A Dive in German Factory Orders, A Cut in Indian Interest Rates, and Still No Resolution on Brexit

April 4, 2019

German factory orders, which had been expected to edge marginally higher, instead plunged 4.2% in February following a 2.1% drop in January that left the combined January-February average 3.7% lower than the 4Q mean and February’s level 8.4% below a year earlier. Export orders sank 6.0% and domestic demand for capital goods, a leading indicator of business investment went down 3.6% on month in February.

The Reserve Bank of India cut its repo rate and reverse repo rate each by 25 basis points to 6.0% and 5.75%, respectively. The cuts were decided by a 4-2 voting margin, with two dissents favoring no change. Reductions of 25 basis points had also been implemented after the prior policy review in February, and they reverse a pair of hikes last year in June and August. Central bank officials released as statement, citing a global slowdown, a benign inflation outlook, and the fact that policy normalization programs at other key central banks had been paused.

British parliamentarians remain unable to find a majority in favor of any plan for leaving the European Union, but are trying to avert an exit with no deal in place. Efforts have turned to attempting to get another extension on this process. As things currently stand, the clock runs out on April 12, eight days from now.

There’s been scant movement in major dollar relationships overnight.

Ten-year sovereign debt yields have slipped two basis points in the United States, Great Britain and Germany but remain unchanged in Japan.

WIT oil firmed modestly, and gold is little changed.

Share prices are down mostly, with declines of 0.8% in Australia, 0.5% in India, New Zealand and the U.K., 0.4% in Italy, and 0.3% in France. But markets also rose 0.9% in China, 0.1% in Japan, and 0.2% so far in Germany.

Euroland construction purchasing manager indices were mixed in March. Germany’s PMI in that sector rose 0.9 points to a 14-month high of 55.6, but the French reading moved back below the 50 n0-change threshold to a 7-month low of 49.0. Italy’s 51.2 reading represented a 2-month high, but Euroland as a whole posted a 2-month low of 52.2.

India’s service sector PMI and composite PMI each dropped in March to half-year lows of 52.0 and 52.7, respectively. India experienced decelerating input price inflation but a rise in output price inflation.

In contrast to global trends, Dutch CPI inflation rose 0.2 percentage points in March to a 69-month high of 2.8%.

Cypriot CPI inflation of 1.4% in March after 1.3% in February broke a string of decelerations dating back to October.

South Korea’s current account surplus rose on month to $3.6 billion in February but was $0.3 billion smaller than in February 2018.

The ISM-compiled U.S. non-manufacturing purchasing managers index fell back 3.6 points to 56. in March, and the IHS-compiled services PMI for the United States was 0.7 points lower at a reading of 55.3. U.S. weekly jobless insurance claims are due shortly. Yesterday’s announced estimate from ADP of private jobs growth last month undershot expectations by 50 thousand, and tomorrow will see the Labor Department released the all-important monthly labor force survey.

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

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