Good Session for Sterling but Difficult Day for High Tech Stocks

March 19, 2018

Negotiators for Great Britain and the European Union report substantial progress in working out a plan for their arrangement during the first two years after the U.K. leaves the Union next March. Sterling rose 0.7% against the dollar, which otherwise is unchanged relative to the euro, kiwi and yuan, up 0.2% versus the Australian dollar and 0.1% vis-a-vis the yen and Swiss franc, but off 0.1% against the loonie.

Democrats in the U.S. Congress are demanding the Facebook CEO and founder Mark Zuckerberg testify before congress after the revelation that his company allowed a massive amount of user personal data to be shared. Facebook share prices have fallen sharply and are pulling other high-tech stocks lower as well.

Stock markets overnight dropped 0.9% in Japan, 0.8% in South Korea and India, and 0.4% in Singapore. Losses so far in Europe amount to 1.3% in London, 0.9% in Frankfurt, 0.7% in Paris, 0.5% in Madrid and 0.4% in Zurich and Milan.

West Texas Intermediate crude oil slumped 0.5%, weighing on the ruble. Gold is little changed, but industrial metals are softer.

The 10-year British gilt yield climbed four basis points. Yields on U.S. Treasuries, German bunds and Japanese JGBs rose but by less than gilts.

Japan recorded a smaller-than-forecast minuscule customs trade surplus of a mere JPY 3 billion in February as on-year growth of 16.5% in imports dwarfed the 1.8% rise in exports. The seasonally adjusted trade balance consequently swung to a deficit of JPY 201 billion from a JPY 352 billion surplus in January. While exports dipped 1.0% on month in seasonally adjusted terms, imports leaped 7.5%.

Euroland’s trade surplus narrowed to EUR 19.9 billion seasonally adjusted in January from EUR 23.2 billion in December and was the smallest since a surplus of EUR 18.4 billion last October. Exports dipped 0.7% on month while imports went up 1.1%. The unadjusted EUR 3.3 billion surplus still exceeded the January 2017 deficit of EUR 1.4 billion.

Construction output in the euro area fell 2.2% in January after rising in the previous two months and by 0.7% in the final quarter of 2017. But the 3.7% 12-month increase of construction output was greater than the 4Q-over-4Q rise of 2.7%.

Italian industrial production fell 1.9% in January, trimming its on-year growth to 4.0% from 5.4% in December. The Italian trade balance in January showed an unadjusted EUR 87 million deficit but was in surplus by EUR 4.195 billion when seasonally adjusted.

Chinese property prices edged up 0.2% in February, their smallest monthly increase in five months. Their year-on-year increase of 5.2% was similar to 12-month advances of 5.0% in January, 5.3% in December, 5.1% in November and 5.4% in October but well below last May’s on-year increase of 11.3%. House price inflation has plateaued at considerably slower rate than the sizzling former pace.

Property price inflation according to the British Rightmove house price index accelerated to a 7-month high of 2.1% in March from 1.5% in February and 1.0% in December.

New Zealand’s service sector purchasing managers index fell 0.7 points to 55.0 in February, which constitutes a 10-month low . Such got as high as 58.5 last May.

Despite a 2.2% monthly drop, Polish industrial production in February surpassed the year earlier level by 7.4%.

Producer prices in Poland fell 0.3% during the year to February but rose 1.4% in Portugal. Icelandic consumer prices showed a smaller 0.7% on-year drop in February after recording a 1.0% decline in the year through January.

The week ahead sees several potential market-moving events: a likely Federal Reserve interest rate increase and incoming Chairman Powell’s first press conference as the central bank’s leader; a meeting of Group of Twenty finance ministers and central bank heads in Buenas Aires; face to face talks between President Trump and the Saudi Crown Prince; and the possibility of Mueller investigation drama and departure of further top people from the Trump administration. Under-Secretary of the Treasury for International Affairs David Malpass apparently misspoke in claiming the U.S.-Sino talks on economic matters had ended.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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