Weekly Market Recap (18-22 March)


ECB’s de Cos (dove
– voter) over the weekend reiterated the willingness of the ECB to start
cutting rates in June:

  • If our macroeconomic
    forecasts are met in the coming months, it is normal that we will start
    cutting rates soon and June could be a good date to start.
  • Current degree of
    consensus is very high, and I hope this will continue to be the case.

ECB’s de Cos

The New Zealand
Services PMI improved further in February:

  • Services PMI 53.0
    vs. 52.2 prior (revised from 52.1).

BNZ comment:

  • “When we combine the
    PMI and PSI together to get an indicator of activity, there is a strong
    suggestion of growth returning later this year. The turnaround occurs a
    little stronger and earlier than we are forecasting but, whatever the
    case, it is a heartening sign”.

New Zealand Services PMI

The Chinese February Industrial Production beat
expectations by a big margin:

  • Industrial
    Production Y/Y 7.0% vs. 5.0% expected and 6.8% prior.

Chinese Industrial Production YoY

The Chinese February Retail Sales beat expectations:

  • Retail Sales Y/Y
    5.5% vs. 5.2% expected and 7.4% prior.

Chinese Retail Sales YoY

The Chinese Unemployment Rate increased to 5.3% vs.
5.2% prior.

Chinese Unemployment Rate

The Canadian February PPI beat expectations by a big

  • PPI M/M 0.7% vs.
    0.1% expected and -0.1% prior.
  • PPI Y/Y -1.7% vs.
    -2.9% prior.
  • Raw materials prices
    M/M 2.1% vs. 0.8% expected and 1.2% prior.
  • Raw materials prices
    Y/Y -4.7% vs. -6.5% prior.

Canada PPI YoY

The US NAHB Housing Market Index increased further in

  • NAHB 51 vs. 48
    expected and 48 prior.


  • Single family 56 vs. 52 prior.
  • Next six months 62
    vs. 60 prior.
  • Traffic of
    prospective buyers 34 v.s 32 prior.

US NAHB Housing Market Index

ECB’s Centeno (dove –
voter) continues to support a rate cut in June:

  • Cutting rates may
    help prevent a recession.

ECB’s Centeno

The RBA left the Cash
Rate unchanged at 4.35% as expected dropping the tightening bias:

  • Board remains
    resolute in its determination to return inflation to target.
  • Inflation continues
    to moderate but remains high.
  • Recent information
    suggests that inflation continues to moderate.
  • Services inflation
    remains elevated and is moderating at a more gradual pace.
  • Board is not ruling
    anything in or out on interest rates.
  • The data are
    consistent with continuing excess demand in the economy and strong
    domestic cost pressures, both for labor and non-labor inputs.
  • Higher interest
    rates are working to establish a more sustainable balance between
    aggregate demand and supply in the economy.
  • The board expects
    that it will be some time yet before inflation is sustainably in the
    target range.
  • Accordingly,
    conditions in the labor market continue to ease gradually, although they
    remain tighter than is consistent with sustained full employment and
    inflation at target.
  • While recent data
    indicate that inflation is easing, it remains high. While there are
    encouraging signs that inflation is moderating, the economic outlook
    remains uncertain.


Moving on to the Governor
Bullock’s Press Conference:

  • We’re making
    progress in fight against inflation.
  • But inflation remains high.
  • Recent data suggests
    we’re on the right track.
  • We need greater
    confidence in seeing inflation return to target in a reasonable timeframe.
  • Risks to the outlook
    are finely balanced.
  • It is too soon to
    rule anything in or out.
  • We have changed
    language on guidance based on data.
  • Not confident enough
    to say that we can rule out certain interest rate changes.
  • But we are on the
    path to achieving goals set out on the inflation front.
  • We are responding to
    data as the data comes out.
  • On the one hand, we
    still have inflation above target.
  • Services inflation
    is still elevated.
  • On the other hand,
    we are conscious that consumption is slowing.
  • And also tightness
    in labour market conditions is easing.
  • We can’t rule
    anything in or out.
  • Need to be much more
    confident on inflation coming down to consider a rate cut.

