Fresh Concern about North Korea and Other Stuff to Watch

September 22, 2017

Escalated saber-rattling between North Korea and the United States drove the dollar lower overnight. The greenback lost 0.6% against the peso, 0.5% versus the yen, loonie and Aussie currency, 0.3% vis-a-vis the euro and 0.2% against the kiwi and Swiss franc. The yuan is steady, and sterling dipped 0.1%.

General elections will be held this weekend in New Zealand on Saturday and Germany on Sunday. The vote in New Zealand appears to be a toss-up. Prime Minister Bill English’s National Party has held power the last nine years. In Germany, Chancellor Merkel’s Christian Democratic Party seems headed for a fourth term.

Oil ministers will meet in Vienna today. It’s unclear if output quotas will be reduced further.

Preliminary purchasing manager survey results for September from the euro area, Germany and France were better than forecast.

  • The euro area’s composite PMI increased a whole point to a 4-month high of 56.7, led by a 79-month high in manufacturing, which thus far is unfazed by the stronger euro. Service sector activity also accelerated, pointing to a likely 0.7% third-quarter GDP growth rate.
  • Germany’s composite PMI advanced two points to 57.8, a 77-month peak. Manufacturing printed at a 77-month high of 60.6, and services scored a 6-month high of 55.6. GDP growth appears likely to have been 0.7% in the third quarter, according to IHS Markit, which compiles this report. Input price inflation rose, too.
  • France’s composite PMI of 57.2 after 55.2 in July was the best score for the euro area’s second largest economy in 76 months. Like Germany and the whole of Euroland, activity improved in both manufacturing and services and each result was better than analyst forecasts.

Equities around the Pacific Rim fell 1.4% in India, 1.2% in Taiwan, 1.1% in Hong Kong, 0.3% in Japan and 0.2% in China. In Europe, stocks are a bit firmer.

The ten-year German bund and British gilt yields are steady. The 10-year JGB yield of zero percent is in line with the Bank of Japan’s target.

Gold firmed 0.3%, but industrial metal prices are down further. With Opec minister gathering in Vienna, WTI crude oil edged 0.2% lower to $50.43 per barrel.

Britain’s industrial trends survey dropped to a 5-month low of 7 in September from 13 in August.

French GDP grew 0.5% in the second quarter and accelerated in on-year terms to 1.8% from 1.1%. Dutch GDP increased 1.5% in the second quarter and somewhat over 3.0% from a year earlier.

Japanese stock and bond transactions generated a 1.497 trillion net capital outflow last week. Japan is approaching the midpoint of its fiscal year.

In later Thursday U.S. releases, the Philly Fed manufacturing index improved to a 3-month high in September. FHFA house price inflation slowed to a 4-month low of 6.3% in July. The index of leading economic indicators climbed 0.4% in August but was matched with an unchanged index of coincident economic indicators.

Canada will be releasing both consumer price and retail sales data today.

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

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