Big Rise in Indian Share Prices, Marginal Change in China’s 1-Year Loan Rate, and Continuing Strain in U.S. Bank Funding Market

September 20, 2019

India’s stock market shot up 5.3%, its greatest one-day rise in a decade, after an announced cut in the country’s corporate tax rate to 25.75% from 30%.

Other stock markets around the world showed only modest net movement and mostly upward in direction.

The dollar and 10-year sovereign debt yields likewise remained generally steady overnight.

The prices of WTI oil (+1.0%) and Comex gold (+0.3%) are somewhat higher.

China’s recently introduced one-year central bank lending rate, which gets refreshed on the 20th of each month, fell only 5 basis points to 4.20%, which was a smaller adjustment than many analysts were anticipating. The rate had been lowered by 6 basis points a month ago, and central bank officials recently cut reserve requirements for the seventh time since early 2018. Chinese growth has been slowing, but the pace of deceleration has been gentle if officially reported data are to be believed.

Fed Chairman Powell at Wednesday’s press conference was asked several times about the slow response of the central bank to a recent crunch in U.S. funding markets and whether a change in Fed operational procedures needs tweaking. He played down the event and didn’t expect the problem to persist, but strains continue to flare up.

Overall Japanese consumer price inflation slowed to a 6-month low in August of 0.3% from 0.5% in July and 0.7% in June. Core CPI inflation, excluding fresh food, dipped 0.1 percentage point to 0.5%, and the CPI excluding energy as well as perishable food stayed level at 0.6%. Energy prices dropped 0.6% on month and swung into the red (-0.3%) in year-on-year terms.

German producer prices fell 0.5% on month in August and slowed 0.8 percentage points in on-year terms to a 33-month low of 0.3%.

CPI inflation in Hong Kong, by contrast, accelerated 0.2 percentage points to a 35-month high of 3.5% last month.

Several economies reported current account (CA) data today. The Swiss CA surplus was CHF 21.273 billion in the second quarter, similar to CHF 20.553 billion in 1Q and CHF 21.721 billion in the second quarter of 2018. The Greek CA surplus of EUR 1.28 billion in July compares with EUR 1.31 billion a year earlier. Finland’s CA surplus increased to EUR 97 million in July from EUR 46 million a year earlier, and Poland’s CA swung to a EUR 122 million deficit in the second quarter from a EUR 299 million surplus in the second quarter of 2018.

Consumer confidence fell in September to a 4-month low in Turkey and a 2-month low in Denmark.

Economic data to be released later today feature Canadian retail sales and a preliminary estimate of consumer sentiment in the euro area. Indices of leading economic indicators for France and India are also on today’s menu as is Belgian consumer confidence.

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

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