RBA’s Bullock

The BoJ has finally
exited the negative interest rates policy hiking rates by 10 bps to 0.00-0.10%
as expected. Moreover, the central bank scrapped the yield curve control and
ETF purchases while maintaining QE:

  • Short-term policy
    rate at around 0.00% to 0.10%.
  • Voting majority of
    7-2 on interest rates (Asahi and Toyoaki dissented).
  • Upper bound of 1% on
    10-year JGB yields removed i.e. yield curve control scrapped.
  • To continue JGB
    purchases with broadly same amount as before.
  • In case of rapid
    rise in yields, BoJ will make nimble response such as increasing JGB
  • Voting majority of
    8-1 on JGB purchases (Toyoaki dissented).
  • To discontinue
    purchases of ETFs and J-REITs.
  • To gradually reduce
    corporate bond purchases and discontinue them in about one year.
  • Voting was unanimous
    on discontinuing ETF purchases.
  • Japanese economy has
    recovered moderately, although some weakness has been seen in part.
  • It is highly likely
    wages will continue to increase steadily this year.
  • Virtuous cycle
    between wages and prices has become more solid amid recent data.
  • BoJ judges it came
    in sight that price stability target would be achieved in a sustainable
    and stable manner towards the end of the projection period as outlined in
    January outlook report.


Moving on to the Governor Ueda’s Press Conference:

  • We will carry out
    ‘regular’ monetary policy.
  • Not thinking of a
    name for new policy framework, since it is a ‘regular’ setting.
  • We will set
    short-term interest rates just like any other central bank.
  • Interest rate levels
    will be determined by markets.
  • Accommodative
    conditions remain in place and will firmly underpin economy, prices.
  • Will consider
    options for easing policy if needed, including ones used in the past.
  • There is still a
    distance to 2% price target when looking at inflation expectations.
  • The pace of further
    rate hikes depends on economy, price outlook.
  • We will consider
    reducing JGB purchases at some point in the future.
  • Likelihood of
    achieving 2% price target is rising but still not 100% guaranteed.
  • We are at a phase
    where we can slowly proceed with possible rate hikes.
  • If wage hike trend
    broadens, it is a consideration for further policy decisions.
  • For now, not
    necessarily confident enough that wages at smaller firms will rise.

BoJ Ueda

ECB’s de Guindos (neutral – voter) said that he’s
ready to discuss a rate cut in June but the evolution of wage growth for him is

  • Ready to discuss
    rate cut in June.
  • We haven’t yet
    discussed anything about future rate moves.
  • We need to gather
    more information.
  • We are data-dependent.
  • Evolution of wages
    is key.
  • In June, we will
    have our new projections and we will be ready to discuss this.

ECB’s de Guindos

The Canadian February CPI missed expectations across
the board by a big margin:

  • CPI Y/Y 2.8% vs.
    3.1% expected and 2.9% prior.
  • CPI M/M 0.3% vs.
    0.6% expected and 0.0% prior.
  • Core CPI Y/Y 2.1% vs.
    2.4% prior.
  • Core CPI M/M 0.1% vs. 0.1% prior.
  • Trimmed Mean CPI Y/Y
    3.2% vs. 3.4% prior.
  • Median 3.1% vs. 3.3% prior.
  • Common 3.1% vs. 3.3%
    prior (revised from 3.4%).

Canada Inflation Measures

The US February Housing Starts and Building Permits
beat expectations:

  • Housing Starts 1521M
    vs. 1425M expected and 1374M prior (revised from 1331M).
  • Housing Starts M/M
    10.7% vs. -12.3% prior (revised from-14.8%).
  • Building Permits
    1518M vs. 1495M expected and 1489M prior.
  • Building Permits M/M
    1.9% vs. -0.3% prior.

US Housing Starts and Building Permits

ECB’s Kazaks (hawk – voter) is supporting the current
market expectations:

  • Comfortable with
    current market pricing on rates.
  • It will take some
    time to get to neutral rate.

ECB’s Kazaks

The PBoC left the LPR rates unchanged as expected:

  • LPR 1 year 3.45%.
  • LPR 5 year 3.95%.


The UK February CPI missed expectations across the

  • CPI Y/Y 3.4% vs.
    3.5% expected and 4.0% prior.
  • CPI M/M 0.6% vs.
    0.7% expected and -0.6% prior.
  • Core CPI Y/Y 4.5% vs.
    4.6% expected and 5.1% prior.
  • Core CPI M/M 0.6%
    vs. 0.7% expected and -0.9% prior.
  • Services Inflation
    6.1% vs. 6.0% expected and 6.5% prior.


ECB’s Lagarde (neutral – voter) is trying to manage
expectations for the ECB rate cuts path after the first move seen in June:

  • Cannot commit to
    rate path even after first cut.
  • We need to move
    further along the disinflationary path.
  • Average wage growth
    in 2024 fell from 4.4% from January meeting to 4.2% in March meeting.
  • Latest data suggests
    wages are growing in a way that is compatible with inflation reaching the
    ECB’s target.
  • Will get a clearer
    picture in the coming months.
  • Expect to have two
    important pieces of evidence to raise confidence level sufficiently for
    first policy move.
  • If the data shows
    sufficient alignment between inflation path and ECB projections, then can
    dial back on current policy cycle.

