Stocks Depressed by Lessening Global Growth and Inflation
January 14, 2019
It’s been a hard day’s night for stocks. Share prices overnight fell by 1.4% in Hong Kong, 0.9% in India, 0.7% in China, 0.5% in Taiwan and South Korea, and 0.4% in Indonesia. European equities are down 1.1% in Italy and Spain, 1.0% in Switzerland, 0.9% in Greece and Great Britain, 0.7% in France and 0.6% in Germany.
Fixed income markets have also reflected concerns about the softening outlook for growth and inflation. Ten-year sovereign debt yields have slid three basis points in France, the U.K. and the United States and by two bps in Germany and Spain.
There’s been no trading in Japan due to the Coming of Age holiday closure.
West Texas Intermediate oil relapsed 0.9% to $51.15 per barrel. Gold firmed 0.4%.
But aside from a 0.4% slide against the yen, the dollar has been an oasis of stability. The greenback is unchanged against the euro and yuan, up 0.2% versus the kiwi and peso and by 0.1% relative to the loonie and Aussie dollar, but down 0.2% against the Swiss franc and 0.1% versus sterling.
China’s December trade balance attracted much attention. A $57.06 billion surplus was the largest in three years, but the big story came from on-year declines of 7.6% in imports (the most since July 2016) and 4.4% in exports, the worst in two years. Both exports and imports had been projected to record moderate increases from a year earlier, but China’s getting hammered by President Trump’s protectionist policies.
So has Euroland’s current account, which fell to a EUR 76.2 billion surplus in the third quarter of 2018 from EUR 108.0 billion a year earlier. As a percent of GDP, that’s a squeeze from 3.8% to 2.6%.
The euro area’s reported industrial production for November provided another ominous piece of news. Such slumped 1.7% on month and by a 6-year low of 3.3% from a year earlier. There had been on-year increases of 1.2% in October and 2.5% last June. Production of intermediate goods, capital goods and consumer durables were respectively 3.0%, 4.5% and 3.5% lower than in November 2017.Likewise, industrial production over the 12 months to November slumped by 5.1% in Germany, 2.8% in Spain, 2.6% in Italy and 1.9% in France.
In Turkey, industrial production, which had recorded robust on-year growth of 5.9% as recently as July, was 6.5% lower than a year earlier in November.
Price data released today attested to softening inflation around the world.
- Indian CPI inflation slowed to a 19-month low of 2.19% in November from 2.33% in October, 3.38% in September and 3.70% in August. India also reported an 8-month low in wholesale price inflation of 3.8% in December, due to lower costs for food, fuel, and manufactured goods.
- German wholesale price inflation receded to an 8-month low of 2.5% in December from 3.5% in November and 4.0% in October. Average WPI inflation last year of 2.7% was down from 3.2% in 2017.
- Finnish CPI inflation edged down 0.1 percentage point to 1.2% in December, a 6-month low. Romanian CPI inflation also eased 0.1 percentage point, printing at 3.3% last month versus 3.4% in November, 4.3% in October and 5.0% in September.
- Swedish consumer price inflation stayed unchanged at November’s 2.0% but was 0.3 percentage points less than the pace in September and October.
- Greek import prices dropped 3.2% on month in November, slashing the 12-month rate of increase to 3.3% from 8.2% the month before.
In other news, Ireland’s construction sector purchasing managers index rose 0.8 index points to a 4-month high of 56.3. And Chinese foreign direct investment rose just 0.9% last year but advanced by 24.9% on year in December alone.
The U.S. federal government shutdown entered its fourth week and now looms as a mounting depressant on GDP growth this quarter.
Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: China trade balance, Euroland current account and industrial production