Macro Roundup (Aug 24)

SHANGHAI, Aug 24 (SMM) – This is a roundup of global macroeconomic news last night and what is expected today.

Last night

The dollar stopped a five-day losing streak and the euro fell on Thursday. The greenback received a boost from political uncertainty, a new round of trade tariffs and the Federal Reserve's latest policy meeting minutes that left little doubt that the US central bank will further raise interest rates.

The dollar index gained 0.57% to close at 95.617.

LME base metals closed mixed on Thursday. Lead soared over 2%, aluminium inched up 0.24%, zinc nudged up 0.1% while tin lost 0.62%, copper dropped 0.76% and nickel slumped 2.5%. SHFE base metals also saw mixed performance overnight. Lead and zinc jumped over 1%, aluminium increased 0.55%, copper gained 0.46% while tin edged down 0.25% and nickel fell over 1%.

IHS Markit’s eurozone composite flash purchasing managers’ index (PMI), seen as a gauge of economic health, nudged up in August to 54.4 from 54.3, just below the forecast of 54.5. A number above 50 indicates growth and expansion in the economy. 

An index measuring manufacturing activity in the eurozone fell to 54.6 from 55.1 in July, a new low since November 2016. The index for services edged up to 54.4 from 54.2.

“August’s small increase in the euro zone PMI suggests that the region’s economy is performing well in Q3, which will reassure the ECB that it is right to be normalising monetary policy very gradually,” said Jessica Hinds at Capital Economics. IHS Markit said that the PMIs indicated GDP growth this quarter at around 0.4%.

Germany’s services sector continues to provide a temporary cushion for the economy against an easing in manufacturing. This reflects the vulnerability of the world’s export heavyweight to rising trade frictions, Markit data showed.

Germany’s PMI, which tracks the manufacturing and services sectors that account for more than two-thirds of the economy, rose to a six-month high reading of 55.7 in August from 55 in July.

An index measuring manufacturing activity fell to 56.1 from 56.9 in July, the lowest reading in two months. The index for services rose to a six-month high of 55.2 from 54.1.

The European Commission’s flash estimate of consumer sentiment disappointed for the month. The index fell by 1.4 points to -1.9, the lowest reading in 15 months.

Markit data also showed that the flash US composite PMI eased to a four-month low of 55 in August, from 55.7 in the previous month. The index for the manufacturing sector registered 54.5 in August, down from 55.3 in July, the lowest since November 2017. The index for services also dropped to a four-month low of 55.2, from 56 in July.

Commenting on the flash PMI data, Chris Williamson, chief business economist at HIS Markit, said: "The US economy lost a little pace in August, according to the flash PMI, but continued to grow at a solid rate. The PMI is indicative of the economy growing at an annualised rate of roughly 2.5%, down from a 3% indicated rate in July."

The number of Americans filing for unemployment benefits fell last week, a sign that the labour market was holding firm despite tensions between the US and its trading partners that have grown restrictions on global commerce.

Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 210,000 for the week ended August 18, the Labor Department said on Thursday. It was the third straight week of declines for claims. In July, claims fell to their lowest since 1969.

The signs of strength in the US labour market have been a key reason behind the Federal Reserve's ongoing campaign to raise interest rates.

Sales of new US single-family homes unexpectedly fell in July to a nine-month low in a sign that the housing market was cooling.

The Commerce Department said on Thursday that  new home sales decreased 1.7% to a seasonally adjusted annual rate of 627,000 units last month, the lowest level since October 2017. June's sales pace was revised up to 638,000 units from the previously reported 631,000 units.

Housing market data has weakened in recent months, with home resales declining in July for a fourth straight month. The sector has been plagued by rising costs of building material and shortages of land and labour, which have squeezed the supply of houses available for sale and kept house prices high. Though the moderation in housing is largely driven by supply constraints, there are concerns that persistent weaknesses will spill over to the broader economy.

The Federal Housing Finance Agency (FHFA) house price index in the US inched up 0.2% month on month in June, slightly below the expectations of 0.3%.

Day ahead

The key developments to monitor today are Germany’s gross domestic product (GDP) growth in the second quarter, US durable goods orders data for July.

A three-day congregation among leading central bankers at Jackson Hole, Wyoming, began on Thursday. Fed Chair Jerome Powell will address attendees in a speech on Friday.