With the Pacific G10 Macro Rates Team
In the UK, speeches by BoE members emphasised the extended period required for the economy to heal, and that more QE, and negative rates were still options available to them.
In Europe, ECB members pushed back on Chief Economist Lane’s speech from the previous week calling from more to be done to achieve their inflation target.
In the US, FOMC members lined up behind their Chair and the Federal Reserves’ new targeting process. We view the new framework as “behind the curve” in terms of inflation targeting.
Major Equity indices declined between -1% and -3.9% with the lead taken by the tech darlings and fingers pointing at so called the robin-hooders and softbank option plays.
US: A slew of data for August with the ISM indices showing strength with manufacturing at 56 (54.8 exp., 54.2 prev.), new orders at 67.6 (58.8 exp., 61.5 prev.), prices paid 59.5 (54 exp., 53.2 prev.), employment 46.4 (44.3 prev.) and services Index 56.9 (57 exp., 58.1 prev.). The employment data had a mixed outcome with ADP +428k (1000k exp., 167k prev.), nonfarm payrolls +1371k (1350k exp., 1763k prev.) and private payrolls +1027k (1325k exp., 1462k prev.). This left the unemployment rate at 8.4% (9.8% exp., 10.2% prev.)
Canada: Aug Manufacturing PMI data was better at 55.1 (52.9 prev.) and employment was slightly lower than expected at +245.8k (250.0k exp., 418.5k prev.) resulting in a drop Unemployment Rate to 10.2% (10.2% exp., 10.9% prev.)
Eurozone: Aug Core CPI YoY dropped to +0.4% (0.8% exp., 1.2% prev.) and Jul retail sales YoY dropped to +0.4% (1.9% exp., 1.3% prev.). German data showed Aug CPI YoY at -0.1% (0.1% exp., 0.0% prev.), Jul retail sales YoY 4.2% (4.1% exp., 5.9% prev.) and Aug unemployment rate as expected at 6.4% (6.4% exp., 6.4% prev.). Italian data showed Aug CPI YoY dropping to -0.5% (-0.3% exp., 0.8% prev.), Jul unemployment rate higher at +9.7% (9.1% exp., 8.8% prev.) and the Aug PMIs a little weaker with manufacturing PMI 53.1 (52 exp., 51.9 prev.) and services PMI 47.1 (49.5 exp., 51.6 prev.). Spanish data showed Aug CPI YoY rising to -0.6% (-0.6% exp., -0.7% prev.) and weaker PMIs with manufacturing at 49.9 (53 exp., 53.5 prev.) and services at 47.7 (48 exp., 51.9 prev.).
Sweden: Aug PMI printed better than expectations with Manufacturing at 53.4 (52.1 exp., 51 prev.) services at 56.6 (54.8 prev.) and composite at 55.7 (53.7 prev.). Speeches by Riksbank members mostly emphasised the extended period required for the economy to heal.
Norway: Aug manufacturing PMI printed lower than expected at 46.1 (50 exp., 43.3 prev.)
Data for July showed industrial production MoM printing better at 8.0% (5.0% exp., 1.9% prev.), but others worse with retail sales MoM at -3.3% (-2.5% exp., 13.1% prev.), the jobless rate at 2.9% (3.0% exp., 2.8% prev.) and the job-to-applicant ratio at 1.08 (1.08 exp., 1.11 prev.). Finally, Aug data for consumer confidence was better at 29.3 (28.5 exp., 29.5 prev.)
Data reflected strength in the housing market with an increase in house prices and mortgage volumes.
Australia: The RBA met and left both their cash and 3-Yr target unchanged at 0.25%.
New Zealand: No significant data. Governor Orr reiterated that more QE and negative rates are still available from the central bank toolbox.
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