Date: January 11, 2019
United States:
U.S. Shutdown Could Hit Labor, Capex Numbers, Pimco Says
About that U.S. shutdown. “It’s only a matter of time before we start to see this in the real economy,” Mark Kiesel, chief investment officer of global credit at Pacific Investment Management Co., told Bloomberg Television Thursday. That includes the labor market and capital spending, the latter of which was down in at least two measures of expectations in December. “As profits slow and as confidence gets hit, you’re going to see that impact labor-market numbers — they’ll weaken,” he said. “You’re also going to see the capex numbers start to weaken as well.”
U.S. Stock Futures Edge Lower as Dollar Declines: Markets Wrap
U.S. stock futures slipped with European shares on Friday, while Asian equities rose at the end of a week when sentiment was mostly bolstered by a dovish tone from the Federal Reserve and hopes for a breakthrough on trade. The dollar fell and Treasuries advanced. Contracts on the S&P, Dow and Nasdaq indexes pointed to a softer open in New York, while the Stoxx Europe 600 Index handed back an earlier gain. In Asia, shares rose in Shanghai, Tokyo, Seoul and Hong Kong. The greenback was set for a fourth week of losses after Fed Chairman Jerome Powell underscored the message of patience with further interest-rate hikes, while saying the central bank will keep shrinking its balance sheet. European debt tracked Treasuries higher. The pound advanced even as Prime Minister Theresa May’s office countered reports that Brexit may be delayed. Equities are still set for big gains this week amid signs of progress between the world’s two biggest economies on trade and dovish commentary from the Fed. Nevertheless, worries remain about economic growth and earnings prospects, while there’s also uncertainty as the U.S. partial government shutdown threatens to extend into a fourth week. Chinese Vice Premier Liu He is set to visit Washington on Jan. 30 and 31 for further trade talks. China’s yuan, which slumped last year as trade tensions worsened, is heading for its best week since 2005 — back when the country dropped a fixed peg to the dollar.
Europe:
The Wreck of 2018 Shows in Brexit Barometer, and 2019 Looks Worse
Uncertainty over Brexit touched every corner of the U.K. economy in the fourth quarter as the Bloomberg Brexit Barometer skidded to the lowest level since the country voted to leave the European Union in 2016. The December barometer was 42 percent below its year-earlier level, weakened by slowing growth and investment. Meanwhile, U.K.-EU negotiations on the withdrawal agreement have failed to produce an accord that Parliament can pass. The U.K. is due to leave the bloc on March 29, with or without a divorce agreement, and uncertainty and fear have intensified as the exit approaches. The barometer, which includes data for growth, labor market, inflation and other key indicators, averaged 8.3 in the fourth quarter—deep in “windy” territory and the lowest three-month average since 2013. The uncertainty gauge, which includes market volatility, was responsible for the bulk of the fourth-quarter decline, followed by the employment indicator. The barometer average for the October-December period was down 16.4 points from the third quarter. It was the biggest quarter-on-quarter decline since the second period of 2016, when the surprise referendum result triggered the departure process.
Asia:
China to Set Growth Target of 6 to 6.5% for 2019, Reuters Says
China plans to set a target range for economic growth of 6 to 6.5 percent for 2019, Reuters reported, citing unnamed officials. That compares with the 2018 target of “about 6.5 percent,” signaling that policy makers are embedding the ongoing economic slowdown into their goals for the year. The government is also widening the targeted budget deficit for the year, to 2.8 percent of gross domestic product, Bloomberg reported this week. Incoming data signal that the moderation in the world’s second-largest economy is deepening in the first quarter, with a report this week raising the risk of factory-price deflation. While conducting negotiations with the U.S. over the ongoing trade dispute, the government has rolled out a series of policies to boost output, without resorting to broad or large-scale stimulus. While a target band signals a greater amount of uncertainty over the economic outlook than in the past, if confirmed the level is in line with economist expectations. The consensus among forecasters surveyed by Bloomberg is for the economy to expand by 6.2 percent in 2019 before 6.0 percent in 2020.