CFD Markets News and Forecasts — 05-09-2018

"The Bank of Canada today maintained its target for the overnight rate at 1 ½ per cent. The Bank Rate is correspondingly 1 ¾ per cent and the deposit rate is 1 ¼ per cent.

CPI inflation moved up to 3 per cent in July. This was higher than expected, in large part because of a jump in the airfare component of the consumer price index. The Bank expects CPI inflation to move back towards 2 per cent in early 2019, as the effects of past increases in gasoline prices dissipate. The Bank's core measures of inflation remain firmly around 2 per cent, consistent with an economy that has been operating near capacity for some time. Wage growth remains moderate.

Recent data on the global economy have been consistent with the Bank's July Monetary Policy Report (MPR) projections. The US economy is particularly robust, with strong consumer spending and business investment. Elevated trade tensions remain a key risk to the global outlook and are pulling some commodity prices lower. Meanwhile, financial stresses have intensified in certain emerging market economies, but with limited spillovers to other countries.

The Canadian economy is evolving closely in line with the Bank's July projection for growth to average near potential. Following growth of 1.4 per cent in the first quarter, GDP rebounded by 2.9 per cent in the second quarter, as the Bank had forecast. GDP growth is expected to slow temporarily in the third quarter, mainly because of further fluctuations in energy production and exports".

U.S. stock-index futures fell on Wednesday, as investors weighed the possibility of imposition by Donald Trump of tariffs on an additional $200 billion of Chinese imports after the public-comment period ends on Thursday

Global Stocks:

(company / ticker / price / change ($/%) / volume)

Visa (V) target raised to $170 from $162 at RBC Capital

Deere (DE) resumed with Hold at Deutsche Bank

Caterpillar (CAT) resumed with Buy at Deutsche Bank

Labour productivity of Canadian businesses rose 0.7% in the second quarter, the highest growth since the first quarter of 2017 (+1.4%). This follows a 0.3% decrease in the first quarter.

The productivity rebound in the second quarter reflected an acceleration of growth in business output, while hours worked were essentially unchanged.

Real gross domestic product (GDP) of businesses rose 0.7% in the second quarter, after increasing 0.3% in the first quarter. Growth in the real GDP of businesses accelerated for both goods-producing and service-producing businesses. Mining, quarrying, and oil and gas extraction was the main source of the overall gain, with professional services, wholesale trade, retail trade and transportation and warehousing services also contributing.

Canada's merchandise trade deficit with the world narrowed from $743 million in June to $114 million in July, the smallest deficit since the most recent surplus in December 2016. Total exports rose 0.8%, mainly on higher crude oil prices. Total imports declined 0.4%, due to fewer aircraft imports.

In real (or volume) terms, exports were down 0.8%. Export prices rose 1.6%, and were behind the export gain in nominal terms. This price increase was primarily attributable to higher prices of energy products. Total import volumes fell 1.1% in July, and prices were up 0.7%.

July exports were $211.1 billion, $2.1 billion less than June exports. July imports were $261.2 billion, $2.2 billion more than June imports.

The July increase in the goods and services deficit reflected an increase in the goods deficit of $4.2 billion to $73.1 billion and a decrease in the services surplus of $0.1 billion to $23.1 billion.

Year-to-date, the goods and services deficit increased $22.0 billion, or 7.0 percent, from the same period in 2017. Exports increased $115.7 billion or 8.6 percent. Imports increased $137.7 billion or 8.3 percent.

Three-Month Moving Averages:

The average goods and services deficit increased $1.5 billion to $46.1 billion for the three months ending in July.

• Average exports increased $0.2 billion to $213.0 billion in July.

• Average imports increased $1.7 billion to $259.1 billion in July.

Year-over-year, the average goods and services deficit increased $1.2 billion from the three months ending in July 2017.

• Average exports increased $18.7 billion from July 2017.

• Average imports increased $19.9 billion from July 2017.

In July 2018 compared with June 2018, the seasonally adjusted volume of retail trade decreased by 0.2% in the euro area (EA19) and remained unchanged in the EU28, according to estimates from Eurostat, the statistical office of the European Union. In June, the retail trade volume increased by 0.3% in the euro area and did not change in the EU28. In July 2018 compared with July 2017, the calendar adjusted retail sales index increased by 1.1% in the euro area and by 2.0% in the EU28.

