Market News & Analysis
US Philly Fed and Initial Claims are Just the Beginning
Joe Perry March 20, 2020 2:23 AM
The US Philadelphia Fed Manufacturing Index (Philly Fed) was released earlier today and the data was not encouraging. The headline number was -12.7 vs an expectation of +15. The February Philly Fed number was +36. Today's reading is the lowest since July 2012. In addition, the new orders component fell from +33.6 in February to -15.5 for March.
The number if initial claims for unemployment benefits for the week ending March 14th was also released earlier today and it increased to 281,000 vs 220,000 expected and 211,000 the prior week. This is the highest level since the week of September 2017.
Get ready for the bad data to continue and get even worse! The readings above are through the first half of March. With industries temporarily shutting down, such as airlines, cruise lines, bars and restaurants, stadium events, and casinos, demand for new products and equipment we be less. Employees in these industries will have to file for unemployment claims. The US government is already asking people not to travel unless, and they would prefer people not even leave their homes if not necessary. The ongoing economic effects of the coronavirus are likely to be felt for months to come.
Yesterday, JP Morgan revised their quarterly GDP outlook for the US for 2020. For the year, JP Morgan sees and a GDP contraction of -1.9%. The breakdown by quarter is as follows:
- 1Q: -4%
- 2Q: -14%
- 3Q: +8%
- 4Q: +4%
On Tuesday of next week, we will get flash PMI’s from around the global for March. This will be the first release of global data since the Coronavirus invaded countries outside of China. Economists expect the numbers to be bad. Prepare for them to be even worse.
Be aware however, that much of this data is already priced into the markets. On the release of poor data earlier today, USD/JPY barely flinched. The pair moved lower 20 pips over a 15-minute period. Under “normal” circumstances, a Philly Fed miss as big as this would probably cause USD/JPY to drop nearly 100 pips immediately!
Source: Tradingview, City Index
As the data going forward continues to be dismal, just remember that markets have priced a lot of it in already. Stocks are currently in bear market territory. Surprises would be if the data were better than expected!!
From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.