ECB’s President Lagarde

The BoC released the Minutes of its March Monetary
Policy Meeting:

  • Agreed conditions
    for rate cuts should materialize in 2024
    if economy evolves as
  • Council members had differing
    views on when
    there would likely be enough evidence to judge if
    conditions for a cut were in place.
  • Members also had
    differing views on how to weigh risks to inflation outlook.
  • Indicators of
    underlying inflation suggested slow progress getting inflation down to
  • Expressed concern
    that housing continued to pose upside risks to the inflation outlook.
  • Saw nothing in data
    that would change their view that CPI inflation will remain around 3% in
    the coming months.
  • While house prices
    continued to fall in January, recent strength in resales could translate
    into pickup in house prices and stoke shelter inflation.
  • Strength in equity
    markets could provide a boost to consumer sentiment.


The Fed held interest rates steady at 5.25-5.50% as
expected with no change to the statement:

  • Dots continue to
    show 75 bps in cuts this year but show fewer in 2025 and 2026
  • 2024 core PCE median
    seen at 2.6% vs. 2.4% prior.
  • Central tendency on
    PCE inflation edges up.
  • No mention in the
    statement of the balance sheet or tapering.

Summary of Economic Projections

Moving on to the Fed Chair Powell’s Press Conference:

  • Risks are moving
    into better balance.
  • Inflation has eased
    substantially but is still too high.
  • Path forward is uncertain.
  • Economy has made
    considerable progress.
  • Risks are moving
    into better balance.
  • Activity in the
    housing sector was subdued last year.
  • GDP has been
    bolstered by strong consumer demand as well as healing supply chains.
  • Longer-term
    inflation appears to remain well anchored.
  • Inflation has eased notably.
  • We’re likely to cut
    rates at some point this year.
  • The economy is
    performing well.
  • We continue to make
    good progress on bringing inflation down.
  • We’re strongly committed
    to bringing inflation down to 2% over time but we stress ‘over time’.
  • There is some
    confidence that lower market rents we’re seeing will show up but there’s
    uncertainty on the timing.
  • There will be a
    combination of lower goods and services inflation bringing inflation down
    to 2% sustainably.
  • The risks are really
    two-sided now.
  • On the January PCE
    and CPI reports, we have reason to think there were seasonal adjustment
    effects there.
  • If you take January
    and February together, I don’t think the story of bumpy but lower
    inflation is unfolding.
  • I don’t think those
    numbers add to our confidence that inflation is coming down.
  • I don’t think we
    know if rates will be higher in the longer run.
  • We’re looking for
    data that confirms what we saw late last year that will give us higher
    confidence in inflation falling to 2%.
  • It’s still likely in
    most people’s view that we will have rate cuts this year but depends on
  • We do think
    financial conditions are weighing on economic activity.
  • Wage growth is
    moderating to more sustainable levels.
  • Labor market is in
    good shape.
  • Initial claims are
    very, very low.
  • We are closely
    watching layoffs but don’t see it.
  • We don’t see cracks
    in the jobs market.
  • Strong job growth,
    in and of itself, is not a reason to hold off on rate cuts.
  • Fed is discussing
    the pace of balance sheet runoff, will have something ‘fairly soon’.
  • I don’t think
    inflation was mostly caused by wages.

Fed Chair Powell

Nikkei reported that the BoJ was weighing the next
rate hike for July. The report also said that an October hike was considered
one of the most likely scenarios and that the timeline would “keep us from
coming off like we’re rushing to hike rates,” said a BOJ source. But an
early hike “leaves room for us to consider rolling out another increase
before the end of the year”.


The New Zealand Q4 2023 GDP missed expectations:

  • Q4 2023 GDP Q/Q
    -0.1% vs. 0.1% expected and -0.3% prior.
  • Q4 2023 GDP Y/Y
    -0.3% vs. 0.1% expected and -0.6% prior.

New Zealand GDP

The Australian March PMIs showed another downtick in
Manufacturing and uptick in Services:

  • Manufacturing PMI
    46.8 vs. 47.8 prior.
  • Services PMI 53.5
    vs. 53.1 prior.

Australia Manufacturing PMI

The Australian February Labour Market report beat
expectations by a big margin with positive revisions to the prior figures:

  • Employment change
    116.5K vs. 40K expected and 15.3K prior (revised from 0.5K).
  • Unemployment rate
    3.7% vs. 4.0% expected and 4.1% prior.
  • Participation rate
    66.7% vs. 66.8% expected and 66.6 prior (revised from 66.8%).
  • Full-time
    employment 78.2K vs. 19.9K prior (revised from 11.1K).
  • Part-time
    employment 38.2K vs. -4.6K prior (revised from 10.6K).

