil Corp
Ford Motor Co.
Freeport-McMoRan Copper & Gold Inc., NYSE
General Electric Co
General Motors Company, NYSE
Home Depot Inc
International Business Machines Co...
International Paper Company
JPMorgan Chase and Co
Procter & Gamble Co
Starbucks Corporation, NASDAQ
Tesla Motors, Inc., NASDAQ
The Coca-Cola Co
Twitter, Inc., NYSE
United Technologies Corp
Verizon Communications Inc
Wal-Mart Stores Inc
Walt Disney Co
Yandex N.V., NASDAQ
Canada reported on Friday that the number of employed people fell by 24,200
m-o-m in July, while economists had forecast a gain of 12,500 and after an
unrevised drop of 2,200 in the previous month.
Meanwhile, Canada's unemployment rose to 5.7 percent from 5.5 percent in July, missing economists’ forecast for 5.5 percent.
According to the report, full-time employment decreased by 11,600 (or -0.1 percent m-o-m) in July, while part-time jobs declined by 12,600 (or -0.4 percent m-o-m).
In July, the number of private sector employees decreased by 69,300 (-0.6 percent m-o-m), while the number of public sector employees grew by 17,500 (+0.5 percent m-o-m). At the same time, the number of self-employed rose by 27,700 (+1.0 percent m-o-m) last month.
Sector-wise, there were fewer people working in wholesale and retail trade (-20,600), transportation and warehousing (-14,800), "other services" (-10,600), and natural resources (-8,700). In contrast, employment rose in construction (+25,000) and public administration (+9,200).
On a year-over-year basis, employment grew by 353,000 (or +1.9 percent), driven by gains in full-time work (+326,000 or +2.2 percent).
Department reported on Friday the U.S. producer-price index (PPI) edged up 0.2
percent m-o-m in June, following gains of 0.1 percent m-o-m in both June and
For the 12 months through July, the PPI rose 1.7 percent, the same pace as in the previous month.
Economists had forecast the headline PPI would increase 0.2 percent m-o-m and 1.7 percent over the past 12 months.
According to the report, the July rise in final demand prices was led by a 0.4-percent m-o-m advance in the index for final demand goods. Meanwhile, prices for final demand construction rose 0.6 percent m-o-m. In contrast, the index for final demand services edged down 0.1 percent m-o-m.
Excluding volatile prices for food and energy, the PPI fell 0.1 percent m-o-m and 2.1 percent over 12 months. Economists had forecast gains of 0.2 percent m-o-m and 2.4 percent y-o-y, respectively.
Mortgage and Housing Corp. (CMHC) reported on Friday the seasonally adjusted
annual rate of housing starts was at 222,013 units in July, down 9.6 percent
from a downwardly revised 245,455 units in May (originally 245,657 units).
Economists had forecast an annual pace of 203,500 for July.
According to the report, urban starts tumbled by 10.4 percent m-o-m last month to 209,122 units, as multiple urban starts plunged by 12 percent m-o-m to 162,722 units, while single-detached urban starts fell by 4.6 percent m-o-m, to 46,400 units. At the same time, rural starts were estimated at a seasonally adjusted annual rate of 12,891 units, up 7.9 percent m-o-m.
Uber (UBER) reported Q2 FY 2019 loss of $4.72 per share (versus -$2.01 in Q2 FY 2018), worse than analysts’ consensus estimate of -$3.19.
The company’s quarterly revenues amounted to $3.166 bln (+14.4% y/y), missing analysts’ consensus estimate of $3.389 bln.
UBER fell to $39.52 (-8.03%) in pre-market trading.
Analysts at TD Securities are expecting the U.S. PPI inflation to come in at 0.2% m/m for July, up from 0.1% in the month before.
Analysts at TD Securities say the UK’s Q2 GDP was disappointing, with the -0.2% q/q result softer than consensus of flat and TD’s -0.1% forecast.
James Smith, developed markets economist at ING, notes the UK economy shrank by 0.2% during the second quarter, recording the first negative GDP growth figure since the end of 2012.
Analysts at TD Securities are expecting the Labour Force Survey of Canada to reveal job growth of 10k for July (market consensus 15k) in a further moderation from the robust performance over the first half of the year.
The Bank of Japan may seek to prevent unwelcome yen rises by tolerating temporary, market-driven falls in long-term interest rates, former BOJ board member Sayuri Shirai said.
Japanese government bond (JGB) yields hit three-year lows on Friday on concerns about the U.S.-China trade war, even as the BOJ cut its purchase of long-dated bonds to prevent 10-year yields from deviating too much from its 0% target.
