Down Day for Stocks and Dollar
April 11, 2018
Military conflict between U.S. and Russian forces in Syria appears at hand. Trump is promising missile strikes, and Russia claims to have the ability to knock them out of the sky before targets are hit. Investors are uneasy that these hostilities will escalate further.
U.S. consumer price inflation accelerated further in March in spite of a 4.9% month-on-month drop in gasoline. The 12-month pace rose to a one-year high of 2.4% from 2.2% in February and 2.1% in January. Core inflation of 2.1% constituted a 13-month high. Real average weekly earnings growth climbed to a 0.9% on-year pace after being 0.6% in the previous three months.
The dollar fell overnight by 0.4% against the yen, 0.2% versus the euro and peso, and 0.1% vis-a-vis the yuan and sterling. The loonie, Swiss franc and kiw are steady.
Stock markets closed down 0.5% in Japan and Australia. Share prices in Europe have thus far dropped 2.0% in Greece, 1.0% in Germany, 0.8% in Italy, 0.7% in France, 0.6% in Switzerland and 0.4% in Spain.
The Dow Jones Industrials opened lower, too, and is currently showing a 0.6% daily loss.
WTI crude oil climbed 0.5% to a 2-week high near $66 per barrel. Gold jumped 0.8% to hedge against the possibilities of trade and military wars.
In the rush to less risky assets, ten-year sovereign debt yields gold pushed down 4 basis points in the U.K. and U.K. and by 4 bps in Germany. The 10-year Japanese JGB remains pinned down near the Bank of Japan target of zero percent.
Reserve Bank of Australia Governor Lowe said the next change in the Official Cash Rate will be upward and that its timing will probably catch investors by surprise.
The National Bank of Poland once again left key interest rates in a very accommodative stance, with a 1.5% reference rate flanked by a 2.5% Lombard rate and a 0.5% deposit rate. Top priority is the support of domestic demand.
Released British data today showed
- A weaker-than-expected month-on-month 0.1% rise in industrial production in February, with factory output dipping 0.2% after January’s 0.1% rise.
- A 1.6% plunge in recession-plagued construction during February, resulting in the biggest on-year decline (3.0%) in 59 months.
- A deceleration of GDP growth. Monthly GDP rebounded just 0.1% in April from March’s 0.2% fall.
- Smaller trade deficits. The goods and services deficit narrowed to GBP 965 million in February from GBP 2.949 billion in January and GBP 2.492 billion in December. Merchandise trade generated another shortfall of more than 10.0 billion pounds in February, but at GBP 10.202 billion it was less than GBP 12.228 billion in January or GBP 11.77 billion in December.
The Bank of France’s business sentiment index in manufacturing printed at 103 in March, down from 105 in February and 107 at the end of 2017. Although sentiment in the construction and services sectors were each unchanged, central bank officials revised down by a tenth of a percentage point their forecast of first-quarter GDP growth to 0.3%.
Italian retail sales and industrial production in the year to February respectively fell by 0.6% and rose 2.5%.
House prices in the euro area increased 0.9% on quarter in 4Q17, the least in three quarters, by the on-year rate of rise climbed to 4.2% from 4.0% in 3Q, 3.7% in 2Q and 3.8% in the first quarter of 2017.
Euroland’s current account surplus in the final quarter of 2017 equaled 3.8% of GDP compared to 4.4% of GDP in the third quarter and 3.5% in the final quarter of 2016.
Chinese consumer prices fell back 1.1% in March, their first decline of any sort since last June, and that caused the 12-month increase of consumer prices to drop back from a 4-1/2 year high of 2.9% in February to 2.1% in March. Producer price inflation also decelerated last month to 3.1% from 3.7% in February and a high of 6.9% last September and October.
Japanese core private domestic orders for machinery increased 2.1% in February. Such had been projected to drop between 2% and 3%. Public-sector demand for machinery leaped 23.6%, more than reversing an 18.7% slump in February, but foreign orders for machinery fell 7.8%. Total machinery orders in January-February averaged 2.4% less than the mean in the final quarter of 2017, but the level in February was 9.4% higher than a year earlier.
Japanese domestic corporate goods prices dipped 0.1% on month in March and decelerated by a half percentage point to a 2.1% year-on-year pace. In the year to March, export prices fell 0.5%, while import prices rose 1.8%.
On-year growth in Japanese bank lending slowed to 2.1% last quarter from 2.6% in the final quarter of 2017.
The Westpac gauge of Australian consumer sentiment fell 0.6% in April. Such was the second decline in the last three reported months.
Mark Zuckerberg’s testimony before Congress continues today. All things considered, lawmakers gave him an easier pass than one might have expected given the alleged damage that his company has caused and the enormous profit that Facebook is reaping. Minutes from the last FOMC meeting will be published later today.
Just In: Speaker of the House Paul Ryan will not seen re-election to Congress in November.
Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Chinese CPI and PPI, Euroland current account, Japanese machinery orders, U.S. consumer prices