Sharp Overnight Increases in Price of Oil and Long-Term Interest Rates

December 1, 2016

West Texas Intermediate crude oil traded another 3.3% higher to $51.05 per barrel.

Manufacturing purchasing manager surveys from November were mostly encouraging on growth but also reflect intensifying input price inflation. The latter development and oil’s recovery support the dramatic climb in ten-year sovereign debt yields. These rose today by 26 basis points in Brazil, 10 bps in Mexico, 9 bps in Canada, 7 bps in athe United States, 5 bps in Spain, Italy, Germany, and the U.K. and a single basis point in Japan.

Share prices rose in Japan (1.1%), Australia (1.1%), India (1.0%) and China (0.7%) but have declined 2.4% in Greece, 1.2% in Germany and Switzerland, 0.8% in the U.K. and 0.6% in France. U.S. stocks are marginally up.

The dollar declined 0.8% against sterling, 0.6% relative to the loonie, 0.3% versus the Swiss franc and Aussie dollar, but the U.S. currency is unchanged against both the yen and euro.

Gold sank to a 9-month low, dropping another 0.8% to $1164.60 per ounce.

Manufacturing purchasing managers survey results are listed below (scores of 50 divide expansion from contraction):

  • United States 53.2 in November, a 5-month high after 51.9 in October.
  • Euroland 53.7, a 34-month high after 53.5.
  • Britain 53.4, a 3-month low and down from 55.5 two months ago. Sterling’s drop is fanning input cost inflation.
  • Japan 51.3, a 2-month low versus 51.4 in October.
  • China 50.9, a 2-month low and 0.3 points less than in October according to the Caixin index.
  • India 52.3 following a 22-month high of 54.4 in October and 52.1 in September.
  • South Korea 48.0, same as October’s 2-month high.
  • Taiwan 54.7, a 27-month high.
  • Vietnam 54.0, an 18-month high.
  • Thailand 48.2, an 11-month low after 48.8.
  • Indonesia 49.7, a 2-month high.
  • Philippines 56.3, a 3-month low.
  • Malaysia 47.1, a 5-month low.
  • Turkey 48.8, a 6-month high.
  • Russia 53.6, a 68-month peak, buoyed by the U.S. election and rising oil prices.
  • Switzerland: a 33-month high of 56.6, 1.9 points above October’s level.
  • Sweden: a 2-month low of 57.3 due to rising inventory levels.
  • Norway: 47.6, a 7+ month low.
  • The Netherlands 57.0, a 35-month high helped by improved energy prices.
  • Austria 55.4, a 66-month high.
  • Spain 54.5, a 10-month high.
  • Germany 54.3, a 2-month low.
  • France 51.7, also a 2-month low.
  • Ireland 53.7, an 8-month high.
  • Italy 52.2, a 5-month high.
  • Greece 48.3, a one-year low.
  • Canada 51.5, a 4-month high.
  • Brazil 46.2, a 2-month low.
  • Mexico 51.1, a 3-month low.
  • Czech Republic 52.2, a 2-month low following October’s 5-month high of 53.2.
  • Poland 51.9, a 2-month high.
  • Australia 54.2, a 28-month high and 7.8 points above the July level four months earlier.

The Fed Beige Book of regional trends released Wednesday observed continuing modest to moderate U.S. growth and housing market uncertainty.

U.S. new jobless insurance claims increased to 268K last week. The 4-week average of 251.5K is in line with results in prior months and consistent with a dynamically healthy labor market.

U.S. construction spending rose 0.5% in October, reversing September’s 0.4% drop.

Euro area unemployment unexpectedly slid to 9.8% in October from 9.9% in September, 10% in July and August and 10.6% in October 2015.

Swiss retail sales volume jumped 1.2% in October, cutting the 12-month decline to 0.5% from 2.1% the month before.

Italian GDP rose 0.3% last quarter according to revised data, which also bumped the year-on-year increase to 1.0% from 0.9% reported initially.

Japanese business investment fell 1.3% last quarter. Motor vehicle sales in November were 13.9% greater than a year earlier.

Private investment spending in Australia declined 3.0% in the third quarter.

In the year to November, South Korean consumer prices rose 1.3%. Indonesia’s CPI advanced 3.6%, and Thailand’s CPI went up 0.6%. Cypriot consumer prices fell 1.4%.

A British government official indicated a willingness to support the EU on a continuing financial basis if that’s needed to ensure access to the single market.

Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

 

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