Canada's Trade Accounts Register a $496 Million Surplus in January

Canada’s merchandise trade balance flipped back into black ink after December's deficit, which was revised downward to $863 million. January's surplus was modest at $496 million, as exports fell less than imports.

Sunset Market Commentary

The ECB delivered no surprises by holding rates constant and sticking to a natural APP rundown, to be followed by PEPP from 2024H2 at €7.5bn/month with this cap removed by year-end. Growth remains sluggish this year (0.6%, from 0.8%) with downside risks but should pick up further out (1.5% in 2025 and 1.6% in 2026). Lagarde did note the recent improvement in some indicators (eg. PMIs).

Research China

China continues to struggle with a housing crisis that shows no signs of turning three years into the crisis. We expect it to weigh on the economy again this year. However, the overall economy continues to muddle through with the help of stimulus and industrial policy.

ECB Review: June Cut is Coming

Today, the ECB decided to keep policy rates unchanged, as unanimously expected by markets and analysts. The new staff projections saw a downward revision of the 2024 projection across growth, headline and core inflation. For 2025, the ECB revised down the projections for 2025 by 0.1pp and 0.2pp for headline and core respectively. Core inflation for 2026 was revised 0.1pp lower.

Opposing Perspectives on China's Path to Prosperity

China’s National People’s Congress for 2024 and the market response again highlighted how far apart the views of China’s authorities and global investors are on both the current health of the economy and the way to achieve long-term prosperity.

The Slow Lane in the Tunnel

The big-picture themes from the national accounts for the December quarter were largely as expected. The Australian economy is soft, expanding just 0.2% in the quarter and 1½% over 2023 as a whole. Domestic demand in the December quarter was weaker still, especially in the private sector. Almost all the 0.1% increase in domestic demand in the quarter came from the public sector.

Jobs Friday

Due today, the US jobs numbers could further boost the dovish enthusiasm… or not. Note that the last two readings were abnormally strong with NFP reads above 300K mark. The latter interrupted the downtrend in US payrolls – a downtrend that was in play following the post-pandemic peak.

Focus Turns to the US and Nonfarm Payrolls

In the US, we get the February jobs report today. We see downside risks to the non-farm payrolls and expect employment growth of +180k and see average wages to have risen 0.2% m/m seasonally adjusted. Whilst February data points received thus far have been mixed, we expect labour market conditions to gradually cool over the coming months.

US: Job Growth Remained Strong in February, But Unemployment Rate Rises to Two-Year High    

On the surface, this was a very strong employment report with payrolls coming in well above the consensus forecast. But February's upward surprise needs to be weighed against the 167k in downward revisions to the prior two months, and the fact that the unemployment rate ticked up to a two-year high. Overall, the labor market remains incredibly tight and will likely need to show further signs of cooling before inflation can return to 2%.

Pound Eyes UK Jobs and GDP Data Eyed After Underwhelming Budget

The British economy along with Japan became the first of the major economies in the post-pandemic era to slip into a technical recession in the second half of 2023. Germany narrowly avoided one, while the United States grew at the fastest pace in two years. GDP figures are prone to significant revisions, particularly UK ones, so it’s probably not a good idea to overdo the comparisons.