Monday Night Massacre, Lots of Released Data, and a BOJ Meeting

January 31, 2017

President Trump sacked Acting Attorney General Sally Yates late last night, who had refused to enforce his selective immigration ban, and replaced her with Dana Boente. The firing stirred recollections of Nixon firing of Eliot Richardson and Bill Ruckelshaus when they wouldn’t fire Watergate Special Prosecutor Archibald Cox in October 1973.

In other U.S. political developments,

  • Economist Peter Navarro, Trump’s selection to head the National Trade Council, characterized the euro as grossly undervalued. The remark lifted the euro.
  • High-tech industry leaders have been the most outspoken in criticizing the new president’s tighter immigration rules.
  • Senate Minority Leader Chuck Schumer is the latest object of verbal ridicule from President Trump, who’s called Schumer’s tears at a press conference fake.

The dollar fell overnight by 0.6% against the euro, 0.5% relative to the loonie, 0.4% vis-a-vis the yen and Australian dollar, and 0.3% versus the kiwi and Swissie. The dollar dipped 0.1% against the Mexican peso. Mexican real GDP grew 0.6% last quarter and was 2.2% greater than in the final quarter of 2015.

Equity markets in China, Taiwan, Vietnam and Hong Kong remained shut for the Lunar New Year holiday.

Stocks elsewhere in the Pacific Rim fell by 0.8% in South Korea, 0.7% in India, and Australia, 0.6% in New Zealand and Singapore and 0.4% in Japan. But in Europe, stocks have traded up 0.5% in the U.K., 0.3% in France, 0.2% in Spain and 0.1% in Germany.

Ten-year sovereign debt yields firmed two basis points in Germany and one basis point in Britain.

Politically-inspired bidding for gold lifted its price by 0.9% to $1,206.20 per ounce. West Texas Intermediate crude oil rose 0.2%.

The Bank of Japan left its policy settings and economic assessment unchanged. Quantitative asset purchases are to continue at the same pace. The policy-balance portion of holdings of financial institutions at the BOJ continues to carry a negative 0.1% interest rate. The target for 10-year JGB’s is zero percent. Governor Kuroda expressed concern about U.S.-led protectionism. The BOJ revised projected growth a bit higher but retained price forecasts well below target.

Released Japanese data revealed

  • A 0.5% rise of industrial production in December but a smaller 3.0% on-year increase. Production on average edged 0.2% lower in 2016.
  • An unchanged 3.1% unemployment rate in December. Jobs that month were 1.3% higher than at end-2015, and the job offers:seekers ratio climbed further.
  • Real household spending fell 0.3% in the year to December.
  • Small business sentiment printed 0.5 points higher but still below the 50.0 threshold. It was the third reading of 48.3 in the last four months.
  • On-year growth in housing starts slowed to 3.9% in December, a four-month low, from 6.7% in November and 13.1% in October.
  • Construction orders, a volatile series, recorded on-year growth of 7.1% in December following a 6.0% drop in November and double-digit gains in August-through-October.

Real GDP in Euroland increased by 0.5% last quarter, most since the first quarter of 2016. On-year growth averaged 1.8% in the second half of 2016 and 1.7% in the year as a whole.

Euroland’s jobless rate slid to 9.6% in December from 9.7% in the prior two months and 10.5% at the end of 2015.

Euro zone CPI inflation jumped more than forecast to 1.8% in January from 1.1% in December, 0.6% in November and 0.3% in the first month of 2016. This acceleration is an energy story. Energy prices were 8.1% greater than a year earlier in January, up from a 2.6% rise in December and a 5.6% on-year drop in January 2016.

German retail sales volume unexpectedly declined 0.9% in December on top of a 1.7% drop in November. Such posted a 1.1% on-year slide, a bad way to end the year.

German unemployment, on the other hand, slipped 0.1 percentage point to 5.9% in January, also unexpectedly. The number of unemployed workers fell 46K over the two months of December-January. But on-year growth in employment of 0.5% in December was down from 0.6% in 4Q and 0.8% in the third quarter.

French real GDP growth doubled to 0.4% last quarter. Growth of 1.1% in 2016 was 0.1 percentage point lower than in 2015. Separate French statistical releases showed a smaller 1.5% December-on-December advance in consumer spending and a significantly higher 1.7% rate of PPI inflation in December following a 0.2% on-year dip in November.

Italian PPI inflation swung similarly from -0.3% in November to +0.9% in December. Italy’s jobless rate held steady at 12.0% last month.

British consumer confidence remained below zero in January with a reading of -5 after -7 in December, -8 in November and +2 in January 2016. British M4 money on an adjusted basis expanded 3.5% in the year to December, down from 4.6% in November, and consumer credit increased just GBP 1.0 billion, about half as much as in the prior month.

Australian M3 money growth accelerated from 5.6% in November to 6.8% in December. Private credit grew 5.6% on year. The business conditions and business confidence indices of Australia compiled by NAB each rose, especially conditions which printed six points higher at 11 for December. Business confidence rose one point to a reading of 6.

The U.S. employment cost index went up 0.5% last quarter following four straight quarters with a rise of 0.6% each. House price inflation in the U.S. according to the widely followed Case Shiller index edged up to 5.3% in November from 5.1% in October. The Chicago regional purchasing managers index for manufacturing, which had been expected to rise slightly, instead slumped 4.3 points to 50.3 in January, its worst reading in ten months. Finally, the Conference Board’s consumer confidence index, which had leaped to a score of 113.3 in December from 107.1 in November and 100.8 in October, settled back to 111.8 in January.

Canadian GDP rebounded 0.4% in November from a 0.2% slide in October largely on a swing in monthly industrial production growth to +0.9% from -1.2%. Canadian producer price inflation accelerated to 2.2% in December from 1.4% in November.

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

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