Westpac IQ Economics Morning Report
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Monthly purchasing managers’ indices (PMI) show resilient growth in the US and subdued activity in the UK and Europe; US treasuries and dollar pull back; US yields flat to lower; S&P 500 up 0.2%, NASDAQ up 0.8%, Dow Jones down 0.3%; Euro Stoxx 50 and German Dax up 0.3%; UK FTSE 100 up 0.1%; 2-year US yield at 4.08%, 10-year yield at 4.21%; 94% chance of November Fed rate cut; Aussie dollar slightly firmer; WTI crude down 0.4% to $70.36; Iron ore futures up 0.6% at $100.50; Eurozone composite PMI at 49.7; UK composite PMI at 51.7; US composite PMI at 54.3; Initial jobless claims at 227k.
#Economics #MarketMovements #Pmi #UsDollar #InterestRates #Commodities #Equities #Australia #Westpac #FinancialReport
https://www.westpaciq.com.au/economics/2024/10/Morning-report-25-Oct-2024
Cliff Notes: shifting views on the state of the economy
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October’s Westpac-MI Consumer Sentiment Survey shows a 6.2% increase to 89.8, a two-and-a-half year high; improvement attributed to reduced interest rate hike fears; sub-indexes for 12-month and 5-year outlooks rose 14.3% and 8.0%; RBA's September Minutes indicate weaker demand momentum; economic activity slowed to 1.0%yr in Q2 2024; forecasts growth recovery to 1.5%yr by year-end and 2.4%yr in 2025; RBA expected to cut rates in February 2025 to a terminal rate of 3.35%; US non-farm payrolls rose 254k in September, unemployment rate at 4.1%; FOMC minutes reveal discussions of 25 and 50bp cuts; CPI data for September showed slight increases, indicating stable inflation; Reserve Bank of New Zealand cut rates by 50bp to 4.75%, with expectations for further cuts.
#Economy #Australia #Us #ConsumerSentiment #InterestRates #Inflation #Rba #Fomc #Employment #Forecasts
https://www.westpaciq.com.au/economics/2024/10/cliff-notes-11-oct-2024
Fed starts at a sprint, but the finish line is uncertain
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The US Federal Reserve initiated a 50 basis point rate cut on September 20, 2024, a larger move than expected, signaling urgency in its monetary policy. Chief Economist Luci Ellis notes that this approach may risk market volatility, as not all FOMC members agreed, with Michelle Bowman dissenting. The Fed's actions are characterized as a 'sprint first, then dawdle' strategy, reflecting uncertainty about the neutral rate, which is likely higher than pre-pandemic levels. The Fed's median member expects only a further 50 basis points cut over the next two meetings. Global factors, including geopolitical tensions and demographic shifts, are pushing interest rates higher, with neutral rates projected to be in the low to mid 3% range, contrary to the Fed's estimates. Ellis emphasizes that the RBA's decisions remain independent of the Fed's actions, expecting no rate changes in Australia for the rest of the year.
#FederalReserve #InterestRates #MonetaryPolicy #LuciEllis #Westpac #Economics #Rba #GlobalEconomy #NeutralRate #MarketVolatility
https://www.westpaciq.com.au/economics/2024/09/lucis-friday-note-20-september-20243
Cliff Notes: nerves show on the outlook
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September Westpac-MI Consumer Sentiment survey shows a decline of -0.5% to 84.6; sub-indexes for 'one year ahead' and 'five years ahead' down -2.6% and -1.0%; family finances below long-run averages by 16.4pts and 9.7pts; Q2 national accounts indicate consumer weakness spilling into business sector; NAB business conditions index fell -3pts to +3; August marks 11th consecutive negative reading for forward orders; employment index lowest since January 2022; business confidence down 5pts to -4; US CPI rose 0.2% in August, annual CPI at 2.5%; FOMC expected to reduce rates by 25bps at next meeting; European Central Bank cut rates by 25bps; UK average weekly earnings decelerated to 5.1%yr in July; China consumer prices lifted to 0.6%yr in August.
