Important Decisions Later Today in the Long Brexit Saga

January 29, 2019

The major dollar relationships have moved 0.2% or less overnight. President Trump’s State of the Union Address has been reset for February 5th. Originally, it would have been today but was delayed because of the federal government shutdown.

That leaves today’s major object of market attention fixed on Britain’s Parliament, where a series of votes on as many as 14 proposed amendments to Prime Minister May’s second Brexit Plan are to be held this evening. The EU has already rejected any renegotiation of Plan A’s terms, which were overwhelmingly turned down by the House of Commons.

Equities have done better than yesterday. Share prices in the Pacific Rim fell 1.3% in New Zealand,0.8% in Taiwan, 0.5% in Australia, 0.4% in Singapore, 0.3% in Indonesia, 0.2% in India, and 0.1% in China and Hong Kong, but Japan’s Nikkei edged 0.1% higher.

Stocks in Europe show gains so far of 0.9% in Switzerland, 1.2% in the U.K., 0.8% in France, 0.5% in Spain and Italy but just 0.2% in Germany.

Gold and oil firmed 0.3% and 0.4% overnight, respectively.

10-year sovereign debt yields, like the dollar, are little changed this morning.

Although New Zealand posted its first monthly trade surplus, NZD 264 million, in seven months during December, the NZD 5.9 billion deficit (about $4 billion) in 2018 was a bit more than twice the size in the prior year and indeed the largest calendar year shortfall since 2007.

The Swiss trade surplus narrowed some 40% in December to CHF 1.787 billion following November’s 22-month high. The 2018 surplus of CHF 31.32 billion was CHF 3.5 billion smaller than the 2017 surplus.

National Australia Bank’s monthly index of Australian business conditions sank 9 points in December, its largest month-to-month deterioration since the global great recession, which Australia managed to avoid. With a value of just +2, the index was the only single digit reading of 2018. NAB’s complementary business confidence index matched the reading from November, thus remaining at the lowest level since the first month of 2016.

Austria, which each month is the first European economy for which a manufacturing purchasing managers survey is released, saw that measure fall by a further 1.2 points in January to 52.7, a 29-month low. The PMI in January 2018 had been at 61.3. The data point to a further loss of growth and inflation momentum in the early going of 2019. The subindex for input prices fell to a 26-month low.

Italian producer prices dropped 0.5% on month in December after a 0.7% decline in November. This trimmed on-year PPI inflation by 0.4 percentage points to 4.1%, a six-month low. Icelandic CPI inflation fell 0.4% in January, cutting its 12-month rate of increase by 0.3 percentage points to a 3-month low of 3.4%.

French consumer confidence in January reversed December’s drop of 5 index points to 86, but at 91 was 14 points below the 2018 high point of 105 hit in January of that year.

Spanish unemployment fell 0.1 percentage point last quarter to a 10-year low of 14.45%.

The National Bank of Hungary left its 0.90% base rate and -0.15% overnight deposit rate unchanged as expected. The previous changes in those central bank rates were a reduction of 15 basis points in the base rate in May 2016 and a 10-basis point cut of the deposit rate in September 2017.

Producer prices in Singapore posted their second consecutive monthly decline of more than 5.0% in December, resulting in the first 0n-year drop since last February. As recently as July, PPI inflation had crested at 13.5%.

The Case Shiller U.S. house price index will be released shortly. Other scheduled and shutdown-delayed releases today include the advanced trade deficit, consumer confidence, durable goods orders, and new home sales.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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