Mar 8 • Morning Roll Call • 2322 Views • Comments Off on MORNING ROLL CALL

U.S. equities continue to sell off, as the U.S. trade deficit widens to a five year high. Sterling continues to sell offbetween-the-lines1

Have we been here before? Excuse us if we sound like a broken record, but once again we experienced diverse and dislocated economic calendar, fundamental news, pertaining to the USA economy on Tuesday. The USA trade deficit widened to a five year high, coming right in on the forecast at -$48.5 for the month of January. Consumer credit shrunk significantly, missing the prediction of $17.25b by some distance, the print was $8.974b. This left many in the analyst community scratching their collective heads.

Does this shrinkage indicate a consumer who’s all spent up, a sensible consumer who’s not been drinking the Kool Aid and has decided to pay down some debt in anticipation of the inevitable Fed interest rate rises in 2017? Or have lenders begun to tighten their underwriting criteria, beyond giving an (on average) $500 a month credit line, for anyone with a heartbeat in the USA, in order to buy a gas guzzling SUV over a nine year lease period?

What is for sure; “making America great again”, through manufacturing and exporting, looks a tall order, given the poor balance of payments data. Oh and just to confuse us a touch more, a Gallup poll was published in the USA revealing that consumers are now at their most optimistic on record, whilst consumer spending has actually hit record highs.

Not to be left out regarding outlier data prints Germany, the manufacturing powerhouse of Europe, missed the forecast of a -2.5% fall in manufacturing factory orders, coming in with a reading of -7.5%. This had the cumulative effect of sending the annualised reading into negative territory of -0.8%.

Europe’s GDP came in as forecast at 1.7% annualised, whilst in the UK house price inflation slipped to a 5.1% year on year increase according to the Halifax, with most journalists still bizarrely citing this cooling as bad news. Perhaps more worrying for the UK, as an economy so reliant on services and consumers, according to the BRC (British Retail Consortium) like for like yearly retail sales fell to -0.4% in February.

The DJIA slipped by 0.14%, with the SPX down by 0.29% by Tuesday’s close. The U.K. FTSE closed down 0.15%, Euro STOXX 50 down 0.07%, CAC down 0.35%, with Germany’s DAX, despite the poor factory order data, rising by 0.06%.

Sterling slipped to a fresh seven week low versus the U.S. dollar, this came after the weak consumer spending data revealed by the BRC spooked analysts and investors that Britain’s economy is now slowing down, as it prepares to trigger its Brexit from the European Union. GBP/USD dropped by circa 0.3% to 1.2202.

The Swiss franc slumped to a recent low versus several peers, USD/CHF rose to its highest since January 11th during the New York session before giving back some gains to close the day out at circa 1.0131. EUR/CHF reached its highest level since January 25th at 1.074, before also giving back gains in the N.Y. trading session.

West Texas Intermediate crude fell to $52.602 a barrel, despite Saudi Oil Minister Khalid al-Falih stating that OPEC were supposedly making progress delivering the promised output curbs agreed in December. With USA increasing production and inventories rising, the markets just aren’t buying OPEC’s narrative. Gold fell by approx. 0.8% percent $1,215 an ounce, after dropping by 0.8% in the previous trading sessions on Monday.

Economic calendar events for March 8th, all times quoted are London (GMT) times.

07:00, currency impacted EUR. German Industrial Production n.s.a. and w.d.a. The anticipation is for the reading to have fallen marginally to -0.6%, from -0.7% previously.

12:00, currency impacted USD. MBA Mortgage Applications (MAR 03). The expectation is for applications to have improved and increased by 5.8%

12:30, currency impacted GBP. U.K. Spring Budget. Slotted in as a low impact event, given that most of the content appears to have been pre-released, there are no surprises forecast for the new UK chancellor’s first Spring Budget.

13:15, currency impacted USD. ADP Employment Change (FEB). As always the ADP data is the precursor for the NFP data on the next calendar Friday, predicted to come in at 185k, this is significantly below the previous print of 246k.

15:00, currency impacted USD. Wholesale Inventories (JAN F). Inventories are forecast to fall to -0.1%, from -0.10% previously.



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