A Fearful Market as Trump Gets Down to Business

January 23, 2017

The dollar traded down 1.3% against the peso, 0.8% against the yuan, 0.8% relative to the yen, 0.6% vis-a-vis sterling, 0.4% against the kiwi, 0.3% versus the euro, Swissie and loonie, and by 0.2% against the Australian currency. President Trump last week insinuated that the dollar is too strong, but his Treasury Secretary appointee favors the preexisting commitment to a strong currency over the long run.

Investors are worried that faster U.S. growth will not ensue¬†and about numerous possibilities for¬†mounting geopolitical struggle — a clash between China and the United States perhaps or a U.S.-Russian alliance isolateded against the rest of the world. Deteriorating conditions between India and Pakistan, the Koreas, in the Middle East, and within Europe are some of the other dangers.

Japan’s Nikkei fell 1.6%. Australia’s market lost 0.8%. In Europe, equities have fallen by 0.5% in Switzerland, 0.4% in the U.K. and Germany, and 0.3% in France and Spain.

West Texas Intermediate crude oil dropped 1.1% back to $52.65 per barrel. But Comex gold (+0.7%) and the prices of a wide spectrum of industrial metals strengthened.

Ten-year German bund and British gilt yields slipped by one and two basis points.

Euroland public-sector debt declined to 90.1% of GDP in the third quarter of 2016 from 91.2% in the second quarter and 91.5% in 3Q15. But Greece (176.9%), Portugal (133.4%), Cyprus (132.7%), Belgium (108.8%) and Spain (100.3) all had outstanding fiscal debt that is larger than GDP.

Germany, whose debt ratio was 69.4% of GDP in 3Q16, ran a smaller fiscal surplus of 0.3% of GDP versus a surplus equal to 1.3% of GDP a year earlier. France (a deficit of 3.5% of GDP), Belgium (3.8%), and Portugal (3.0%) had deficits of at least 3.0% of GDP. Euroland as a whole experienced a rise of its public-sector deficit to 1.7% of GDP from 1.5% in the prior quarter.

Japanese supermarket sales reverted back to an on-year decline of 2.0% in December from a year-on-year rise of 0.8% in November.

Japan’s all-industry index, a supply-side monthly proxy for GDP, only rose 0.3% in November despite a 1.5% increase in industrial production. Construction plunged 2.5%, and services rose merely 0.2%. The all industry index in October-November combined was 0.2% above the 3Q mean and 0.9% higher than a year earlier.

Revised data put Japan’s November index of leading economic indicators 2.0% above October’s level. The index of coincident economic indicators printed at 115.0 versus 113.5 in October and 112.3 in September, and its trend earned a designation of “improving” once again. The trend designation had shifted to improving in October after being “weakening from May 2015 through September 2016.

On-year Swiss M3 money growth accelerated to 3.0% last month from 1.8% in November.

Danish and Turkish consumer confidence improved significantly in January. A preliminary estimate of consumer sentiment for Euroland will be reported later today.

Consumer prices in Singapore and Hong Kong rose 0.2% and 1.2% between end-2015 and end-2016.

The Bank of Israel’s monthly interest rate decision will be reported today. The rate has been at 0.10% since a 15-basis point cut in February 2015.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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