Steen Jakobsen
The Bank of Japan has abandoned quantitative easing and the European Central Bank may taper its bond-buying programme, so what is the role of central banks in 2017, asks Saxo Bank’s chief economist Steen Jakobsen.
Article / 01 August 2016 at 7:00 GMT

Morning Markets: Soft Chinese data and the open society

Editor / Saxo Bank

Morning Markets: Prices


  • Brazil: Manufacturing PMI (1300 GMT)
  • US: Construction Spending (1400 GMT) 
  • US: ISM Manufacturing Index (1400 GMT)

After the traditionally high-demand summer months draw to an end, the global oil glut is back at the forefront of traders' minds with Bloomberg reporting that "there's nowhere to go but down". Also back in the spotlight is the Chinese slowdown as that country's Manufacturing PMI for July slid into negative territory for the first time since February.

Stepping back for an even broader view, The Economist is out with a forceful new cover story that calls the US election "the gravest risk to the free world since communism" as forces of "anti-globalism take aim at the post-World War Two consensus behind Republican presidential candidate Donald Trump.

The question remains how much economic expansion policymaking globalists require before their populations grow restive and inclined to nationalist poilicies. While globalists can point to the all-time highs reached by the S&P 500 as support for the world order they claim has "brought about the greatest poverty reduction in history," investors suspicious of the current order's strength can point to gold's near-30% rise this year, the oil glut, soft data from the world's developed economies, and a steady stream of central bank stimulus as signs that the present order is running on fumes.

In Saxo Bank chief economist Steen Jakobsen's view, it is not globalisation or openness that is to blame, but rather the profound unwillingness of political elites to enact large-scale reforms

The Economists's favoured order draws its legitimacy from its openness/pluralism on the ideological level, but from its wealth on the economic one. As we head towards the US ballot in November, and as the UK continues to navigate its path out of the European Union, we will note that, like the Federal Reserve, the current ideological regime has grown deeply data-dependent.

This week's nonfarm payrolls release will be one key indicator among many.

Market signals

Asian session

  • A majority of economists polled by Bloomberg believe the RBA will cut rates tomorrow 
  • Australia's AIG Manufacturing Index rose to 56.4 in June
  • Monthly new-home sales for Australia were up 8.2% in June from minus 4.4% in May
  • China's Manufacturing PMI fell to 49.9 in July, below economist expectations of 50.1
  • The Caixin China PMI was stronger, coming in at 50.6, higher than the 48.8 estimate
  • Japan's manufacturing sector contracted for the fifth consecutive month in July
  • The Markit/Nikkei final manufacturing PMI came in at 49.3 
  • Asian markets traded mixed, with Chinese mainland shares falling behind regional peers
  • SHCOMP plunges lower on open, but recovers somewhat late in the Shanghai session
  • Nikkei 225 rallies on relative yen weakness

Forex ahead

  • USDJPY opens the week with a climb back towards the 102.50 area
  • EURUSD holding Friday's gains above 1.1150
  • GBPUSD in an upward channel out of late-July lows
  • AUD, NZD largely in range overnight from Friday's closes

From the Floor

Watch the charts.The real stress test is what happens in the markets daily,” says Garnry

Moneybags.There is too much cash in the system and most is going to Euroepan core bonds,” says Fasdal

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Today’s July release for US manufacturing is expected to hold on to the 53.2 reading – the highest in more than a year, writes James Picerno.

BoJ punt
The BoJ is stuck in no-man’s land, punting that Prime Minister Shinzo Abe’s fiscal package will save the day. The ball’s in his court now,
says Max McKegg.

Rate calls
It's going to be a week of important announcements, says Kay Van-Petersen, with the main events including the Japanese stimulus and central bank announcements on rates.

Beyond the BoJ

The USDJPY is still very much in play, but the Antipodean currencies as well as sterling are also likely to see some pronounced movements this week writes John J Hardy.

Pokémon no-go

Nintendo shares spiked massively on the Pokémon Go release,. but it was not enough to boost earnings. Now there appears little room for a rally says Christoffer Moltke-Leth.

Globalisation (and its discontents)

The globalised world order advocated by the Economist has many advantages, but in order to avoid popular discontent, strong growth figures are continually needed. Photo: iStock 

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