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Daily Insights - September 02, 2014

Japan wage growth lifts equities

  • US ISM manufacturing index (Barclays: 56.7, cf. 57.0, last: 57.1) will be in focus today after the euro area, UK and China PMIs posted negative surprises. The euro area PMIs fell to a 13-month low led by falls below consensus in Germany and Italy. The UK manufacturing PMI hit its lowest level since mid-2013, but today the construction PMI surprised markets with a rise to 64. The NBS China PMI came in at 51.2, moving down from 51.7 in the previous month. Despite the recent weakness in European macro data, recent trends suggest we are near a turning point for European equities, according to our equity strategists.
  • We discuss the risks and rewards for the EM carry trade. Carry trades have attracted renewed attention from investors, but an environment of diverging fundamentals and policies among developed economies poses both considerable risks and rewards for EM carry trades. As such, we believe it is critical to evaluate risk-adjusted returns, together with idiosyncratic factors.
  • Market attention for the rest of the week will focus on central bank meetings and US non-farm payrolls. The ECB meeting (Thu) will be closely scrutinised for hints regarding the thresholds for QE. The BoJ meeting (Thu) will also be closely watched in light of the recent weak growth but strong wage data. For US Payrolls (Fri), our forecasts are a touch weaker than market consensus: a headline payroll gain of 200k (cf: 225k) and the unemployment rate to drop to 6.1%. In the euro area, we forecast Q2 GDP at 0.0% q/q, in line with expectations (0.0% q/q and 0.7% y/y).
  • Our monthly Thematic Review analyses the key trends in markets over the past month in an effort to better understand the core themes for macro investors.
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Highlights

Exceptional service in OTC client clearing

Risk magazine names Barclays OTC Client Clearing Service of the Year

Barclays has centrally cleared more than US$30 trillion of derivatives transactions on behalf of clients, including the industry’s first ever cleared client trades in 2009. Our focus on delivering exceptional service, and on proactive engagement with clients, clearing houses, regulators, and other market participants has helped us to grow our business into a multiple award-winning platform, most recently recognized by Risk magazine.

Read Risk’s article here

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