January 12, 2017
President-Elect Trump’s press conference yesterday was contentious and uninformative with regard to coming policy specifics, leaving investors confused, disillusioned and scared.
The dollar, which had rallied since the U.S. election, suffered significant overnight losses against advanced and emerging market currencies alike. The greenback lost 1.2% against the yen and peso, 1.0% relative to the kiwi, 0.9% vis-a-vis the loonie, euro and Swiss franc, 0.8% versus sterling and 0.6% against the Chinese yuan. The rand and Turkish lira recovered sharply, too.
A 1.2% slump in Japan’s Nikkei set the tone for stocks overnight. Equities also fell 0.6% in China and are currently down that far in Germany and Switzerland. Pharmaceuticals, one particular object of the President-Elect’s scorn, have been particularly hard hit.
Among ten-year sovereign debt yields, the British gilt, Japanese JGB and German bund dropped five, two and one basis points. Futures trading in the 10-year Treasury saw the yield fall to its lowest level since late November.
Commodities strengthened. Gold ($1,205.60 per ounce) is above $1,200 for the first time since November 22. West Texas Intermediate crude oil climbed 1.1%, and industrial metals have been very well bid.
German real GDP expanded 1.9% in 2016 (1.8% when adjusted for variations in the number of working days). Either way, that’s the best year since a 3.7% advance in 2011 but not much stronger than growth in 2014 and 2015. Personal consumption and government spending provided the major impetus for growth in 2016, while both net exports and inventories exerted drags. Investment in machinery and equipment was lackluster. The government budget last year was a surplus equal to 0.6% of GDP. Surpluses were also run in 2014 and 2015.
Industrial production in the euro area leaped 1.5% in November, three times faster than forecast, powered by intermediate goods and the energy sector. On-year growth of 3.2% was four times greater than that of 0.8% between October 2015 and October 2016.
Japan’s current account surplus in November of JPY 1.416 trillion was lower than October’s JPY 1.72 trillion but greater than the year-earlier surplus of JPY 1.106 trillion. Merchandise imports slumped 10.7% on year, compared to a 0.8% dip in exports. The seasonally adjusted current account surplus rose to JPY 1.800 trillion from JPY 1.93 trillion in October and JPY 1.477 trillion in September.
In the first twenty days of December, Japan recorded a customs clearance deficit of JPY 219 billion versus a JPY 262 billion deficit a year earlier.
Japanese bank lending picked up to a 2.6% on-year pace of growth in December. An average increase of 2.5% was recorded in the fourth quarter after 2.1% in the third quarter.
Japan’s economy watchers index improved strongly to 51.4 in December from 48.6 in November, 46.2 in October and 44.8 in September. Workers in the services are more optimistic about future conditions, too.
New bank lending in China during December picked up to a 3-month high of 1.04 trillion yuan, but on-year growth in M2 money slowed to 11.3% from 11.4% in November and 11.6% in October.
NIESR estimates that British GDP expanded 0.5% last quarter. Bank of England Governor Carney said the central bank is likely to revised projected British growth for this year higher. A review is scheduled next month. November’s review also resulted in upward revisions to growth.
Sweden and France reported December consumer price data.
- Sweden’s CPI increased 0.5% on month and accelerated to a 5-month on-year high of 1.7%.
- French CPI inflation ticked up 0.1 percentage point to a 31-month high of 0.6%.
Italian industrial production grew 0.7% in November and was 3.2% greater than a year earlier. But, the first 11 months of 2016 saw just a 1.3% on-year rise.
In the year to November, industrial output climbed 1.5% in Romania and 0.6% in Hungary. Comparable November-over-November increases for India and South Africa were reported as 5.7% and 0.5%.
Greece’s jobless rate in October of 23.0% was the lowest since March 2012 and 1.5 percentage points below the year-earlier pace. Swedish seasonally adjusted unemployment held steady at 4.0% last month.
The National Bank of Serbia retained a 4.0% interest rate. Last year there were cuts of 25 basis points each in February and July. Peru’s central bank will announce its latest monetary policy decision later today.
Scheduled U.S. economic data releases today included import prices, weekly jobless insurance claims and the federal budget. Evans and Harker of the Federal Reserve speak publicly, and the ECB publishes minutes of its last Governing Council meeting.
Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.