#Australia #ConsumerSentiment #EconomicOutlook #BusinessConfidence #Inflation #Fomc #Ecb #UkEconomy #China #Westpac
https://www.westpaciq.com.au/economics/2024/09/cliff-notes-13-sep-2024
Cliff Notes: nerves show on the outlook
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September Westpac-MI Consumer Sentiment survey shows a decline of -0.5% to 84.6; sub-indexes for 'one year ahead' and 'five years ahead' down -2.6% and -1.0%; family finances below long-run averages by 16.4pts and 9.7pts; Q2 national accounts indicate consumer weakness spilling into business sector; NAB business conditions index fell -3pts to +3; August marks 11th consecutive negative reading for forward orders; employment index lowest since January 2022; business confidence down 5pts to -4; US CPI rose 0.2% in August, annual CPI at 2.5%; FOMC expected to reduce rates by 25bps at next meeting; European Central Bank cut rates by 25bps; UK average weekly earnings decelerated to 5.1%yr in July; China consumer prices lifted to 0.6%yr in August.
#Australia #ConsumerSentiment #EconomicOutlook #BusinessConfidence #Inflation #Fomc #Ecb #UkEconomy #China #Westpac
https://www.westpaciq.com.au/economics/2024/09/cliff-notes-13-sep-2024
Westpac IQ Economics Morning Report
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US economy shows solid performance; pricing for a 50 basis point Fed rate cut is likely overdone; Dow Jones hits record high; S&P 500 flat, NASDAQ down 0.2%; US treasury yields rise; US dollar strengthens above 101; Aussie dollar peaks at 0.6824 but falls below 0.6800; Crude oil prices rise due to Libya's export suspension; Private business capex in Australia down 2.2% in June quarter; Eurozone consumer confidence at -13.5; Germany's CPI down 0.1% in August; US GDP growth revised to 3.0% for June quarter; initial jobless claims steady at 231k.
#Economy #Market #Us #Australia #Eurozone #Commodities #InterestRates #Currency #Business #Inflation
https://www.westpaciq.com.au/economics/2024/08/Morning-report-30-Aug-2024
FOMC to act decisively, but with confidence
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The FOMC is expected to make rate cuts at the November and January meetings; Westpac predicts a terminal rate of 3.375% by end-2025; July's US employment report showed slower growth and a rise in the unemployment rate; FOMC participants are pricing in a 50bp cut in September and a 60% chance of a follow-up cut in November; Westpac expects a more muted easing cycle than the market currently expects; US employment estimates point to a stalling out of job growth, not a contraction; Current momentum in US economic activity is healthy with domestic final demand growth around 2.5% annualized; Westpac predicts 25bp cuts at the November 2024 and January 2025 meetings in addition to those already expected in December 2024 and March 2025; The 10-year US Treasury yield is expected to hold near its current level over the remainder of the year before drifting back up to around 4.00% in mid-2025; Westpac expects the Australian dollar to have a slow uptrend through USD0.70 from late-2025.
