Australian dollar flies on ABS lies

See the latest Australian dollar analysis here:

Macro Afternoon

DXY was firm last night:

Despite that, the Australian dollar rebounded:

EMs more so:

Gold is having another crack:

The oil bottom is in:

Dirt was mixed:

And miners of it:

EM stocks fell:

But junk jumped:

Bonds are all bid:

Stocks fell but the robots rallied to end up:

Westpac has the wrap:

Event Wrap

COVID-19 update: The global case count, according to the latest data from John Hopkins University, indicates 85k new confirmed cases worldwide on 13 May, vs 85k the previous day and vs 99k at the peak on 12 April. Whereas in March daily cases accelerated, in April and May they have trended sideways. Although cases in much of Europe and the US are rolling over, cases in Russia, Brazil and India are accelerating.

US-China tensions persisted, with US President Trump, via interviews and tweets, suggesting that he would not engage with China’s President Xi in the near term.

US weekly jobless claims were 2.981m (vs 2.5m expected), but slightly lower than the previous week’s 3.176m. Continuing claims appear to have stabilised below 23m, suggesting workers returning are roughly matching new jobless as lockdown are relaxed.

Twice in consecutive days BoE Governor Bailey has stressed its easing bias but pushed back (without dismissing) on potential for a negative interest rate policy, favouring more QE instead.

Event Outlook

New Zealand: The April manufacturing PMI will be published, and should post a sharp fall versus the reading in February (the survey was not run in March). April REINZ house sales and house prices will follow. The plunge in sales during the lockdown will make it difficult to gauge the true impact on prices.

China: April industrial production (market f/c -5.4%yr ytd), April retail sales (market f/c -15.6%yr YTD) and April fixed asset investment (market f/c -10.0%yr ytd) are all due for release. Despite the weaker figures versus a year ago, signs of recovery should be evident as China gradually comes back online.

Euro Area: The March trade balance is expected to narrow to €17.0bn from €25.8bn in February. In addition, the prelim release of Q1 GDP is set to confirm the unprecedented 3.8% contraction that printed in the flash reading.

US: April retail sales will open a day of important releases. Westpac is looking for a record monthly decline of 13.0% as the lockdown crushes retail trade. Similarly, April industrial production is expected to post the largest fall in the century-long history of the survey (market f/c -12.0%). Against this backdrop, March business inventories will continue to unwind (market f/c -0.2%). Reflecting widespread hiring freezes, JOLTS job openings are poised for a softer print of 5800k. The market anticipates a slight recovery to -60.0 in the May Fed Empire State index as New York gets the virus under control. However, the May University of Michigan consumer sentiment index is expected to deteriorate further to 68.0. The FOMC’s Kaplan will take part in a moderated discussion at 08:00 AEST.

Alas the ABS took a dump on Australia with its corrupt 6.2% unemployment figure. Had the correct figure been printed – 11.7% using the US methodology –  we’d have seen the AUD get smashed.

Instead the ABS juked the numbers so that bulls had a figure they could hold onto. And today we see the result with the AUD flying again. Even despite this:

President Trump expects to see the needle move on the economic rebound starting in the third quarter as more states reopen for business.

“I call it a transition to greatness. You’re going to have the third quarter….That’s a transition quarter. We’re going to do well in the fourth quarter, and I think next year, with all of the stimulus, all of the things we’ve done, I think we’re going to have one of the best economic years we’ve ever had,” Trump told FOX Business’ Maria Bartiromo.

Trump also wants a stronger U.S. dollar to accompany the economic recovery.

“It’s a great time to have a strong dollar because the whole world — you know, we’re paying zero interest, right. That’s never happened either. We’re paying so low. Everybody wants to be in the dollar because we kept it strong. I kept it strong” he said.

The dollar has advanced 3.67 percent vs. euro and is down 1.48 percent against the Japanese Yen, as tracked by the Dow Jones Market Data group.

ABS labour market data has been disgraceful for years. It failed to capture the slack throughout the past cycle and is now setting a preposterous benchmark for the next.

Has it been taking statistics lessons in China?

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)

Comments

  1. Totally agree. ABS unemployment data is bunk. People make decisions off this information. Bad for our long term prospects.

    • DominicMEMBER

      I think most professional investors are not duped by this.

      There are algorithms that trade on headlines though, so the new mantra is: Don’t fight the algos!

    • DominicMEMBER

      I’d posit the following: the US looks ready to throw much, much more stimulus at the economy — and the Dems have submitted a bill for an additional $3 trillion of stimulus spending so we know what they would do in the event of an election victory.

      Meanwhile ScoMo has recently been quoted saying: Australia is addicted to handouts

      That’s got strong AUD written all over it.

      As for inflation, yes, it’s coming. How can it not? Commodity production declines meet massive money unit increases. It’s Econ101. If we get a stronger AUD we’ll be glad of it because it will temper the effects of inflation. The terms of trade may suffer but who cares – it’s just the exporters who’ll suffer.

      • I can tell you right now that 3 trillion stimulus that Nancy dip$hit proposed wont go anywhere.. watch

        • DominicMEMBER

          100%
          It’s an election year. Needs must.

          What politician has ever given a sh#t about them long-term consequences of their actions? Not their problem – just saddle unborn generations with more debt. It’ll all be fine.

        • DominicMEMBER

          “this is the new norm……. stimulus, bailouts etc……”

          Once it starts, it never stops. Until it does.

          Like a snowball on a steep hill, gathering mass as it goes … before smashing into a million bits at the bottom.

      • Jumping jack flash

        3 trillion seems like a large amount of money but considering their population and their debt and the interest obligation on their debt I don’t think it will be enough.

        For Australia 3 trillion would probably be enough but for the US it is barely adequate.

  2. Jumping jack flash

    “…the ABS took a dump on Australia with its corrupt 6.2% unemployment figure.”

    6.2 is ridiculously high under the Howard Definition!
    The measure was designed to never go much above 5%. 5.9% is far too high. This is absolute carnage.

    I am astounded that the dollar wasn’t smashed. Clearly everyone takes it at the nominal value without drilling down into how the Howard Definition of unemployment is actually defined.

    Well played Howard. Well played.

    • Will have to wait until other economic data is affected by the poor conditions, JobKeeper finishing, etc

      A grind down in AUD, etc, seems more likely, therefore

      • Jumping jack flash

        Jobkeeper will finish but be rebranded as something else. Maybe eligibility criteria will change slightly.

        Far too early to take it away. The banks will have something to say and Scomo will surreptitiously back down.

  3. Rikki StocksMEMBER

    Anyone thinking of going long oil about now? Any producers favoured or is OOO the way to go? I’m a bit wary of ETF’s

    • DominicMEMBER

      Some techies saying oil has now bottomed. But oil stocks have already rallied. Methinks there’s a chance you’ll get another chance to buy them cheap but not guaranteed, of course. The market thinks (is hoping) the economy just gets straight back on its feet — the disappointment will give you the opportunity to get into oil stocks at a lower level. Just my 2 cents.