Stocks Up Overnight but Global Growth Concerns Persist

March 11, 2019

More sluggish data emerged as the second full week of March kicked off.

German industrial production fell 0.8% on month and 3.3% on year in January. This drop followed quarter-on-quarter declines of 1.7% last summer and 1.1% in the fourth quarter of 2018. Capital goods production in January slumped 2.5% on month.

Germany’s current account surplus of EUR 18.3 billion in January was 13.3% smaller than a year earlier. Seasonally adjusted merchandise exports were unchanged from their December level.

German labor costs dipped 0.1% on quarter in 4Q18 and posted a year-on-year rise of 2.0%, down from 2.6% in the third quarter.

Despite a partial recovery in the French monthly manufacturing sentiment index last month, the Bank of France, which compiles the index, revised its first quarter projected GDP growth rate downward to 0.3%.

On-year growth of 0.8% in Spanish retail sales in January was below 1.0% for a third straight month and the fifth time in a half year.

Although non-auto U.S. retail sales bounced back 0.9% in January from a 2.1% plunge in December, overall retail sales were up just 0.2% on month and recorded an average 0.4% contraction in the latest three-month period compared to the mean in the prior three months through October.

Turkey last quarter experienced its first year-on-year contraction of real GDP in nine quarters, and it was an enormous 3.0% drop, led by a 12.9% tumble in business investment and an 8.9% slide in personal consumption. The current account deficit, however, imploded to $0.813 billion from $7.83 billion in the final quarter of 2017.

Chinese CPI inflation slid 0.2 percentage points to a 13-month low of 1.5% in February, and PPI inflation stayed at January’s 28-month low of 0.1%. As in January, new Chinese bank loans failed to reach even CNY 1.0 trillion in February, while on-year growth in M2 money decelerated 0.4 percentage points to 8.0%.

Japanese machine tool orders in February were 29.3% smaller than a year earlier. That on-year drop compares with a decline of 18.8% in the year to January and a rise of 39.5% in the year through February 2018.

In a televised interview with 60 Minutes Sunday night, Fed Chairman Powell made no startling revelations but reaffirmed that growth slowdowns in China and Europe, and uncertainty related to Brexit and the risks of cyber attacks allow the Fed to be patient about raising its interest rates further.

The dollar is unchanged from Friday closing levels against the yen, sterling, and Australian and New Zealand dollars. There’s been a 0.1% uptick against the Swiss franc and an equal downtick relative to the euro.

Share prices in the Pacific Rim climbed 1.9% in China, 1.3% in India, 1.1% in Hong Kong and 0.5% in Japan. Stocks in Europe are up 0.6% in the U.K., 0.5% in Switzerland, 0.4% in Germany and 0.3% in France.

The 10-year Treasury yield is two basis points firmer, but its German and Japanese counterparts are unchanged. The British gilt yield is 2 basis points lower at 1.16%, with less than three weeks to the Brexit deadline. European finance ministers are meeting today.

Reduced Saudi supply continues to buoy oil prices; WTI is 0.8% firmer today. The price of gold eased 0.4% but is only marginally below the $1300 per ounce level.

Other reported price data this Monday show 3.0% Norwegian CPI inflation as of February and an acceleration of PPI inflation to 8.0% from a 21-month low of 4.9% in January. Czech CPI inflation picked up 0.2 percentage points to an 18-month high in February of 2.7%, but Danish CPI inflation slowed to 1.0% last month.

The Irish construction purchasing managers index rose sharply in February to a 7-month high of 60.5, having been as low as 52.9 back in October.

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

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