Australia Unemployment Rate

The Japanese March PMIs both improved further although
Manufacturing remains in contractionary territory:

  • Manufacturing PMI
    48.2 vs. 47.2 prior.
  • Services PMI 54.9
    vs. 52.9 prior.

Japanese Manufacturing PMI

BoJ Governor Ueda reaffirmed the patient stance for
the time being now that they exited the negative interest rates policy:

  • BoJ expected to maintain
    accommodative monetary policy for the time being.
  • Accommodative
    monetary policy likely to underpin the economy.
  • Cost-push pressure
    on inflation dissipating but service prices continue to rise moderately.
  • Recent wage
    negotiation data, hearing on companies confirmed wage-inflation cycle
  • Medium, long-term
    inflation expectations heading toward 2%.
  • BoJ will support
    economy, prices by maintaining accommodative monetary conditions for time
  • We could have waited
    until inflation stays at 2% for long time, before exiting massive stimulus
    but that could have led to sharp increase in upside risk to price outlook.
  • Don’t think our
    latest decision will lead to sharp increase in mortgage loan rates, cost
    of corporate.
  • Negative rate and
    other tools under BoJ’s massive stimulus had boosted demand by pushing
    down real interest rates, but had side-effects too such as on JGB market
  • Preliminary wage
    negotiation outcome tends to be revised down but even so, we thought final
    outcome would be fairly strong number.
  • Consumption was
    showing some weakness, but we were able to confirm strength in capex.
  • We know some small
    firms might struggle to hike wages, but overall, small, midsized firms’
    profits are improving.
  • As we end our
    massive stimulus, we will likely gradually shrink our balance sheet, and
    at some point, reduce JGB purchases.
  • At present, we have
    no clear idea on timing of reducing JGB buying, scaling back size of
    balance sheet.
  • We will take plenty
    of time
    examining how to reduce BoJ’s ETF holdings.
  • In event of reducing
    BoJ’s ETF holdings, BoJ will come up with guidelines taking into account
    market developments at the time.
  • In selling BoJ’s ETF
    holdings, we will do so in a way that minimises losses on BoJ, disruptions
    in markets.

BoJ Governor Ueda

The SNB “surprised” with
a 25 bps cut bringing interest rates to 1.50% vs. 1.75% prior:

  • Easing of policy
    made possible as fight against inflation has been effective.
  • Inflation likely to
    remain in the range below 2% over the next few years.
  • Today’s easing
    ensures that monetary conditions remain appropriate.
  • 2024 inflation seen at 1.4% (previously 1.9%).
  • 2025 inflation seen at 1.2% (previously 1.6%).
  • 2026 inflation seen at 1.1%.
  • Will adjust its
    monetary policy again if necessary to ensure inflation remains within the
    range consistent with price stability over the medium-term.


Moving on to the Chairman Jordan’s Press Conference:

  • Rate cut is not a
    parting gift.
  • We always make brave
    decisions regarding the mandate.
  • Our decisions are
    independent of what other central banks do.
  • We give no forward
    guidance on future interest rates, we will see where we are in 3 months’
  • Rate cut today is
    100% compatible with our framework.

SNB’s Chairman Jordan

The Eurozone March PMI showed Manufacturing falling
further in contraction and Services moving higher in expansion:

  • Manufacturing PMI
    45.7 vs. 47.0 expected and 46.5 prior.
  • Services PMI 51.1
    vs. 50.5 expected and 50.2 prior.

Eurozone Manufacturing PMI

The UK March PMIs showed Manufacturing climbing
further but remaining in contraction with Services ticking lower:

  • Manufacturing PMI
    49.9 vs. 47.8 expected and 47.5 prior.
  • Services PMI 53.4
    vs. 53.8 expected and 53.8 prior.

UK Manufacturing PMI

The BoE left interest rates unchanged at 5.25% as
expected with the vote split showing everyone supporting the rate hold except
Dhingra voting for a 25 bps cut:

  • Bank rate vote 8-0-1 vs. 7-1-1 expected (Dhingra
    voted to cut rates by 25 bps).
  • Moving in the right direction but not yet at the
    point to cut interest rates.
  • Inflation has continued to fall back relatively
  • Restrictive monetary policy stance is weighing on
    activity in the real economy.
  • That is leading to a looser labour market and is
    bearing down on inflation pressures.
  • But key indicators of inflation persistence
    remain elevated.
  • Monetary policy will need to remain restrictive
    for sufficiently long to return inflation to the 2% target.
  • Prepared to adjust monetary policy as warranted
    by economic data to return inflation to the 2% target sustainably.
  • Will keep under review for how long Bank Rate
    should be maintained at its current level.


