Dentalfloss
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A quick look at the Dow
Trading with point and figure
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Updated
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Dax updated
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and bounce
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pivot area not touched yet
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12670-12720 poss a real dog
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Pop.?
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Dump
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Good Morning: The Long & the Short of it and The Bigger Picture - 18 October 2019 - ADM ISI
- Digesting China Q3 GDP and monthly activity data and Japan CPI on an
otherwise quiet day for statistics, along with RBA Lowe and Fed Williams
comments; plenty more Fed speak today along with corporate earnings; Brexit
knife edge vote tomorrow in focus
- China: Q3 GDP to grab headlines, Retail Sales / FAI as expected but
details weak; bigger rebound in Industrial Production may not prove
durable
- Brexit: Independent MPs and Labour MPs in 'leave' seats votes likely to
be decisive
- Charts: US Dollar Index and US/Germany 10-yr spread, GBP/USD & EUR/GBP
- Audio preview:
https://www.mixcloud.com/MOstwaldADM/adm-isi-morning-call-18-october-2019/
- Brexit thoughts via Le Fonti International yesterday
..........................................................................
********************
** EVENTS PREVIEW **
********************
There are some distractions from Brexit and US/China trade today, via way of the overnight run of China Q3 GDP and monthly activity indicators along with national CPI readings in Japan, and another slew of Fed speakers, and corporate earnings reports, among which Amex, Coca-Cola, Kansas City Southern, Schlumberger & State Street are likely to capture the headlines. But Saturday's UK parliament debate and vote on the 'new' UK/EU Withdrawal Agreement will inevitably be the major talking point (recap below), with one further thought about tomorrow's vote. For all that some of 'hard' Brexiteers may still relish the chance of a No Deal, they will be painfully aware that this process really cannot drag on much longer, and that Johnson's deal may be their best chance to ensure an exit; the likelihood is that revoking Article 50 or No Deal would be the only options on the table if this 'deal' fails to get the necessary votes in parliament.
On the central bank front, our hat tip of the week goes to RBA governor Lowe for his highly sceptical and critical comments on the benefits of further monetary easing, and our fallen star award to NY Fed chief Williams whose comments essentially amounted to suggesting that the Fed is making up policy as it goes along, so much for him being the big economic and monetary thinker on the FOMC!
** China - Q3 GDP, Sep Industrial Production, Retail Sales, FAI **
- Headline writers will inevitably focus on the marginally lower than expected 6.0% on Q3 GDP, vs. forecast6.1% and prior 6.2%, and note that this is the lowest pace for 30 years, but that is more 'sturm und drang' than anything else, especially as many unofficial estimates of GDP are well below the official data. In terms of the monthly activity data, Retail Sales at 7.8% y/y were as expected, though the detail was in fact less encouraging in so far as the Auto Sales fall was 'only' 2.2% y/y vs. August -8.1% (this is a very volatile series), while many other components slowed in y/y terms. The surprise came via Industrial Production, rebounding to 5.8% y/y vs. an expected 4.9% and August 4.4%, paced above all by a bounce in machinery and telecoms output, which may or may not prove durable, and it is probably better to take the unchanged 5.6% in year to date Production as a more reliable trend indicator, which was only just above the forecast of 5.5% y/y. Fixed Asset Investment slowed yet again, albeit modestly to 5.4% from 5.5%, with a small pick-up in SOE investment to 7.3% from 7.25, offsetting a further drop in Private FAI to 4.7% from 4.9%. The latter underlines that the ultra-high volume of local govt borrowing this year for infrastructure spending is as yet not having any spillover effect into the private sector.
RECAP: Brexit "state of play" - So what next? - a few thoughts
- A deal has been agreed, with considerable irony in the fact that the 'backstop' of the original Withdrawal Agreement would become the modus operandi, though only if this is approved by parliament on Saturday. A further irony is that this Withdrawal Agreement keeps the UK economy operating under EU rules until the end of 'transition period' in December 2020, which under the terms of the new agreement could in fact be extended - in reality a rather far cry from PM Johnson's claim that 'we have taken back control'. The fact that his effectively endorses the EU proposal of a border in the Irish Sea, which was made back in 2017, which most Brexiteers (including the PM) poured scorn on, even as recently as July/August. Be that as it may, this is a win-win for Johnson and the EU, in so far as Johnson can claim he delivered a 'new' Withdrawal Agreement as promised, and the EU can place blame for the deal being voted down in parliament firmly on the UK.
But mendacity and spin is the lingua franca of the current political world in most western nations, and as such this should not come as any great surprise. Nevetheless one can expect that Mr Farage and the Brexit Party will be launching a bitter tirade about this, and indeed about the fact that until a new trade deal is agreed, which could quite conceivably take a decade, the much despised (by Brexiteers) ECJ will continue to be the ultimate arbiter of legal disputes between the UK and EU. But in what would be a deeply cynical, though predictable move, the Brexiteers will doubtless argue that they are maintaining a clear legislative operating backdrop for domestic and foreign businesses in the UK, while a new trade agreement is negotiated.
