Independent Strategy

Macro Category

US

5th April, 2019 » US March Payrolls Report

A stronger payrolls number, but after the disruptions of last month (weather knocking around 80k off the headline figure) the bounce could still have been a stronger.  But enough to maintain sold employment growth, which continues to defy estimates that the labour market is tight...

Deterioration continues to run at pace, with some rebound in domestic demand failing to offset continuing weakness on the export side.  The release points to a further deterioration in exports in the coming months, although the decline in industrial production is running more closely, suggesting that a further downward adjustment/slump is not needed there.

Another disappointing report and while the yoy rate is still expanding (more robustly once ex-ing out the more volatile items) it seems clear that the 2017/18 mini-boom has exhausted itself.  As far as shipments go, growth still looks better, but we’re still seeing inventories rising.

Price data basically confirms what we knew, inflation is back in a moderating phase with dip in core highlighting that.  Income a little below expectations but the underlying wage story remains constructive, so nothing to be concerned about.  Although in terms of Fed priorities the pick-up in wage growth is not enough to offset broader demand concerns.

US

28th March, 2019 » US Q4 GDP Final

Final US GDP numbers for Q4 revised down a little bit but not that much of a change in year-on-year terms, with growth overall running a shade below 3% which isn’t bad.  Government was weak but investment still looks strong and inventory build also helped headline.  In fact, investment looks too strong given how corporate profits have performed.  Ditto for employment vs. profits.

Germany

25th March, 2019 » March Germany IFO Survey

While there looks to have been an improvement in March it’s generally led by a better services performance.  Looking at industry the trajectory remains weak with the ‘IFO clock’ remaining in downswing territory amid a further mild deterioration in expectations.  This continues to suggest ongoing manufacturing weakness, confirming the deterioration seen in the manufacturing PMI.

Excess reserves have been falling at a far quicker pace than the overall contraction in Fed balance sheet (Fig1).  This is perhaps a cleaner way of showing the same thing, using just Treasury securities which share more similar qualities in terms of value as capital (Fig2).

Special Post: Technicals

19th March, 2019 » IS Technicals 19th March

Dollar remains in a corrective phase overall, but the longer-term bull trend still looks good, meaning an eventual push through 98.00 on DXY.  On the rate side core bonds are in ranges for the moment, reflecting the adjustment central banks have made with regards to monetary policy guidance.

Manufacturing weakness persists, with strong energy output insufficient to offset broader downshift.  Looking at Fed survey orders data we’re not yet at a point to bounce.  So production side likely to remain an overall drag on economic activity over the remainder of the first quarter.

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