#Fomc #UsEmployment #RateCuts #EconomicOutlook
https://www.westpaciq.com.au/economics/2024/08/us-fomc-6-august-2023
Westpac IQ Economics Morning Report
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US economic data shows stronger than expected growth in June quarter; inflationary pressures continue to dissipate towards Fed's target of 2%; US equities mixed with tech stocks selloff and poor earnings reports; European stocks lower on weaker than expected data; US bond yields lower, US dollar unchanged; Aussie lower due to softness in commodity prices; ASX200 index falls 1.3%; longer dated US bond yields lower; 2-year bond yield unchanged at 4.43%, 10-year treasury yield declines to 4.24%; Australian yields broadly unchanged; RBA rate hike priced in for August meeting; US dollar broadly unchanged, Aussie lower; commodities generally lower, gold, copper, and iron ore decline; Eurozone's IFO business climate indicator declines in July; Euro area M3 money supply grows by 2.2% in annual terms; US economy expands by 2.8% in June quarter, above expectations; growth in consumer spending picks up; PCE price index rises 2.3%yr, core PCE eases to 2.9%yr; durable goods orders in June fall 6.6%; weekly initial jobless claims remain low; Kansas City's Fed manufacturing index declines in July; no major economic data published in Australia yesterday
#Morningreport #Commodities #Australia
https://www.westpaciq.com.au/economics/2024/07/morning-report-26-july-2024
Westpac IQ Economics Morning Report
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The market reaction to US President Biden dropping out of the 2024 presidential race was muted; Support for Kamala Harris as Biden's replacement helped reduce political uncertainty; Big gains in tech shares underpinned a strong bounce in US equities; US bond yields were slightly higher, with the US dollar unchanged; Commodity prices continue to slide, with copper at its lowest in three months; US equities rebounded strongly, with tech stocks outperforming; ASX200 index fell 0.5%; US and Australian bond yields were higher; RBA rate hike priced in for 2024; US dollar and Aussie dollar were broadly unchanged; Commodities were generally lower; People's Bank of China cut short-term repo rate; Kamala Harris won backing from prominent Democrats; Chicago Fed National Activity Index edged down; No major economic data published in Australia; State banks in China instructed to ensure indebted municipalities can refinance; Westpac IQ is a service provided by Westpac Banking Corporation
#Morningreport #Commodities #Australia
https://www.westpaciq.com.au/economics/2024/07/morning-report-23-july-2024
Weekly Economic Commentary 15 July 2024
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The Reserve Bank of New Zealand (RBNZ) is expected to ease policy earlier than previously anticipated due to downgraded growth forecasts and a more confident outlook on inflation. The RBNZ's abrupt change in messaging suggests a non-trivial risk of policy easing before long. While the central expectation is for policy easing to begin in February next year, an earlier move is very feasible and will be data dependent.
#Rbnz #MonetaryPolicy #EconomicOutlook #Inflation #GrowthForecasts
https://www.westpaciq.com.au/economics/2024/07/weekly-economic-commentary-15-july-2024
Morning Report
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The unexpected fall in US headline inflation in June suggests that the disinflationary impulse is quickly gathering momentum, supporting the case for US rate cuts in the coming months. Markets have now priced in 62 basis points of rate cuts this year, compared with 48 basis points a week ago. US bond yields were lower across the curve. The US dollar declined on the back of the lower yields. The Aussie traded higher, while the Yen outperformed, with reports suggesting the BOJ intervened to prop up the Yen. US equities were mixed, with falls in tech megacaps dragging down key equity indices. Real estate shares jumped 2.7% - the biggest gain of 2024. The S&P 500 sank 0.9% to 5,584.54. The Nasdaq declined 1.95% to 18,283.41. The industrial heavy Dow Jones outperformed, up 0.1% to 39,753.75. The ASX200 gained 0.9% to close at 7,889 – a three-month high. US bond yields were lower across the curve. The 2-year bond yield declined 11 basis points to 4.51%. The 10-year treasury yield declined 7 basis points to 4.21%. Australian yields were also lower. The 3-year government bond yield (futures) declined 6 basis points to 4.02%, while the 10-year government bond yield (futures) declined 5 basis points to 4.33%. The US dollar was lower (-0.6%) on the back of the fall in yields. The US dollar index fell to a low of 104.08 before settling at 104.46. The Aussie appreciated against the US dollar (+0.2%). The AUD/USD pair increased to a high of 0.6799 (highest since early January this year), before settling at 0.6758. Commodities were generally higher, with gold, copper, and oil all higher. Inflation expectations over the year ahead edged lower to 4.3% in July, from 4.4% in June. Germany’s inflation rate was confirmed at +2.2%yr in June from +2.4%yr in May. The UK economy grew 0.4% in May adding to the cumulative 1.5% increase in GDP since December 2023. Core machinery orders fell 3.2% in May, following a fall of 2.9% in April. In the United States, inflation unexpectedly declined by 0.1% in June, to be +3.0% higher in annual terms. Chicago Fed president, Austan Goolsbee, said the inflation report provides the evidence he’s been waiting for to be confident the Fed is on track to get inflation back down to its 2% target. Initial jobless claims were at 222k last week, with continuing claims at 1.852m. Westpac IQ is a service provided by Westpac Banking Corporation.
