Some Fresh Developments

September 14, 2017

The Bank of England’s Monetary Policy Committee did not change interest rates or asset purchase parameters but signaled a growing probability of a rate increase within a couple of months. In response, sterling rose 0.8% against the dollar, the 10-year British gilt yield climbed three basis points to 1.17%, and the Ftse stock index declined 0.4%.

Chinese industrial production, retail sales, and fixed asset investment grew more slowly than expected in August. On-year increases in output and sales fell to 10.1% and 6.0%, lowest since February and December, while the year-to-date 7.8% rise of fixed asset investment was down sharply from 8.3% in the first seven months of the year. The yuan slid 0.1%.

The Swiss National Bank left its negative interest rate targets unchanged at the latest quarterly policy review but revised projected inflation a tad higher. The franc fell 0.3%% against the dollar and euro overnight.

Australian August labor statistics were robust, easily beating expectations with a 54.2K jump in jobs and a 0.2 percentage point rise in the labor participation rate. Unemployment held steady at 5.6%. The Aussie dollar firmed 0.2% against its U.S. counterpart.

Investors are eagerly awaiting the monthly U.S. consumer price report from the Labor Department. The Fed faces a conundrum of falling unemployment and record-high stock prices but lower-than-anticipated price and wage inflation.

The dollar is unchanged against the yen, euro and loonie. It has strengthened 0.2% versus the kiwi (where higher consumer confidence was reported) and 0.1% relative to the peso.

France, Italy, and Finland released CPI figures, while South Africa and India reported wholesale prices. Hong Kong and Greek price data also arrived.

  • French CPI inflation rose to 0.9% in August from 0.7% the month before.
  • Italian consumer price inflation ticked up 0.1 percentage point to 1.2%.
  • Finnish inflation accelerated to all of 0.7%.
  • South African wholesale prices dropped 1.1% in the 12-months to July.
  • Higher food and fuel costs lifted Indian WPI inflation to a 4-month high of 3.24% from 1.88%. The acceleration had been expected.
  • Bucking the trend, producer price inflation in Hong Kong dipped a half percentage point to 3.7% in the second quarter.
  • And Greek import price inflation more than doubled to 4.2% in July.

Britain’s Royal Institute of Chartered Surveyors’ housing price index rebounded to a reading of 6.0% in August from 1.0% in July but remained below scores from earlier this year.

Swedish unemployment fell to 6.0% in August, lowest since 2008. New car registrations in the European Union were 5.6% higher in August than a year earlier. That’s a bigger on-year gain than the year-to-date average rise of 4.5%.

The second estimate of Japanese industrial production in July was not revised. Output fell 0.8% on month but rose 4.7% on year. Shipments dropped 0.7% on month but climbed 4.1% on year. Capacity use fell 1.8% on month but increased 3.0% from July 2016, and capacity edged up 0.1% versus June.

Stocks in the Pacific Rim rose 0.7% in South Korea and 0.2% in both Taiwan and India but fell 0.4% in China and 0.3% in Japan and Singapore. European equities have traded down 1.3% in Greece, 0.8% in Spain, 0.4% in the U.K., 0.3% in Germany and 0.1% in Switzerland.

Commodities are mixed. Gold is unchanged at $1,328.20 per ounce. West Texas Intermediate crude oil advanced 0.9%, but copper declined over 1% and is around a 1-month low.

Central banks in Turkey, Ukraine, Chile and Peru are also scheduled to make policy announcements today.

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

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