Weekly Market Commentary
The warnings of global growth challenges across Europe and Asia and now impacting US economic data. The Non Farm Payroll numbers were a surprise to many, with only 20,000 jobs added for the month, well below the expected 187,000. This comes hot on the heels, following the latest pessimistic evaluation of economic conditions within the EU, by the ECB. The ECB abruptly halted the intended 'Quantitative Tightening' and added monetary stimulus, in an attempt to rescue the flagging economy. ECB President Draghi cited the slowdown in China and Emerging markets, that is impacting global demand, including the EU. He warned of the threats from Geo-Politics and protectionism. This is a reference to the US/China trade wars and growing political disruptions. The EU, as an economic zone, is protected by tariffs and this is somewhat hypocritical. The EU's biggest and most pressing problem is Brexit. They are intent on punishing the UK for daring to leave the Socialist Utopia, as a deterrent and may pay a steep economic price. The 'Brexit' may push the EU in to recession. The EUR has floundered since the ECB announcement, trading 1.1220, while the GBP has plunged back to 1.3000.
The Brexit crises is facing important parliamentary votes in the coming week, with some clarity to be revealed, so more volatility is to be expected. Expected US/China Trade negotiations should be coming to a conclusion, with a summit and signing ceremony, anticipated by the end of March. This should allay global growth fears. There is a plethora of key economic data coming out of China, Europe and the US, in the coming week. This will more than likely be weaker, until global trade is restored, by the US/China Trade agreement. This should not be considered an elixir, as President Trump is likely to launch trade negotiations/wars with Europe and Japan, to address further trade imbalances.
Commodity currencies have been major casualty, of the extended global trade wars with China, as they are heavily dependent on Chinese demand for their goods. A resolution will be a boost, short term, but the US will be massively increasing exports in direct competition to current suppliers. The currencies have been severely impacted by these disruptions, with the AUD testing 0.7000, while the NZD trades around 0.6800.
Geo-political events, lead by Brexit and US/China Trade negotiations, will dominate a week heavily exposed to global economic data releases.
Weekly Market Calendar
11/3 NZ Credit Card Spending, German Industrial Production, German Trade Exports/Imports, US Retail Sales
12/3 Australia Consumer Confidence, Japan Manufacturing, Australia Business Confidence, UK Trade, UK Industrial/Manufacturing Production, UK Construction, UK GDP, NFIB Small Business Optimism, US CPI
13/3 NZ Food Prices, Australia Consumer Confidence, EU Industrial Production, US Weekly Mortgage Applications, US Durable Goods Orders
14/3 China Industrial Production, China Retail Sales, China Employment, China CPI, US Weekly Jobless Claims, US New Homes Sales
15/3 NZ Manufacturing PMI, NZ Migration, Bank of Japan Rate Decision, EU CPI, EU CPI, Empire State Manufacturing, US Industrial/Manufacturing Production, University of Michigan Sentiment
Paul Bettany
Collinson & Co
0406-744-923
paul@collinsonfx.com