#Inflation #RateCuts #UsBondYields #UsDollar #Equities #Asx200 #AustralianYields #Commodities #Gold #Copper #Oil #InflationExpectations #Germany #UkEconomy #CoreMachineryOrders #UsInflation #JoblessClaims
https://www.westpaciq.com.au/economics/2024/07/morning-report-12-july-2024
NZ First Impressions: NZIER Survey of Business Opinion, Q2 2024
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Business activity measures remained weak in June, with general business confidence at -35.4 and trading activity for the past three months at -27.8. However, inflation indicators have improved, with a net 41% of firms reporting cost increases over the last three months, down from 52% in the previous quarter. The survey suggests that inflation will continue to recede, but not faster or slower than expected by the Reserve Bank. Firms' views on their own activity were mixed, with past performance slightly weaker but expectations slightly higher. The labor shortage has eased, and firms reported shedding workers in the last quarter. The survey indicates that the Reserve Bank of New Zealand (RBNZ) may begin reducing the OCR from February next year, earlier than the RBNZ's own projections. The RBNZ's OCR preview will be published after its July 10 meeting.
#BusinessConfidence #Inflation #EconomicSurvey #ReserveBankOfNewZealand
https://www.westpaciq.com.au/economics/2024/07/nz-first-impressions-nzier-survey-of-business-opinion-q2-2024
Morning Report
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US equities were generally lower after a rally in early trade lost traction amid signs of buyer fatigue. US government bond yields were higher on the back of some hawkish talk from a Fed official. Higher bond yields supported the US dollar which continued to advance, while the Aussie fell. The prices of major commodities were generally lower. In central bank news, the Swiss National Bank cut rates for the second time this year. The Bank of England held steady but hinted that more of its policymakers are close to backing cuts. The Nasdaq declined 0.8%, snapping a seven-day winning streak. The tech megacaps came under pressure during the session with Nvidia Corp. and Apple Inc. recording losses. The Dow Jones outperformed, closing 0.8% higher. The ASX200 was virtually flat. Six of eleven sectors closed in the green, led by financials and real estimate stocks. US bond yields were higher across the curve. The 2-year bond yield increased 3 basis points to 4.74%. The 10-year treasury yield increased 4 basis points to 4.26%. The US dollar continued to advance with the DXY Index breaking through the 105.65 level on two attempts and is now trading at around this level. The Aussie fell against the US dollar, sliding below 0.6650 before increasing and settling at around 0.6656. Commodities were generally lower, with oil, coal, and iron ore all lower. The economy expanded by 0.2% in the March quarter 2024, up from the 0.1% contraction recorded in Q4 2023. The Bank of England MPC voted seven to two to remain on hold in June, the two dissenters preferring to cut by 25bps at this meeting. Initial jobless claims pulled back from a 10-month high last week, falling by 5k to 238k in the period ended June 15. Housing data was weak. Building permits fell 3.8% in the month of May to an annual rate of 1.386mil, the lowest since June 2020. Housing starts fell 5.5% in the month of May to an annualized rate of 1.27mil, down from the 1.35mil recorded in April. The Philadelphia Fed Manufacturing Index declined by 3.2 points to 1.3 index points in June. Minneapolis Fed President, Neel Kashkari, reiterated that the outlook for interest rates remains dependent on the path of the economy, while indicating that it could take up to two years for the inflation to return to its 2% target.
#UsEquities #BondYields #UsDollar #Aussie #Commodities #CentralBanks
https://www.westpaciq.com.au/economics/2024/06/morning-report-21-june-2024
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