"The BOJ will probably maintain its current framework and the target range, but tolerate market-driven falls in yields," Shirai said.
"That way, it can head off excessive rises in the yen, without hurting financial institutions," she told .
If yen rises become too sharp, the BOJ may be forced to widen the range at which it allows yields to move, said Shirai.
"The BOJ probably wants to avoid expanding stimulus for as long as possible," Shirai said. "It has already done so much and there's few policy tools left at its disposal."
According to the report from Istat, in July 2019 the rate of change of Italian consumer price index for the whole nation (NIC) was stable on monthly basis and increased by 0.4% with respect to July 2018, down from +0.7% in the previous month. The flash estimate was +0.5%.
The core inflation excluding energy and unprocessed food was +0.5% (up from +0.4% in June 2019) and inflation excluding energy was +0.6% (up from +0.5%).
The annual rate of change of prices of Goods was -0.1% (down from +0.5% in the previous month) and that one of prices of Services was +1.0% (the same as in June 2019). As a consequence, the inflationary gap between Services and Goods was +1.1 percentage points (+0.5 in the previous month).
Prices of Grocery and unprocessed food decreased by 0.2 on monthly basis and increased by 0.6% on annual basis (up from +0.2% in the previous month).
In July the Italian harmonized index of consumer prices (HICP) decreased by 1.8% compared with the previous month and increased by 0.3% with respect to July 2018 (down from +0.8% in June).
The International Energy Agency (IEA) cut its global oil demand growth forecasts for this year and next, citing fears of an economic downturn as the U.S.-China trade war casts a shadow over markets.
The energy agency now expects oil demand growth to reach 1.1 million barrels per day (b/d) in 2019 and 1.3 million b/d in 2020. That constitutes a downward revision of 100,000 b/d for this year and 50,000 b/d for next year.
In its monthly oil report, the IEA said there was “growing evidence of an economic slowdown” with many large economies reporting weak gross domestic product (GDP) growth in the first half of the year.
From January to May, oil demand rose by 520,000 b/d, marking the lowest rise in that period since the financial crisis in 2008.
“The situation is becoming even more uncertain,” the IEA said, before describing global oil demand growth in the first half of the year as “very sluggish.”
Office for National Statistics said, production output fell by 1.4% for Quarter 2 (Apr to Jun) 2019, compared with Quarter 1 (Jan to Mar) 2019 reversing the 1.1% increase in Quarter 1 2019.
The quarterly fall in manufacturing of 1.4% is the strongest fall since Quarter 1 2009, due mainly to widespread weakness with 10 of the 13 subsectors decreasing; led by strong decreases from transport equipment (5.2%), chemicals and chemical products (6.2%) and basic metals (2.4%).
Production output fell by 0.1% between May 2019 and June 2019 despite rises from three of the four main sectors; the manufacturing sector provided the only downward contribution, falling by 0.2%.
Monthly manufacturing output highlights a mixed picture with only 7 of the 13 subsectors falling, so overall growth is due mainly to falls in basic metals (2.8%) and computer, electronic and optical products (3.5%).
For Quarter 2 (Apr to Jun) 2019 compared with Quarter 2 2018, production output decreased by 0.5%, with falls in manufacturing (0.9%) and electricity and gas (0.3%); partially offset by rises in mining and quarrying (1.9%) and water and waste of (0.9%).
According to the report from Office for National Statistics, UK gross domestic product (GDP) in volume terms was estimated to have fallen by 0.2% in Quarter 2 (Apr to June) 2019, having grown by 0.5% in the first quarter of the year.
When compared with the same quarter a year ago, UK GDP increased by 1.2% in Quarter 2 2019; a slowing from 1.8% in Quarter 1 (Jan to Mar) 2019.
Services sector output provided the only positive contribution to GDP growth, although growth in this sector slowed to 0.1% in Quarter 2 2019.
The production sector contracted by 1.4% in Quarter 2 2019, providing the largest downward contribution to GDP growth; the fall was driven by a sharp decline in manufacturing output, reflective of increased volatility in the first half of 2019.
Nominal GDP increased by 0.4% in Quarter 2 2019, down from 0.9% in Quarter 1 2019.
Commenting on today’s GDP figures, Head of GDP Rob Kent-Smith said: “GDP contracted in the second quarter for the first time since 2012 after robust growth in the first quarter. Manufacturing output fell back after a strong start to the year, with production brought forward ahead of the UK’s original departure date from the EU. The construction sector also weakened after a buoyant beginning to the year, while the often-dominant service sector delivered virtually no growth at all. The trade deficit narrowed markedly, as imports fell following a sharp rise in the first quarter ahead of the UK’s original departure date from the EU.”
