Higher Bond Yields

November 5, 2019

Ten-year sovereign debt yields advanced by another five basis points overnight in Japan and the United States, by 3 bps in Germany and 1 basis point in Great Britain.

The dollar fell 0.4% against the Chinese currency, edging back marginally under 7.0 yuan per dollar. Elsewhere, the dollar advanced 0.4% against the Swiss franc and 0.3% relative to both the euro and yen. Alternatively, the dollar is modestly lower relative to sterling, the loonie, and the kiwi. The dollar is down 0.4% vis-a-vis the Australian dollar.

Among key commodity prices, gold fell 0.6%, while WTI oil has firmed 0.5%.

Share prices climbed 1.8% in Japan, whose market had been closed yesterday, and by 1.4% in Indonesia, 0.8% in Taiwan, 0.6% in South Korea, and 0.5% in China, Hong Kong and New Zealand. The Paris Cac and British Ftse are up 0.3% so far today.

The U.S. goods and services trade balance narrowed $2.6 billion on month to $52.45 billion in September, but the year-to-date shortfall of $481.3 billion was 6.1% smaller than the deficit in January-September of 2018.

Euroland producer prices in September were 1.2% lower than a year earlier, their most deflationary result in 35 months.

Spanish consumer confidence sank sharply to a 68-month low of 73.3 in October from 80.7 in September and a 2019 high of 102.5.

Irish unemployment eased 0.1 percentage point in October to 4.8%, lowest since January 2007.

Same-store sales in the U.K. edged up 0.1% on year in October. This matched July’s result and was only the second positive on-year change in the last six reported months.

Indonesian consumer confidence dropped 2.8% to a 32-month low in October. On-year Indonesian growth in real GDP of 5.02% in 3Q was the smallest since the second quarter of 2017.

Japan’s monetary¬† base, the money concept most closely controlled by the Bank of Japan, was 3.1% higher than a year earlier in October. That year-on-year advance was down from 3.2% in 3Q, 3.6% in 2Q, 4.4% in the first quarter, 7.3% in 2018 and 17.0% in 2019.

Canada’s October trade deficit narrowed from C$ 1.235 billion in August to C$ 978 million in September as imports declined more rapidly than exports.

Civil unrest in Hong Kong, weaker Chinese growth, and trade uncertainties depressed Hong Kong’s private purchasing managers index to a 131-month low of 39.3 in October from 41.5 in September. The index has been in contractionary sub-50 territory since April 2018.

Singapore’s private sector PMI dropped 0.9 points to an 86-month low of 47.4 in October.

The Standard Bank-compiled South African purchasing managers index recovered 0.2 points to a 2-month high but, at 49.4, was below 50 for a sixth straight time.

Among Middle Eastern economies, the Saudi Arabian PMI rose to a robust 50-month high of 57.8 in October, but the U.A.E. PMI remained unchanged from September’s 112-month low of 51.1, indicating scant growth. Also, Egypt’s non-oil PMI slipped 0.3 points to a 5-month low of 49.2.

Australia’s CBA-compiled service sector and composite PMI readings in October were at 2-month lows of 50.1 and 50.0.

The Chinese service and composite PMI results were mixed. The services sector reading slid to an 8-month low of 51.1, whereas the composite PMI edged 0.1 point higher to a 6-month high of 52.0.

In India, the services PMI stayed below 50 for a second straight month, touching a 2-month highof 49.2. The composite Indian PMI dropped 0.2 points to a 14-month low of 49.2.

Brazil’s service-sector PMI reading in October of 51.2 was a 4-month low, while that economy’s composite PMI score dropped 0.7 points to a 3-month low of 51.8.

The British service and composite PMIs in October, respectively 50.0 and 49.5, each represent 2-month highs.

The Reserve Bank of Australia left its Official Cash Rate unchanged as expected at a record low of 0.75%. Reductions of 25 bps had been implemented in June, July and October. Global risks are skewed to the downside. Growth has been subdued but at least house prices may be recovering in response to the recent easing. A released statement foresees “an extended period of low interest rates” as necessary to secure the inflation target and full employment and affirms that the Board is “prepared to ease monetary policy further if necessary.”

Bank Negara Malaysia left that economy’s overnight policy rate at 3.0% as was expected. The last change was a 25-basis point cut in May that reversed a similar hike done in January 2018. The central bank’s statement says that recent Malaysian economic data have been in line with expectations. Inflation is low but seen picking up modestly next year. Growth should be steady. Officials view their stance as “accommodative.”

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

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