The US Jobless Claims beat expectations once again:

  • Initial
    Claims 210K vs. 215K expected and 212K prior (revised from 209K).
  • Continuing
    Claims 1807K vs. 1820K expected and 1803K prior (revised from 1811K).

US Jobless Claims

The US March PMIs showed Manufacturing climbing
further into expansion while Services missed slightly:

  • Manufacturing PMI 52.5 vs. 51.7 expected and 52.2
  • Services PMI 51.7 vs. 52.0 expected and 52.3

“A steepening rise in costs,
combined with strengthened pricing power amid the recent upturn in demand,
meant inflationary pressures gathered pace again in March. Costs have increased
on the back of further wage growth and rising fuel prices, pushing overall
selling price inflation for goods and services up to its highest for nearly a
. The steep jump in prices from the recent low seen in January hints at
unwelcome upward pressure on consumer prices in the coming months.”

US Manufacturing PMI

The Japanese February Core CPI came in line with

  • CPI Y/Y 2.8% vs.
    2.2% prior.
  • Core CPI Y/Y 2.8%
    vs. 2.8% expected and 2.0% prior.
  • Core-Core
    CPI Y/Y 3.2% vs. 3.5% prior.

Japan Core-Core CPI YoY

BoE’s Bailey (neutral – voter) speaking to the FT
reaffirmed the central bank patient stance as they gather more information to
guide their rate cuts timing:

  • Rate cuts this year is not unreasonable.
  • All our meetings are in play, we take a fresh
    decision each time.
  • Need to have confidence that wages are heading in
    the right direction.
  • Don’t need to wait for inflation to drop to 2%
    before cutting rates.
  • Recent economic developments are obviously good
  • The job on inflation is not done but what we are
    seeing is encouraging.

BoE’s Governor Bailey

The UK February Retail Sales beat expectations:

  • Retail sales M/M
    0.0% vs. -0.3% expected and 3.6% prior (revised from 3.4%).
  • Retail sales Y/Y
    -0.4% vs. -0.7% expected and 0.5% prior (revised from 0.7%).
  • Retail sales ex
    autos, fuel M/M 0.2% vs. -0.1% expected and 3.4% prior (revised from
  • Retail sales ex
    autos, fuel Y/Y -0.5% vs. -0.9% expected and 0.5% prior (revised from

UK Retail Sales YoY

ECB’s Nagel (hawk – voter) supports a rate cut in

  • The probability of a
    rate cut before the summer break is increasing.
  • Does not see any
    automatism in rate cuts.
  • A June rate cut has
    a higher probability than one in April.

ECB’s Nagel

The German March IFO beat expectations across the

  • IFO 87.8 vs. 86.0
    expected and 85.7 prior (revised from 85.5).
  • Current conditions
    88.1 vs. 86.8 expected and 86.9.
  • Expectations 87.5
    vs. 84.7 expected and 84.4 prior (revised from 84.1).

German IFO

ECB’s Holzmann (uber hawk – voter) says that a rate
cut is in preparation as most ECB members are looking for a move in June:

  • A rate cut is in
  • But the timing of
    the rate cut is unclear.
  • We are data dependent.
  • There are many who
    believe that developments in June will be such that we can cut at the
  • My view is that
    inflation is stickier than those people believe, which is why I am waiting
    for June data.

ECB’s Holzmann

The Canadian January Retail Sales beat expectations:

  • Retail Sales M/M -0.3% vs. -0.4% expected and
    0.9% prior.
  • Retail Sales Y/Y 0.9% vs. 2.9% prior.
  • Ex autos M/M 0.5% vs. -0.4% expected and 0.6%
  • Ex auto and gas M/M 0.4%.
  • Sales were up in 6 of 9 subsectors.
  • Advance
    February retail sales 0.1%.

Canada Retail Sales YoY

The highlights for next week
will be

  • Tuesday: US Durable Goods Orders, US Consumer Confidence.
  • Wednesday: Australia Monthly CPI, Fed’s Waller.
  • Thursday: BoJ Summary of Opinions, Australia Retail Sales,
    Canada GDP, US Final Q4 GDP, US Jobless Claims.
  • Friday: Japan Jobs data, Tokyo CPI, Japan Industrial
    Production and Retail Sales, US PCE, Fed Chair Powell.

That’s all folks. Have a nice weekend.


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