Sterling Extends Rally
September 15, 2017
Sterling rose another 1.4% against the dollar overnight, at one point reaching $1.3617, which is the strongest level since the first day following last year’s Brexit referendum on June 23rd. The Bank of England has signaled that its first interest rate hike in a decade is likely to occur within a few months.
It’s been a night of geopolitical tension. A terrorist bomb explosion on the London Underground injured at least 22 people, and North Korea successfully launched an intermediate-range missile over Japan, with sufficient distance to have reached Guam. The yen fell 0.6% and seems poised for its worst weekly performance since last November. The Japanese Nikkei closed 0.5% firmer.
Stocks in Europe have declined thus far by 1.3% in the U.K. and Greece, 0.5% in Switzerland, 0.3% in Spain and 0.1% in Germany, France and Italy.
Equities in the Pacific Rim fell by 0.9% in New Zealand, 0.8% in Australia, 0.5% in China and 0.4% in Indonesia and Singapore but advanced 0.4% in South Korea and 0.3% in Hong Kong and Taiwan.
The dollar declined overnight by 0.8% against the kiwi, 0.5% versus the euro and Swiss franc, and 0.3% vis-a-vis the loonie and peso.
The 10-year British gilt yield leaped ten basis points to 1.33% today. U.S. Treasury and German bund equivalent yields are up, too, while the ten-year Japanese JGB slid back a basis point.
Gold and oil prices are marginally lower.
Central banks in Chile and Peru announced interest rate decisions late Thursday. Chile’s rate was left at 2.5%, its level since a 25-basis point cut last May. Authorities at the Central Reserve Bank of Peru cut their rate by 25 basis points to 3.5% in the third reduction of 2017. The rate also had been cut 25 bps in May and July.
Earlier today, the Bank of Russia lowered its policy interest rate to 8.5% from 9.0%. That’s the fourth reduction of 2017. The rate was at 10% at the end of 2016.
U.S. data today were mixed.
- Retail sales dropped unexpectedly in August by 0.2%, trimming their 12-month rate of increase to 3.2% from 3.5%. Non-auto sales rose 0.2%, half as much as in July. Auto sales were especially weak, but destroyed autos in the southern hurricanes should generate demand in coming months.
- The Empire State manufacturing index for September printed well above expectations at 24.4 and only marginally below August’s 25.2 reading, which had been its most elevated score since September 2014.
- U.S. industrial production dived 0.9% in August, defying expectations of a minuscule increase. Capacity usage fell to 76.1% from 76.9% the month before.
Euroland’s trade surplus totaled EUR 18.6 billion seasonally adjusted in July for the third time in four months, the exception being a surplus of EUR 21.7 billion in July. Exports fell on month for a second straight month. The unadjusted surplus in January-July, 15.5% smaller than a year earlier.
Total hourly labor costs in the euro area accelerated to an 0n-year advance of 1.8% in the second quarter of 2017 from 1.4% in the first quarter and 1.2% in the second quarter of 2016.
On-year Chinese M2 money growth slowed from 11.3% last January to 9.4% at midyear and 8.9% in August. That’s the smallest 12-month advance since at least 1996, and it has fallen by government design as officials try to dampen property market speculation. However, new bank lending of 1.09 trillion yuan exceeded expectations and seems ample. The economy has enough liquidity.
New Zealand’s manufacturing purchasing managers index increased 2.4 points in August to 57.9, a 3-month high, but house prices in that economy were 20% lower in August than a year earlier.
Canadian house prices were 3.8% above year-earlier levels in July.
Danish PPI inflation rose to 2.2% in August from 1.5% the month before.
Irish GDP posted a 1.4% quarter increase in the second quarter.
On-year Dutch retail sales growth slowed to 2.0% in July.
Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Chinese money growth, Euroland trade surplus, North Korean missile test, U.S. retail sales and industrial output
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