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The Opening Belle
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A strong tech-led recovery on Wall Street in late U.S. trading led to a somewhat improved risk sentiment in equities overnight.
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ASX the stand out performer. Nikkei only down slightly after the two day bank holiday in Japan.
U.S. Futures are picking up slightly after an overnight pause, and European markets look to open on the front foot;
European Opening Calls:#FTSE 5900 +1.21%#DAX 12727 +1.05%#CAC 4822 +1.03%#AEX 546 +1.05%#MIB 19090 +1.03%#IBEX 6710 +0.92%#OMX 1793 +0.62%#STOXX 3197 +1.02%#IGOpeningCall— IGSquawk (@IGSquawk) September 23, 2020
In FX, the USD has maintained its recent appeal with DXY above the 94 handle.
Australia
Australian PMI headline figures indicate improvement on the previous month;
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But the headline figures are not usually the main focus...
"The latest PMI data showed signs of stabilisation in Australia's private sector business conditions during September, with activity and sales increasing marginally after falling in August amid tightening containment measures to contain a surge in new infection cases.
However, other survey indicators suggest that the rebound may lack legs going forward.
The absence of capacity pressure led to a further and sharper decline in workforce numbers, highlighting the prospect of rising unemployment.
"The survey also showed a divergence in the sectors participating in the economic recovery.
Services business activity remained subdued, coinciding with weak sales as the sector was more adversely hit by COVID-19 restrictions.
Meanwhile, manufacturing output continued to increase, supported by renewed growth in export sales.
"Government spending on public works and expectations of an eventual easing of containment measures, including crossborder restrictions, boosted business sentiment, which rose to the highest for just over two years."
Westpac & NAB expect RBA to ease policy further, cut rates to 0.1%
This is following Deputy Governor Debelle's fairly dovish speech yesterday.
NAB now sees significant risk of the RBA easing policy further by cutting the cash rate, 3-year yield target and TFF rate by 15bps to 0.10% (from 0.25%).
The remuneration on ES balances which is already at 0.10% is likely to be either unchanged, or cut slightly, so as to remain positive.
We also expect the RBA to announce outright QE purchases in the 5-10 year area of the curve, so as to lower longer-dated rates to provide stimulus via the portfolio rebalance effect/a lower $A.
Different to YCC, this would likely require a nominated quantum of bond purchases per period to be announced.
The A$ continued lower overnight, hittin a low of 0.71120 vs the dollar.
Japan
Japanese PMI's headlined with Private sector downturn extends into September.
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There isn't much more to say.
Japan is really struggling to get back on track.
Output contracted at a faster pace for the first time in four months, weighing on the headline index, which remained below the 50.0 threshold that separates contraction from expansion for a 17th month.
“New order inflows continued to fall in September, reflecting subdued demand,” said Bernard Aw, principal economist at IHS Markit, which compiles the survey.
“That said, the picture of the economy remained much improved when compared to the height of the pandemic during the second quarter.”
New Zealand
RBNZ kept policy on hold overnight as expected.
There is no doubt that further easing is coming soon.
The RBNZ said the ongoing virus-led activity restrictions, especially during a second wave of infections in Auckland, continued to dampen economic activity, and business and consumer confidence.
...further stimulus may be needed and that it was prepared to use additional tools like a Funding for Lending Programme (FLP), a negative OCR, and purchases of foreign assets.
“Members agreed that monetary policy will need to provide significant economic support for a long time to come to meet the inflation and employment remit, and promote financial stability,”
The U.S. government shutdown has been avoided;
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After announcing new restrictions yesterday, the U.K government is looking at wage support/subsidy schemes.
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Looking ahead, the PMI's will continue to roll in today, and we have a packed roster of Fed speakers.
Mester, Evans, Rosengren, Kashkari, Bostic, Quarles & Daly are all scheduled to speak, plus Powell's testimony to congress moves into the second day.