In this briefing:
- UK: PMIs Diverge as Bias Intensifies in Mar-19
- What Next in the Inflation / Deflation Debate and What Does It Mean for Asset Prices?
- UK: IP Indicators Boom Above Peers in Mar-19
- Buy or Sell/Europe/Trade War/Huawei/Financial Services
- Bull Or Bear? Latest Global Liquidity Readings
1. UK: PMIs Diverge as Bias Intensifies in Mar-19
- The pace of activity growth implied by the UK services PMI collapsed again in Mar-19 as the index fell by 2.4 points to 48.9. It is biased to overstate the effect of uncertainty, which has intensified recently amid political gridlock.
- A slight slowing in comparable sectors remains likely, but I maintain my relatively bullish forecast for 1Q19 GDP growth of 0.4% q-o-q, with 0.0% m-o-m in Feb-19.
2. What Next in the Inflation / Deflation Debate and What Does It Mean for Asset Prices?
Despite some signs of stabilization in China’s factory gauges the primary trend is still weakness and it might be rash for investors to read too much into the recent data given the apparent weakness in the Eurozone and the moderation form a high level of growth in the United States. Quantitative tightening is on hold in the United States but a sharp “U-turn” to easing has not happened yet and is politically embarrassing. As inflation falls real rates are rising. Housing markets are showing signs of price weakness. Investors need to watch for signs of credit quality decay that could be an indicator of the next period of severe financial distress.
3. UK: IP Indicators Boom Above Peers in Mar-19
- The UK’s manufacturing PMI surged to 55.1 in Mar-19, contrary to the consensus and the euro area’s ongoing collapse. Inventory accumulation ahead of Brexit is exaggerating the UK’s strength, but full payback may not come in April.
- Energy output also rebounded in March while robust extraction of oil and gas in February offsets some of the earlier energy weakness. My 1Q19 GDP growth forecast remains brisker than the BoE and Consensus at 0.4% q-o-q.
4. Buy or Sell/Europe/Trade War/Huawei/Financial Services
China News That Matters
- Ride that A-Share wave. Until you can’t
- Europe looks East
- Change, China! You’ll thank us for it
- We’ll buy your gear – but please try and behave
- Scots take aim at Chinese pension insurance
In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.
5. Bull Or Bear? Latest Global Liquidity Readings
- Global Liquidity bottoming out, but Central Banks not yet easing
- US Fed only withdrew $30bn in Q1, versus $350 bn in Q4
- PBoC still tightening through OMOs
- ECB on ‘pause’
- QE4 is coming in 2019, but no evidence it has started yet
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