Pause in the Action

January 17, 2018

Stocks show a calmer, healthier tone overnight¬†following Tuesday’s roller-coaster ride that saw the DOW initially soar over 200 points and break above 26K to 26,086 but ultimately crash to a 10-point loss on the day. Share prices eased just 0.5% in Australia, 0.4% in Japan, 0.3% in South Korea and Singapore but firm 0.2% in China and Hong Kong. In Europe, equities are down only 0.5% in Spain and 0.2% in the U.K. and Germany while firming 0.2% in Italy.

Tuesday had been a difficult day in the U.S. Congress, which is bogged down in an acrimonious debate over immigration that has distracted lawmakers from addressing the clear and present danger of a government spending shutdown after Friday. Nonetheless, U.S. stock futures trading point to a marginal rise.

The dollar climbed overnight by 0.6% against the Swiss franc, 0.5% versus the euro, 0.3% relative to the yen, 0.2% vis-a-vis the Canadian dollar and 0.1% against the kiwi and sterling. The dollar also edged 0.1% lower versus the peso, yuan and Australian dollar.

Crypto-currencies extended a big correction downward.

The ten-year Treasury yield rose two basis points in futures trading, but comparable German bund and British gilt yields slipped a basis point each.

West Texas Intermediate oil slipped back 0.4% to $63.50 per barrel, and Comex gold has hardly moved on balance.

Investors await U.S. industrial production, the Fed Beige Book of regional economic conditions and trends, the Bank of Canada’s rate announcement all later today, plus a slew of Chinese data including 4Q GDP tomorrow, for guidance on where next to move market prices. Action in the U.S. congress is also being watched very carefully.

Euroland CPI inflation in December was confirmed at 1.4%, down from 1.5% in November and 0.3 percentage points above the end-2016 level. Consumer prices rose 0.4% on month, mainly on seasonal factors, despite only a 0.1% uptick in the energy component. Core CPI inflation printed at 0.9% for a third straight month and was unchanged from the pace of core inflation in 2016.

Construction output in the euro area jumped 0.5% on month in November and surpassed its year-earlier level by 2.7%.  Construction output had dipped 0.3% in October and risen only 0.1% on average between the second and third quarters of 2017.

In Japan, core private domestic machinery orders surged 5.7% in November after a 5.0% jump in October. October-November combined shows a 3.1% average advance from 3Q on top of a 4.7% 3Q-over-2Q increase. Officials two months also predicted that the 4Q level would be lower than in 3Q. Machinery orders from abroad also climbed strongly in November, rising 4.9% for a second straight month.

The Westpac measure of Australian consumer confidence increased 1.8% in January after a 3.6% rise in December. Aussie mortgage loans rebounded 2.1% in November.

South African retail sales, up 8.2% in November from a year earlier, posted their biggest on-year increase since mid-2012. Singapore’s trade surplus of SGD 5.03 billion in December was larger than November’s surplus but below a surplus of SGD 5.49 billion in the final month of 2016.

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

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