EGBS: Futures Test Key Short-Term Support On Whatever It Takes Defense Moment
Mar-04 18:49
- Bund futures have slid in late trading on Merz-Klingbeil comments around submitting a proposal to change the debt brake in Germany next week and setting up to a EUR 500bn special defense fund.
- RXH5 extended the initial slide to have hit fresh lows of 130.93 (latest 131.07).
- It’s easily through 131.79 (Mar 3 low) and also a bear trigger at 131.26 (Feb 19 low), testing the key short-term support at 131.00 (Jan 24 low). After that lies 130.28 (Jan 15 low).
- Bloomberg writes that “Germany will set up a €500 billion ($528 billion) fund as part of a sweeping policy overhaul to tackle urgently needed investments in defense and infrastructure, according to chancellor-in-waiting Friedrich Merz. Merz, speaking to reporters in Berlin Tuesday, also said that spending over 1% of GDP will be exempted from the country’s debt brake.”
- Handelsblatt writes on it more specifically being E500bn for infrastructure spending over a period of 10 years.
- Whilst the magnitude of the infrastructure fund looks in keeping with Reuters reports over the weekend (E400-500bn) and it seems to have no specific mention of a separate defense fund (which Reuters sources had seen at E400bn), - which could argue for some paring of the sharp move – the bearish reaction is likely being sustained by Merz saying "I want to make it very clear: In view of the threats to our freedom and peace on our continent, our defense must now also be based on 'whatever it takes,'" (per a translation from Handelsblatt coverage).
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CANADA STILL CONSIDERING TAX ON OIL EXPORTS TO US- OFFICIAL
Feb-02 18:26
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FED: Powell To Deliver Semi-Annual Testimony In Mid-Feb
Jan-31 21:48
The House Financial Services Committee's website confirms that Fed Chair Powell will deliver his semi-annual Monetary Policy Report on Wednesday Feb 12 at 1000ET.
- The Semi-annual testimony will be closely eyed as Powell's first scheduled appearance since the January FOMC - and the House testimony on the 12th is the same day as the release of January CPI (and the week after nonfarm payrolls and benchmark revisions) so will be of particular interest.
US OUTLOOK/OPINION: Nonfarm Payrolls, Revisions Highlight Next Week In US Macro
Jan-31 21:39
Friday’s nonfarm payrolls for January highlights the US macro week. It's a highly anticipated report that could alter recent trends considering it will include annual benchmark revisions along with seasonal factors and an updated birth-death model.
- The preliminary estimate for the benchmark revision pointed to the level of payrolls being some 818k lower than currently reported for back in March 2024. There’s a broad expectation from what we can gather that the hit seen next week won’t be as large but it could still be significant. We also watch the seasonal revisions closely, as whilst they should have a zero-sum impact over the calendar year, we’ve noted some particularly favorable seasonal factors in recent months that have biased seasonally adjusted jobs growth higher.
- With these considerations in mind, the early days of the Bloomberg consensus points to nonfarm payrolls growth of 150k after a solid three-month average of 170k. Note that the unemployment rate from the separate household survey won’t be affected by these revisions, having already seen its own seasonal factor revisions last month. A population control will complicate month-on-month changes in the levels of employment and unemployment but shouldn’t be significant for the rate, which is seen unchanged at 4.1% having surprised lower with 4.09% in December. The recent high is technically 4.23% in November having first popped to 4.22% back in July.
- Two other special mentions for the week are: 1) rare remarks from FOMC Vice Chair Jefferson speaking on the economic outlook and monetary policy late on Tuesday with both text and Q&A, having last spoke on Oct 9. 2) ISM services on Wednesday after its priced paid series jumped 5.9pts to 64.4 in December for the highest since Feb 2023.
- Away from macro but still material, the coming week brings the US Treasury's quarterly refunding process - our preview is here.