TD Securities analysts point out that Fitch is due to review its BBB- (positive) sovereign rating for Russia and will be a key event for today’s markets.
“Moody's has a rating of Baa3 (stable) and S&P BBB- (stable). Fitch moved the outlook to positive from stable back in September 2017. Fitch has continued to point to the strong sovereign balance sheet and robust external finances, but US sanctions risk remains an ongoing concern which, in their view, keeps the rating one notch lower than it should be. It is possible that today Fitch finally decides that the positives outweigh the risks and moves the rating to BBB, although given the length of time that the outlook has been positive it is hard to have a great deal of conviction about this.”
The Chambers of Industry and Commerce slashes its exports forecast for the German economy this year
Association now expects exports to nearly stagnate as a slowing world economy and escalating trade conflicts hurt foreign sales.
Association had forecast export growth in 2019 for 1.2% back in May.
Rising protectionism and a noticeably weakening global economy are burdening Germany's export-reliant economy.
The US-China trade dispute and tenacious struggle for Brexit are unsettling investors worldwide and clouding the prospects for German producers of capital goods in particular.
Societe Generale's Greater China economist, Michelle Lam, spoke to Bloomberg TV:
PBOC will watch carefully on capital outflow dynamics in the near-term
Doesn't want to upset traders too much on the matter
If trade tensions continue to escalate, can expect USD/CNY to rise to 7.50
PBOC may tighten capital controls if outflows start to pick up
However, doesn't expect pace of capital outflows to be as dramatic as in the past
Markets are more prepared to deal with a weaker yuan now
Danske Bank analysts suggest that in terms of economic data releases, it is another quiet day today and the UK Q2 GDP will be the only key economic release for the day.
“In the UK, the monthly GPD indicator for June (and hence the full estimate of Q2 GDP) is released at 10.30 CEST, which is expected to show that GDP growth has slowed in Q2 compared to Q1, as the original Brexit stockpiling effect is no longer artificially boosting GDP growth. In the Scandies, we have a couple of interesting releases. In Sweden, we could see a rebound in the household consumption indicator for June, given the fact that retail sales rebounded sharply. In Norway, we expect a further slowdown in core inflation to 2.2% in July.”
The Bank of Japan likely heaved a sigh of relief following Friday’s strong economic numbers, but the central bank will have to remain “on guard and prepared to do more” amid the present global uncertainty, said the chief Japan strategist at Goldman Sachs, Kathy Matsui.
However, the BOJ has “pretty limited” options if the trade friction between China and the U.S. becomes worse, according to Matsui.
Japan reported Friday that GDP grew at an annualized rate of 1.8% in the second quarter which ended in June. It was much better than a median forecast for a 0.4% growth.
It comes at a time when short-term interest rates in Japan has been unchanged at -0.1% since the BOJ adopted negative interest rates in January 2016. The country’s central bank has been struggling to meet an elusive inflation target of 2%.
“If the yen were to appreciate much further, let’s say (it) breaks the 100 barrier (against the dollar), I think that could force the BOJ’s hand to do something more,” Matsui told.
“They (Japan) obviously can take negative rates even further to negative territory but that is not without any cost,” Matsui said.
That cost would be borne by the country’s banking system, whose net interest margins are “already suffering” as a result of negative interest rates being set for a prolonged period of time, she added.
National Institute of Statistics and Economic Studies (Insee) said, in June 2019, output slipped back sharply in the manufacturing industry (−2.2%, after +1.6%), as well as in the whole industry (−2.3%, after +2.0%).
Over the second quarter of 2019, manufacturing output declined (−0.3%). Output increased slightly in the whole industry (+0.3%).
Compared with the first quarter of 2019, output grew strongly in mining and quarrying, energy, water supply (+3.8%) and it was virtually stable in “other manufacturing”. Conversely, it decreased markedly in the manufacture of transport equipment (−2.1%) and in the manufacture of coke and refined petroleum products (−6.4%). It was virtually stable in the manufacture of food products and beverages (−0.1%) and stable in that of machinery and equipment goods.
Manufacturing output of the second quarter of 2019 increased compared to the same quarter of 2018 (+1.0%), as well as in the whole industry (+1.6%).