But the immediate question relates to whether this 'agreement' will be ratified by Parliament on Saturday, given that it will clearly be approved by the EU Summit Council of Ministers today. That remains far from clear, and at the time of writing only the DUP of the potential swing group of voters has stated that it will vote against the 'deal'. They have in effect been thrown under a proverbial bus, and no amount of rumoured investment programmes were ever likely to be enough to induce them to at least abstain. Equally unsurprising was the GBP sell-off after an initial knee-jerk flip up to 1.30 vs USD and down to 0.8600 vs EUR, given much of the short GBP position has been purged over the past week.
The GBP will now be dancing to the tune of the 31 independent MPs voting intentions, and those on the right wing of the Labour party (ca. 30-40), who are opposed not only to a 'no deal' Brexit, but also to Labour leader Corbyn. It will certainly be a very close vote, with political analysts currently suggesting that Mr Johnson looks to be short of about 6 votes to pass the deal. As importantly, Johnson has negotiated a deal, and therefore the terms of the Benn Act that was passed to avoid a 'No Deal Brexit' have been met, and in principle he would not be forced to write a letter to the EU to request an extension.
It is not a 'good' deal other than the fact that it avoids the worst case scenario of 'No Deal' (in theory), but that is a moot point in the short-term. Whether it is or is not endorsed by Parliament, the UK is a) still headed for a general election, and b) none of the uncertainty about future trading arrangem and the rest of the world at the end of 2020. Per se and regardless of what happens on US/China trade and how that plays out in terms of global growth prospects, the UK economy faces another period of protracted uncertainty, which will dampen economic growth.
The question then is how a general election plays out under either vote scenarios. Should the deal pass, Johnson can campaign on how he delivered Brexit, and it is assumed that this would be something of a victory parade with a lot of 'airy' promises of more public sector spending (Law & Orders, NHS, Transport, Education, being pitched against Corbyn's socialist agenda of hefty tax increases for higher income earners and a programme of nationalisation for utilities and doubtless the railways. If the deal is not ratified, then both sides are unlikely to shift their position in terms of promises on spending and other measures, but Johnson would assuredly attack all the opposition parties as enemies of the "people's vote". The fact remains that none of this would change the very uncertain economic outlook in either scenario, nor would either heal the deep divisions as a result of the past 3 years, which also suggests that voting patterns will be very difficult to predict, and that opinion polls will not only be unreliable, but also suggest a wide range of possible outcomes. Further political gridlock would remain a very high probability, which would only foster even more social tensions.
| 08:50 (4 minutes ago) |
|
- Digesting China Q3 GDP and monthly activity data and Japan CPI on an
otherwise quiet day for statistics, along with RBA Lowe and Fed Williams
comments; plenty more Fed speak today along with corporate earnings; Brexit
knife edge vote tomorrow in focus
- China: Q3 GDP to grab headlines, Retail Sales / FAI as expected but
details weak; bigger rebound in Industrial Production may not prove
durable
- Brexit: Independent MPs and Labour MPs in 'leave' seats votes likely to
be decisive
- Charts: US Dollar Index and US/Germany 10-yr spread, GBP/USD & EUR/GBP
- Audio preview:
https://www.mixcloud.com/MOstwaldADM/adm-isi-morning-call-18-october-2019/
- Brexit thoughts via Le Fonti International yesterday
..........................................................................
********************
** EVENTS PREVIEW **
********************
There are some distractions from Brexit and US/China trade today, via way of the overnight run of China Q3 GDP and monthly activity indicators along with national CPI readings in Japan, and another slew of Fed speakers, and corporate earnings reports, among which Amex, Coca-Cola, Kansas City Southern, Schlumberger & State Street are likely to capture the headlines. But Saturday's UK parliament debate and vote on the 'new' UK/EU Withdrawal Agreement will inevitably be the major talking point (recap below), with one further thought about tomorrow's vote. For all that some of 'hard' Brexiteers may still relish the chance of a No Deal, they will be painfully aware that this process really cannot drag on much longer, and that Johnson's deal may be their best chance to ensure an exit; the likelihood is that revoking Article 50 or No Deal would be the only options on the table if this 'deal' fails to get the necessary votes in parliament.
On the central bank front, our hat tip of the week goes to RBA governor Lowe for his highly sceptical and critical comments on the benefits of further monetary easing, and our fallen star award to NY Fed chief Williams whose comments essentially amounted to suggesting that the Fed is making up policy as it goes along, so much for him being the big economic and monetary thinker on the FOMC!
