Elections, Fed Rhetoric, and Some New Data
May 9, 2017
On Sunday, French voters elected a centrist president but gave far-right candidate Le Pen about a third of the vote. The result avoids the specter of Frexit for now but didn’t spell the end of pan-European nationalism. In Germany, meanwhile, two recent state elections have also swung to Chancellor Merkel’s pro-EU CDU party, increasing chances that she will win another term in national parliamentary elections set for September.
South Korean voters today appear to have ended nearly a decade of conservative rule by electing Moon Jae-in, a liberal who seeks a less confrontational approach to North Korea. The implication here is more strained relations with the United States. South Korean markets were closed today due to the election holiday. An election was necessitated after the previous president was impeached on corruption charges. She is now in jail.
Loretta Mester, president of the Cleveland Federal Reserve Bank, became the latest monetary official to imply a predisposition for raising the federal funds rate again as soon as June in spite of some recent softer U.S. growth and price statistics.
The Central Bank of Sri Lanka announced today no change in its 7.25% deposit rate or its 8.75% lending rate after the Monetary Board conducted its latest policy review, which concluded the current stance remains appropriate. There were two rate hikes in 2016, each by a half percentage point, made in February and July. Since then, rates have not changed.
The dollar advanced overnight by 0.4% against the Australian dollar and Swiss franc, 0.3% versus the yen and euro, and 0.1% relative to the kiwi and sterling. The U.S. currency also edged 0.2% lower against the Mexican peso and dipped 0.1% vis-a-vis the loonie. The yuan is unchanged.
Share prices advanced 1.4% in Hong Kong and 0.4% in Singapore but fell by 0.5% in Australia, 0.3% in Japan and New Zealand, and 0.2% in Indonesia and Taiwan. In Europe, by contrast, most stock markets are up, with gains of 0.4% in France, 0.6% in Switzerland, 0.7% in the U.K. and Germany, 0.8% in Italy and 0.9% in Greece.
Among 10-year sovereign debt yields, the British gilt climbed four basis points and the German bund and Japanese JGB yields each nudged a basis point higher.
WTI crude oil firmed 0.3% to $46.58 per barrel, while Comex gold edged 0.1% lower to $1,225.80 per troy ounce.
German industrial production fell 0.4% in March but still posted a 1.4% increase in the first quarter and a 1.9% rise between March 2016 and March 2017. In March, factory output and energy production declined, while construction expanded.
The German current account surplus widened to EUR 30.2 billion in March from EUR 20.7 billion in February and also exceeded the March 2016 surplus of EUR 29.1 billion. The seasonally adjusted trade surplus in the first quarter averaged EUR 19.9 billion per month, similar to the prior quarter’s mean of EUR 20.1 billion per month. Exports and imports in the first quarter were 14.7% and 10% greater than a year earlier.
The Bank of France’s measure of French business sentiment printed back at 104 in April after dipping to 103 in March from 104 in February. Such only moved above 100 in November.
Italian retail sales were flat in March and 0.4% lower than a year earlier.
Switzerland’s jobless rate fell to a seasonally adjusted 3.2% in April from 3.3% previously.
Australian retail sales dipped 0.1% in March, marking the second straight small decline. The 12-month rate of increase declined to 2.5% from 2.9% in February and 3.2% in January. Retail sales volume only edged 0.1% higher last quarter.
Japanese labor cash earnings swung from a 12-month 0.4% increase in February to a 0.4% on-year drop in March. In real terms, the on-year drop was 0.8%. The stagnant trend of Japanese wages has stymied the Bank of Japan’s effort to lift core inflation to 2%.
Consumer confidence in Indonesia improved another 1.8% in April and was 7.2% better than its end-2016 level. Consumer sentiment is the best such has been since 2000.
Small business sentiment in the United States according to the NFIB measure dipped 0.2 points to a better-than-forecast 104.5 but nonetheless was at its lowest level since a big post-election bounce in November.
Still to come: The U.S. IBD/TIPP economic optimism index and the U.S. Labor Department monthly JOLTS survey of job hires and separations arrive later today. Boston Fed President Rosengren has a public speaking engagement. Canadian building permits data also get reported.
Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: German industrial production and current account, South Korean presidential election