Difficult Session for Indian Stocks and the Rupee… Key Vote on Brexit… Florida Watching Dorian Warily

September 3, 2019

The Sensex index of Indian share prices fell 2.1%, its worst daily session of 2019, and the rupee has fallen over 0.5% against the dollar. Investors reacted to a 6-year low in Indian on-year GDP growth and a 15-month low in the economy’s manufacturing purchasing managers index.

British MPs in the House of Commons across party lines are trying to block Prime Minister’s authority to take the U.K. out of the European Union on October 31 even if no deal has been negotiated with the rest of the EU.

Meteorologists are still unsure if Hurricane Dorian will reach Florida’s east coast. The hurricane has been downgraded to a still very dangerous Category 3 storm.

The mixed dollar shows overnight gains of 0.4% against sterling, 0.3% relative to the euro, kiwi, and loonie, and 0.1% versus the yuan. The dollar is unchanged versus the Swiss franc and down 0.3% relative to the peso, 0.2% versus the Australian dollar, and 0.1% vis-a-vis the yen.

Japan’s Nikkei closed unchanged, but in other Asian markets, stocks fell 0.7% in Taiwan, 0.5% in Indonesia, 0.4% in Honk Kong and 0.2% in South Korea but rose 0.3% in Singapore and 0.2% in China. European equity markets are down modestly.

Ten-year sovereign debt yields are also lower, with declines ranging from a basis point in U.S. futures to two bps in Germany and Japan, 4 bps in Great Britain, and six basis points in Italy.

West Texas Intermediate oil fell 1.7%, while the price of Comex gold is 0.6% firmer.

As expected, the Reserve Bank of Australia Board kept its official cash rate unchanged at a record low of 1.0%. Following cuts of 25 bps at its June and July meetings, it had also not changed policy in August. A released statement from Governor Lowe asserts that “it is reasonable to expect that an extended period of low interest rates will be required in Australia to make progress in reducing unemployment and achieve more assured progress towards the inflation target.” Australia’s economy grew more slowly than forecast in the first half of 2019 but is projected to strengthen in the second half. Although jobs have been created at a good clip, wage pressure and overall inflation will be subdued for some time to come. Policymakers are assessing the data especially since the housing market slump seems to have reversed tentatively.

The British construction purchasing managers index remained very depressed in August, slipping 0.3 points to a 2-month low of 45.0. New business orders and optimism about the futures fell to 125- and 128-month lows.

The non-oil PMI of the United Arab Emirates dropped by a sharp 3.5 points to an 8-year low of 51.6, and Egypt’s PMI slid back under the 50 level to a 2-month low of 49.4. The Saudi Arabian non-oil PMI rose 0.4 points to a 2-month high of 57.0.

Manufacturing PMIs for August reported for Vietnam of 51.4 and Malaysia of 47.4 constitute their lowest readings in six and four months, respectively.

Australian retail sales slipped 0.1% in July but were 2.4% higher than in July 2018. Australia also experienced its first quarterly current account surplus since the second quarter of 1975. The 2Q19 current account surplus totaled A$ 5.85 billion compared to deficits of A$ 1.12 billion in the first quarter and A$ 11.886 billion in the second quarter of 2018.

South Korean GDP grew 1.0% last quarter, the most in five quarters, and that lifted on-year growth to 2.0%. South Korean CPI inflation dropped 0.6 percentage points to zero percent in August, a record low.

Producer price inflation in the euro area slowed 0.4 percentage points to 0.2% in July and was down from 3.0% as recently as February. The 12-month change in energy prices in that span collapsed from 8.0% to minus 1.7%. Non-energy PPI inflation was at 0.6% in July, half that posted in the year to February.

Swiss CPI inflation remained steady at 0.3% last month, lowest since July 2017.

Sweden experienced a much larger current account surplus last quarter of SEK 37.0 billion versus SEK 0.8 billion in the second quarter of 2018.

The number of Spanish unemployed workers climbed by 54.4k last month, its first increase since February and largest rise since January.

In a speech, incoming ECB President Lagarde said the global economy has arrived at a delicate moment.

South African GDP expanded 3.1% at a quarter-on-quarter annualized rate in 2Q19, making such the fastest growth in six quarters and lifting on-year growth from zero in 1Q to 0.9%. GDP had contracted sharply in the first quarter of this year, but service sector activity rebounded.

Turkish CPI and PPI inflation declined sharply to 15.01% and 13.45% last month. Such had crested last year at 25.2% and 46.2%.

Consumer prices in Thailand dipped 0.2% on month in August, cutting their 12-month rate of increase in half to 0.5%. Thai producer prices dropped 0.7% on month and 1.7% on year.

Still to come: U.S. manufacturing PMI, IBD/TIPP optimism index, and construction spending.

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

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