April 11, 2023
We See Some Slowing in Demand for Labor, but Still High
Fed’s Williams: We See Some Slowing in Demand for Labor, but Still High
Inflation remains well above the 2% target as it falls mostly in goods.
Ali Sabbaghi
Fed’s Williams: We See Some Slowing in Demand for Labor, but Still High
Inflation remains well above the 2% target as it falls mostly in goods.
China’s loan growth was stronger than the market expected. This should move the market tomorrow when China’s stock market opens. CNY and CNH should strengthen
New yuan loans rose by CNY3890 billion in March from CNY1810 billion in February. Including loan growth, all credit channels experienced very strong growth, which totalled CNY5380 billion.
For the first quarter, new yuan loans rose by CNY10.7 trillion and overall credits rose by CNY14.53 trillion. This is a quarter of exceptionally strong credit growth. Most of the growth came from infrastructure and corporate investment needs. If we look at the details, government bond net issuance, which includes local government bonds increased by CNY1.83 trillion. This means credit growth from the government contributed more than 12.5% of total credit growth in the first quarter, and this does not include bank loans for infrastructure investment.
We think that this exceptionally strong loan growth in March could be market-moving for several reasons.
So, we believe that the market should open higher tomorrow but could be calmer after market participants digest the data. The same should apply to USD/CNY and USD/CNH, with the yuan strengthening at the beginning of China’s market open before stabilising for the day.
To confirm our view, we need to wait a bit longer. Activity data and the first quarter GDP report will be released on 18 April. We expect a pickup in infrastructure investment from the strong loan growth. How fast could these loans turn into investment activity? This should be clearer if the fixed asset investment grows faster than February’s rate and faster than the pre-Covid growth rate. We also expect that some loans were taken out by real estate developers. If this is the case, we should see faster property investment in March.
source: ING
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Retail sales in February continued to decline, which makes it unlikely for a positive contribution to first quarter GDP. This suggests that there may be weakness in the economy and no strong rebound in growth is expected.
Retail sales volume has declined since peaking above pre-pandemic levels and has fallen to levels well below. The decline accelerated in 2022 and there is no break from the trend yet. The spike in the value of retail sales last year due to inflation has now plateaued.
Sales figures for February were disappointing in all five major markets, with Germany and France experiencing the biggest drops of -1.3% and -1.5% respectively. This suggests that consumers are still struggling with high inflation and an uncertain economic future, despite a slight improvement in confidence levels. Although there has been a slight uplift in consumer sentiment, it remains at levels typically associated with an economic recession.
Although surveys such as PMI and Ifo showed a positive outlook for the economy in the first quarter, there has been no concrete evidence from actual sales data to support this. Unless there is a significant increase in March, retail sales are likely to decrease in the first quarter. However, it is important to note that retail sales may not accurately reflect the state of the economy as services have been performing well and there is a potential for increased production activity. Despite this, the current retail sales figures do not suggest a strong economic recovery.
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After a 1% decrease in the previous days, gold rose to about 2013 dollars due to the depreciation of the dollar on the eve of the release of key US inflation data.
Traders now know that the Federal Reserve is 70 percent likely to raise interest rates by another 25 percent in May.
Data released last week showed US employers continued to hire at a strong pace in March, while the International Monetary Fund said in a report on Monday that interest rates in the US and other industrialized nations will return to very low levels. Financial markets have been pessimistic about the U.S. economy since some U.S. banks collapsed in March. Elsewhere, data on Saturday showed that consumer inflation in China, the biggest consumer of bullion, fell to an 18-month low in March. The past has arrived.
Gold is in an Over Bought area but We expect a short-term rise for gold. From the technical point of view, the broken 2003 and Polk at that level can provide a good opportunity to enter into a purchase transaction.
Falling below the 1988 level can invalidate the buying scenario.
The resistance levels of 2021 and 2032 can be your first profit limit.
Gold Long idea by Alisabbaghi on TradingView.com
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