Discussions on a Quiet Day in the Market

March 17, 2017

Fed Chair Yellen and U.S. Treasury Secretary Mnuchin are in Baden-Baden Germany for two days of talks with their Group of Twenty counterparts. Trade and currency manipulation will be center stage.

German Chancellor Merkel is in Washington on a visit with U.S. President Trump, who has criticized the size of the German current account deficit (about 8.5% of GDP) and the softness of the euro.

U.S. Secretary of State Tillerson in Seoul, South Korea did not rule out U.S. military action against North Korea, whose escalation of nuclear weapons development increasingly endangers the Pacific Rim.

The dollar did not change overnight against the yen or loonie. The greenback is slipped 0.5% against the euro, 0.4% versus the kiwi, 0.3% vis-a-vis the Mexican peso, 0.2% relative to sterling and 0.1% against the Swiss franc and Aussie dollar.

Stocks in the Pacific Basin fell 1.0% in China and 0.4% in Japan but rose 0.7% in South Korea and Taiwan, 0.4% in Indonesia, and 0.2% in Australia, India and Singapore.

In Europe, stocks are up 0.4% in Spain, 0.3% in Greece, 0.2% in France and 0.1% in Switzerland but down 0.2% in Germany and 0.1% in Italy.

Long-term sovereign bond yields continue to grind higher, with gains of four basis points in the 10-year Japanese JGB yield and 3 bps in German bunds and British gilts.

Industrial metal prices rose further, and WTI crude oil is 0.3% firmer at $1,227.60 per barrel. After its strong run-up yesterday, comex gold is unchanged at $1,227.60 per ounce.

Chile’s monetary policy interest rate was cut by 25 basis points for the second time this quarter. Those reductions to 3.0% erase two increases undertaken in the final quarter of 2015 and represent the first cuts since late 2014.

Euroland’s seasonally adjusted trade surplus narrowed 32% on month to EUR 15.7 billion in January. That’s the smallest surplus in over a year and resulted from a 4.0% rise in imports but a 0.6% drop in exports. The unadjusted trade balance posted a rare EUR 0.6 billion deficit after December’s surplus of EUR 4.8 billion. 2016 as a whole saw the surplus widen 13.9% to EUR 271.9 billion.

Construction output in the euro area fell 2.3% in January after edging 0.3% higher in the fourth quarter relative to the third quarter. January construction was 6.2% below its year-earlier level after posting on-year advances of 3.1% in 3Q16 and 1.8% in 4Q16.

Italy scored an unexpected trade deficit in January of EUR 574 million after a EUR 5.73 billion surplus in December.

Icelandic harmonized consumer prices rose 0.6% in January, trimming on-year deflation to 0.2%.

New Zealand consumer confidence dropped 1.7% this month on top of a 1.0% fall in February. But New Zealand’s manufacturing purchasing managers index improved 3.0 points to print at 55.2, the best score since October.

Distorted by the Lunar New Year holiday, Chinese foreign direct investment recorded on-year growth of 9.2% in February after a similar-sized drop in January. Hong Kong’s February unemployment rate and Malaysia’s January unemployment were each at 3.3%.

U.S. data to be released today include industrial production, capacity usage, the U. Michigan/Reuters consumer sentiment index, and the Conference Board index of leading economic indicators. Canada’s monthly survey of manufacturing sales, orders and inventories also arrives.

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

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