A Rebound in Sovereign Bond Yields but Softer Stocks and Dollar
November 9, 2017
The dollar fell 0.5% overnight against the yen, 0.3% versus the euro and Swiss franc and 0.1% relative to the loonie. The Australian dollar and sterling are unchanged, and the kiwi, yuan and peso dipped 0.1%.
Share prices eased 0.7% in Taiwan, 0.3% in New Zealand and 0.2% in Japan. Equity losses today in Europe so far amount to 0.9% in Germany, 0.7% in Switzerland, Italy and France, and 0.6% in the U.K. and Spain.
Oil prices are steady. Gold and industrial metal moved somewhat higher.
Ten-year German bund, British gilt and Japanese JGB yields climbed today by 4, 2, and 1 basis points.
Speaking in China, President Trump blamed unfair trade conditions between the two countries on the policies of previous U.S. administrations. He announced $250 billion of business deals that amounts to less new information than the headline suggests.
Several Japanese economic statistics were released today:
- The seasonally adjusted 1.84 trillion yen current account surplus in September was 19% smaller than August’s surplus, but the unadjusted JPY 2.27 trillion surplus was 21.8% greater than in September 2016.
- Core domestic machinery orders slumped 8.1% on month and 3.5% on year in September. A 4.7% 3Q-on-2Q advance is expected to be followed by a 3.5% decline in the final quarter of calendar 2017. Government and foreign orders for machinery respectively declined 30.9% and 4.9% in September from the month before.
- There were 7.3% more Japanese bankruptcies in October than a year earlier, which is an accelerated increase from a 4.6% increase in September and a 12% on-year drop in August.
- Bank lending posted a smaller 2.8% on-year advance in October than the third quarter’s increase of 3.1%.
- Japan’s economy watchers index climbed 0.9 points in October to its best reading (52.2) of 2017. The forward looking outlook economy watchers index jumped by 3.9 points to a score of 54.9.
Chinese consumer prices rose 0.1% on month in October, the smallest monthly gain since July, but the 12-month rate of CPI inflation accelerated to a 9-month high of 1.9%. PPI inflation held steady in October at 6.9%.
There were a number of central bank policy meetings whose decisions were unveiled today.
- The New Zealand Official Cash Rate was left unchanged at 1.75%, its level since a 25-basis point cut engineered a year ago. But note was made that recent kiwi depreciation has inflationary implications if it continues.
- The Filipino reverse repo rate of 3.0% since September 2014 was maintained and declared still appropriate in spite of inflation risks that are somewhat skewed to the upside.
- Malaysia’s overnight policy interest rate was kept at 3.0%, its level since a 25-basis point reduction in July 2016. But officials hinted that they may in the future begin to lessen the current accommodative stance.
- The National Bank of Serbia’s 3.5% policy rate, which had been cut last month by 50 basis points, was left unchanged this time. Inflation is projected to hover in the lower half of its 1.5-4.5% target band in the first half of next year.
- The Bank of Japan released an executive “summary” of its late October Board meeting, revealing some consideration of extending yield curve control to even longer maturities.
Germany recorded a EUR 25.4 billion current account surplus in September, 1.9 billion euros larger than posted a year earlier. The seasonally adjusted trade surplus was EUR 21.8 billion in September and averaged EUR 21.0 billion per month in 3Q verus EUR 20.1 billion per month in the first half of 2017 and EUR 20.7 billion per month in 2016.
The Bank of France is projected that real GDP this quarter will expand by 0.5%. The central bank’s manufacturing and service sector indices of business sentiment were at their best levels in October since April and June of 2011.
The U.K. economy is suffering from fears of Brexit and a weak government riddled with loose cannons in Prime Minister May’s cabinet and a number of political scandals. The latest weak data-point comes from the Royal Institute of Chartered Surveyors whose house price balance index dropped to 1% in October from 6% in each of the previous two months.
In the year to October, Greek industrial production expanded 2.4%, and consumer prices went up just 0.7%. The Greek jobless rate stood at 20.6% in August, 0.3 percentage points less than in July.
The Swiss seasonally adjusted jobless rate stayed at 3.1% in October.
Irish and Hungarian CPI inflation printed at 0.6% and 2.2% in the latest reported month. Denmark had a DKK 16.3 billion current account surplus in September.
South African factory output dropped 0.8% on month and 0.6% on year in September.
U.S. jobless insurance claims last week remained at historically very low levels, amounting to 239K in the week and dampening the 4-week average to merely 231-1/4K.
Copyright 2017, Larry Greenberg. All rights received. No secondary distribution without express permission.
Tags: German current account, Japanese current account, RBNZ
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