Macro Roundup (Oct 9)

SHANGHAI, Oct 9 (SMM) – This is a roundup of global macroeconomic news last night and what is expected in the day ahead.

Last night

The US dollar strengthened against a basket of other currencies on Tuesday as investors monitored the latest news around US-China trade talks and digested comments from the top Federal Reserve official.

Washington blacklisted Chinese companies over Beijing’s treatment of predominantly Muslim ethnic minorities, while President Donald Trump said a quick trade deal was unlikely.

Federal Reserve Chairman Jerome Powell said Tuesday that the central bank would expand its balance sheet “soon.” He noted this measure will be used as a response to the recent funding issues the bond market faced in recent weeks. “This is not QE. In no sense is this QE,” Powell said in a question and answer session after the speech.

LME base metals, except for zinc, closed lower on Tuesday. Lead led the declines with a drop of 2%, nickel tumbled 1.5%, copper, aluminium and tin fell 0.4%.

The SHFE complex also traded mostly lower overnight. Lead shed 1%, copper lost 0.5%, zinc slipped 0.2%, and nickel edged down, while aluminium inched up and tin advanced close to 1.4%.  

On the data front, US producer prices unexpectedly fell in September, leading to the smallest annual increase in nearly three years, which could give the Federal Reserve room to cut interest rates again later this month.

The US Labor Department said Tuesday that the producer price index for final demand dropped 0.3% last month, weighed down by decreases in the costs of goods and services. That was the largest decline since January and followed a 0.1% gain in August.

On a year-on-year basis, the PPI increased 1.4%, the smallest gain since November 2016, after rising 1.8% in August.

China’s services sector grew at its slowest pace in seven months in September despite a strong increase in new orders, a private survey showed on Tuesday.

The Caixin services purchasing managers’ index (PMI) fell to 51.3 last month, the weakest since February, following August’s 52.1 reading. A reading above 50 indicates expansion, while anything below that signals a contraction.

German industrial output rose unexpectedly in August, suggesting Europe’s largest economy may avert a recession. Output rose by 0.3% on the month against expectations of a 0.1% fall.

The American Petroleum Institute (API) on Tuesday reported a build of 4.1 million barrels in the US crude oil inventories for the week ending October 4.

API reported a draw of 5.9 million barrels of crude oil inventories for the previous week ending September 27, and the US Energy Information Administration (EIA) reported an increase of 3.1 million barrels.

The EIA on Tuesday cut its 2020 world oil demand growth forecast by 100,000 barrels per day (bpd) to 1.3 million.

Day ahead

Economic data slated for release today include US job openings and wholesale inventories for August as well as EIA weekly crude inventory data.

The Federal Open Market Committee’s minutes from its September meeting are also due on Wednesday.