The 0.2% decrease in volume of retail trade in the euro area in July 2018, compared with June 2018, is due to a fall of 0.7% for automotive fuel and of 0.6% for "food, drinks and tobacco", while non-food products rose by 0.4%. In the EU28, the unchanged volume of retail trade is due to an increase in non-food products by 0.5%, while automotive fuels fell by 0.9% and "food, drinks and tobacco" by 0.3%.

At 54.3 in August, up from 53.5 in July, the seasonally adjusted IHS Markit/CIPS UK Services PMI Business Activity Index reached its secondhighest level since February. The headline index has posted above the 50.0 no-change mark in each month since August 2016, and the latest reading was slightly above the average seen over this period (54.0). Service providers linked higher activity to resilient business and consumer demand.

Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply, said: "The services sector was a little more upbeat than the other sectors this month maintaining a steady level of activity growth, and the number of new orders ticked higher. "Despite this, optimism was more subdued and lower than the survey average. With the weakest business optimism since March, uncertainty around the UK's decision to leave the EU continued to dampen client operations. Struggles around securing talent and the right skills were also a drag on a sector highly-dependent on trained staff even though job creation rose to its highest levels for half a year".

Euro area economic growth moved broadly sideways during August. The final IHS Markit Eurozone PMI Composite Output Index came in at 54.5, up slightly from the earlier flash estimate but only a marginal improvement on July's 54.3.

Rising activity has now been registered continuously for over five years, although growth in August remained well down on the rapid rates seen around the turn of the year. Both manufacturing production and service sector activity rose at similar and slightly faster rates. In line with the recent trend, national PMI data again pointed to a broad-based expansion of economic output

German services firms created jobs at the fastest rate for nearly 11 years in August, reflecting ongoing efforts to boost capacity amid rises in business activity and new orders. Cost pressures in the sector meanwhile increased to the strongest since early-2011 on the back of higher salaries and transport costs, which service providers passed onto clients in the form of another marked increase in selling prices.

The headline seasonally adjusted final IHS Markit Germany Services PMI Business Activity Index ticked up to a six-month high of 55.0 in August, from 54.1 in July. The latest reading was indicative of a robust rate of growth, and one that was above the average over the current 63-month sequence of expansion.

The headline seasonally adjusted IHS Markit France Services Business Activity Index registered 55.4 in August, up from 54.9 in July. The latest figure was above the 20-year long-run survey average of 54.7, and signalled a strong overall rate of growth. That said, it was below the marked increases seen throughout most of 2017 and early2018. Unless growth accelerates notably in September, the overall rise in activity in the third quarter is set to be the slowest since Q4 2016.

The Australian economy grew 0.9 per cent in seasonally adjusted chain volume terms in the June quarter 2018, according to figures released by the Australian Bureau of Statistics (ABS) today.

Chief Economist for the ABS, Bruce Hockman, said: "Growth in domestic demand accounts for over half the growth in GDP, and reflected strength in household expenditure."

Domestic demand increased 0.6 per cent for the quarter, driven by a 0.7 per cent growth in household consumption, with increased expenditure on both discretionary and non-discretionary goods and services.

General government final consumption expenditure increased 1.0 per cent in the June quarter. Public investment remained at elevated levels reflecting continued work on infrastructure projects across the nation.

Investment in new dwellings increased 3.6 percent for the quarter. with strength observed in Victoria and South Australia. This strength was reflected in the Construction industry, which grew 1.9 per cent for the quarter.

The latest Caixin China Composite PMI data (which covers both manufacturing and services) indicated that business activity growth across China weakened for the second month in a row in August. Notably, the Composite Output Index fell from 52.3 in July to a fivemonth low of 52.0, to signal only a modest rate of expansion. The decline in the headline index was driven by slower growth of services activity during August. Furthermore, business activity at services companies increased at the weakest pace since October 2017. This was highlighted by the seasonally adjusted Caixin China General Services Business Activity Index falling for the second month in a row, from 52.8 in July to 51.5 in August. In contrast, manufacturing production rose at the quickest rate since January, though growth remained moderate overall.