** China - Q3 GDP, Sep Industrial Production, Retail Sales, FAI **
- Headline writers will inevitably focus on the marginally lower than expected 6.0% on Q3 GDP, vs. forecast6.1% and prior 6.2%, and note that this is the lowest pace for 30 years, but that is more 'sturm und drang' than anything else, especially as many unofficial estimates of GDP are well below the official data. In terms of the monthly activity data, Retail Sales at 7.8% y/y were as expected, though the detail was in fact less encouraging in so far as the Auto Sales fall was 'only' 2.2% y/y vs. August -8.1% (this is a very volatile series), while many other components slowed in y/y terms. The surprise came via Industrial Production, rebounding to 5.8% y/y vs. an expected 4.9% and August 4.4%, paced above all by a bounce in machinery and telecoms output, which may or may not prove durable, and it is probably better to take the unchanged 5.6% in year to date Production as a more reliable trend indicator, which was only just above the forecast of 5.5% y/y. Fixed Asset Investment slowed yet again, albeit modestly to 5.4% from 5.5%, with a small pick-up in SOE investment to 7.3% from 7.25, offsetting a further drop in Private FAI to 4.7% from 4.9%. The latter underlines that the ultra-high volume of local govt borrowing this year for infrastructure spending is as yet not having any spillover effect into the private sector.
RECAP: Brexit "state of play" - So what next? - a few thoughts
- A deal has been agreed, with considerable irony in the fact that the 'backstop' of the original Withdrawal Agreement would become the modus operandi, though only if this is approved by parliament on Saturday. A further irony is that this Withdrawal Agreement keeps the UK economy operating under EU rules until the end of 'transition period' in December 2020, which under the terms of the new agreement could in fact be extended - in reality a rather far cry from PM Johnson's claim that 'we have taken back control'. The fact that his effectively endorses the EU proposal of a border in the Irish Sea, which was made back in 2017, which most Brexiteers (including the PM) poured scorn on, even as recently as July/August. Be that as it may, this is a win-win for Johnson and the EU, in so far as Johnson can claim he delivered a 'new' Withdrawal Agreement as promised, and the EU can place blame for the deal being voted down in parliament firmly on the UK.
But mendacity and spin is the lingua franca of the current political world in most western nations, and as such this should not come as any great surprise. Nevetheless one can expect that Mr Farage and the Brexit Party will be launching a bitter tirade about this, and indeed about the fact that until a new trade deal is agreed, which could quite conceivably take a decade, the much despised (by Brexiteers) ECJ will continue to be the ultimate arbiter of legal disputes between the UK and EU. But in what would be a deeply cynical, though predictable move, the Brexiteers will doubtless argue that they are maintaining a clear legislative operating backdrop for domestic and foreign businesses in the UK, while a new trade agreement is negotiated.
But the immediate question relates to whether this 'agreement' will be ratified by Parliament on Saturday, given that it will clearly be approved by the EU Summit Council of Ministers today. That remains far from clear, and at the time of writing only the DUP of the potential swing group of voters has stated that it will vote against the 'deal'. They have in effect been thrown under a proverbial bus, and no amount of rumoured investment programmes were ever likely to be enough to induce them to at least abstain. Equally unsurprising was the GBP sell-off after an initial knee-jerk flip up to 1.30 vs USD and down to 0.8600 vs EUR, given much of the short GBP position has been purged over the past week.
The GBP will now be dancing to the tune of the 31 independent MPs voting intentions, and those on the right wing of the Labour party (ca. 30-40), who are opposed not only to a 'no deal' Brexit, but also to Labour leader Corbyn. It will certainly be a very close vote, with political analysts currently suggesting that Mr Johnson looks to be short of about 6 votes to pass the deal. As importantly, Johnson has negotiated a deal, and therefore the terms of the Benn Act that was passed to avoid a 'No Deal Brexit' have been met, and in principle he would not be forced to write a letter to the EU to request an extension.
It is not a 'good' deal other than the fact that it avoids the worst case scenario of 'No Deal' (in theory), but that is a moot point in the short-term. Whether it is or is not endorsed by Parliament, the UK is a) still headed for a general election, and b) none of the uncertainty about future trading arrangem and the rest of the world at the end of 2020. Per se and regardless of what happens on US/China trade and how that plays out in terms of global growth prospects, the UK economy faces another period of protracted uncertainty, which will dampen economic growth.
The question then is how a general election plays out under either vote scenarios. Should the deal pass, Johnson can campaign on how he delivered Brexit, and it is assumed that this would be something of a victory parade with a lot of 'airy' promises of more public sector spending (Law & Orders, NHS, Transport, Education, being pitched against Corbyn's socialist agenda of hefty tax increases for higher income earners and a programme of nationalisation for utilities and doubtless the railways. If the deal is not ratified, then both sides are unlikely to shift their position in terms of promises on spending and other measures, but Johnson would assuredly attack all the opposition parties as enemies of the "people's vote". The fact remains that none of this would change the very uncertain economic outlook in either scenario, nor would either heal the deep divisions as a result of the past 3 years, which also suggests that voting patterns will be very difficult to predict, and that opinion polls will not only be unreliable, but also suggest a wide range of possible outcomes. Further political gridlock would remain a very high probability, which would only foster even more social tensions.
Dentalfloss
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DXY....Will it hold.?
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OZ
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sellers in with a chance...if it dumps that pivot
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lining up