Over a year, output of the second quarter increased in mining and quarrying, energy, water supply (+5.0%), in “other manufacturing” (+1.1%), in the manufacture of machinery and equipment goods (+3.8%) and in the manufacture of coke and refined petroleum products (+4.4%). However, it decreased in the manufacture of transport equipment (−0.5%) and in the manufacture of food products and beverages (−0.2%).
According to the report from Insee, in Q2 2019, private payroll employment increased by 0.3%. It slowed down slightly compared to the previous quarter: +62,100 net jobs after +95,600 jobs in Q1 2019. Year on year, private payroll employment rose by +1.3% (that is +259,400 jobs). Excluding temporary employment, its growth was similar: +0.3% over the quarter (that is +61,100 jobs) and by +1.4% over the year (that is +266,300 jobs).
Private payroll employment increased steadily again in construction: +0.7% in Q2 2019 (thas is +9,800 jobs),after +1.2%. It barely slowed down in industry: +0.1% (that is +3,000 jobs), after +0.2% Year on year, private employment increased by 41,400 in construction and by 20,000 in industry.
In Q2 2019, private employment continued to increase sharply in market services: +0.4% (that is +47,500 jobs), after +0.6% in Q1 2019, bringing its rise to 1,5% over a year (that is +186,300). Excluding temporary employment, the increase was comparable: +0.4% (that is +46,500 jobs), after +0.5% in the previous quarter, and +1.7% over a year. Private employment in non-market services remained stable over the quarter, at a slightly higher level than a year ago (+0.3%).
Barclays Research discusses the outlook for the PBoC policy expectations.
"We think domestic considerations will continue to dominate China’s monetary policy decision making. We do not think the PBoC will automatically follow Fed cuts. A review of the 2015-19 Fed-PBoC movements shows that the PBoC followed the Fed in four of the five US hikes that occurred during China’s 2016-2018 deleveraging campaign. However, it has been easing since April 2018, when the US and Chinese economies diverged before fine-tuning policies to address emerging risks this March. Overall, our base case for gauging the monetary policy outlook expects visible downward pressures on growth, elevated food inflation in the short term (but less of an issue in Q4), a more flexible CNY exchange rate, moderate increase in leverage (debt/GDP) and a cooling housing market. We think the PBoC could lower policy rates in September," Barclays notes.
According to the provisional data from Federal Statistical Office (Destatis), Germany exported goods to the value of 106.1 billion euros and imported goods to the value of 89.3 billion euros in June 2019. German exports decreased by 8.0% and imports by 4.4% in June 2019 year on year. After calendar and seasonal adjustment, exports were down 0.1% on May 2019, while imports rose 0.5%.
The foreign trade balance showed a surplus of 16.8 billion euros in June 2019. In June 2018, the surplus amounted to +22.0 billion euros. In calendar and seasonally adjusted terms, the foreign trade balance recorded a surplus of 18.1 billion euros in June 2019.
According to provisional results of the Deutsche Bundesbank, the current account of the balance of payments showed a surplus of 20.6 billion euros in June 2019, which takes into account the balances of trade in goods including supplementary trade items (+18.1 billion euros), services (-2.9 billion euros), primary income (+8.8 billion euros) and secondary income (-3.3 billion euros). In June 2018, the German current account showed a surplus of 24.8 billion euros.
In June 2019, Germany exported goods to the value of 63.5 billion euros to the Member States of the European Union (EU), while it imported goods to the value of 53.3 billion euros from those countries. Compared with June 2018, exports to the EU countries decreased by 6.2%, and imports from those countries by 1.1%.
Exports of goods to countries outside the European Union (third countries) amounted to 42.6 billion euros in June 2019, while imports from those countries totalled 36.0 billion euros. Compared with June 2018, exports to third countries decreased by 10.7% and imports from those countries by 8.9%.
Resistance levels (open interest**, contracts)
Price at time of writing this review: $1.1197
Support levels (open interest**, contracts):
- Overall open interest on the CALL options and PUT options with the expiration date August, 9 is 76903 contracts (according to data from August, 8) with the maximum number of contracts with strike price $1,1100 (5332);
Resistance levels (open interest**, contracts)
Price at time of writing this review: $1.2144
Support levels (open interest**, contracts):
- Overall open interest on the CALL options with the expiration date August, 9 is 17023 contracts, with the maximum number of contracts with strike price $1,3000 (2051);
- Overall open interest on the PUT options with the expiration date August, 9 is 20588 contracts, with the maximum number of contracts with strike price $1,2450 (2360);
- The ratio of PUT/CALL was 1.21 versus 1.17 from the previous trading day according to data from August, 8
* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.
** - Open interest takes into account the total number of option contracts that are open at the moment.
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