Further Leap in U.S. Consumer Confidence Lifts Dollar

December 9, 2016

The Reuters/U. Michigan consumer sentiment index leaped to 98.0 in early December from final readings of 93.8 in November and 87.2 in October. The latest score almost matches the greatest optimism since 2004. Excitement about the coming Trump presidency appears responsible for this much greater-than-anticipated upturn.

The dollar climbed overnight by 1.0% against the yen and 0.7% relative to the euro. There were also rises of 0.4% against the Swissie and 0.3% versus the Australian and New Zealand currencies.

Ten-year Treasury and Japanese JGB yields firmed another basis point. The 10-year British gilt is four bps higher, while its German counterpart retreated four bps.

West Texas Intermediate crude oil appreciated 1.0% to $51.34 per barrel on OPEC’s overture to non-cartel producers to help support world prices. Comex gold fell 0.6% to $1,165.60 per ounce, largely in reaction to dollar strength. Industrial commodities advanced.

Japan’s Nikkei closed 1.5% higher and just off of the 19K level. Stocks have risen 1.7% in Spain, 1.4% in Germany and 1.2% in Australia but are little changed in the United States.

Japanese quarterly business sentiment compiled by the Ministry of Finance strengthened to a reading of 3.0 for all large firms this quarter from 1.9 in 3Q. On-year growth in Japanese M2 money accelerated to 4.0% in November from 3.7% in October and 3.5% in September.

On-year growth in German labor costs rebounded from a depressed 1.9% in the second quarter to 2.5% in 3Q but was still below the 2.7% increase in the year to the third quarter of 2015.

Germany’s current account surplus narrowed to EUR 18.4 billion in October from EUR 24.4 billion in September and EUR 21.7 billion in October 2015. The ten-month surplus, EUR 216.5 billion, was still EUR 14.3 billion greater than a year earlier, however. And the seasonally adjusted merchandise trade surplus of EUR 20.5 billion in October was similar to monthly averages of EUR 20.8 billion in the third quarter, EUR 22.3 billion in 2Q and EUR 20.8 billion in the first quarter of this year.

Britain’s goods and services trade deficit contracted sharply to a 5-month low of  GBP 1.971 billion in October from GBP 5.812 billion in September and GBP 5.446 billion in August. Merchandise exports leaped 8.7% on month, while imports fell 3.6%, shrinking the goods trade deficit by GBP 4.1 billion to GBP 9.71 billion.

Construction output in the U.K. fell 1.2% on month, depressing the year-on-year increase to a 3-month low of 0.7%. These results were a lot worse than analysts were expecting.

The French and German central banks issued semi-annual forecasts of growth in their respective economies. The Bank of France looks for GDP to edge upward from 1.3% in 2017 to 1.4% in 2018 and 1.5% in 2019, while the Bundesbank projects German growth of 1.8%, 1.6% and 1.5% in those years.

Irish GDP growth accelerated to 4.0% last quarter, more than doubling the on-year pace to 6.9%. Real GDP in Cyprus grew 1.5% on quarter and 2.6% from 3Q15.

Greek industrial output in October was 6.8% greater than a year earlier, but Greek consumer prices fell 0.9% in the year to November. French industrial production dipped 0.2% in October and was 0.8% lower than a year earlier.

Spain’s indices of leading and coincident economic indicators respectively rose 0.4% and 0.2% in October, twice as much as seen in September.

Swiss unemployment stayed at a seasonally adjusted 3.3% in November.

Norwegian and Czech consumer prices increased by 3.5% and 1.5% in the year to November.

Home loans in Australia fell 0.8% in October, reversing half of September’s increase.

Chinese CPI inflation accelerated to 2.3% in November from 2.1% in October, 1.9% in September, and 1.3% in August. PPI inflation of 3.3% exceeded analyst expectations by a full percentage point.

Next week is the last one before the year-end holidays.

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


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