Dollar and Sovereign Debt Yields Firm… Commodity and Share Prices Lower
November 8, 2019
The dollar appreciated overnight by 0.6% against the kiwi, 0.3% versus the Australian dollar, 0.2% relative to the loonie, yuan, and peso, and 0.1% vis-a-vis the yen, euro, sterling and Swiss franc.
The 10-year gilt and U.S. Treasury yields extended their rise by another three basis points. Comparable sovereign debt yields in Italy, Greece, Portugal and Spain are up 12, 11, 8, and 5 basis points. The German bund and Japanese JGB yields edged up only 1 basis points by comparison.
Prices for WTI oil and Comex gold dropped 1.3% and 0.4%. Share prices overnight have fallen 0.8% in India, 0.7% in Hong Kong and Singapore, 0.5% in China and Spain, 0.4% in Germany and the U.K. and 0.3% in France and Japan.
China reported a larger-than-forecast 3-month-high trade surplus of $42.81 billion in October. That’s $16 billion or 62% wider than the October 2018 surplus. Exports dropped only 0.9% on year versus a 6.4% decline in imports.
The Central Reserve Bank of Peru late yesterday announced a 25-basis point reduction of its reference interest rate to 2.25%. This follows a similar cut in August. There were also two 25-basis point cuts in the first quarter of 2018 and three such cuts in the second half of 2017. A released statement observes weakness in the economies primary industries and projects CPI inflation hovering near 2.0% but with a downside bias. The statement also indicates that today’s rate doesn’t necessarily herald further easing.
Japan released several indicators. The index of leading economic indicators rebounded 0.3 points to a still low 2-month high of 92.2, but officials retained a “worsening” designation on the trend in the index of coincident economic indicators. Household spending in September was quite buoyant, rising 5.5% on month and 9.5% on year. Labor cash earnings recorded their largest on-year advance (still a mere 0.8%) in 21 months. Japanese FX reserves rose $1.887 billion last month following a $9.0 billion drop in September.
Germany posted a EUR 25.5 billion current account surplus in September, EUR 6.6 billion greater than a year earlier. The seasonally adjusted trade surplus averaged EUR 19.2 billion in the third quarter versus an average monthly surplus of EUR 18.4 billion in the first half.
The Reserve Bank of Australia’s quarterly Monetary Policy Statement revised downward projected GDP growth, price inflation, and wage inflation. The statement suggests that the Official Cash Rate of 0.75% could be lowered again, although officials are nervous that such is near to its effective lower boundary.
French industrial production recovered only 0.3% in September, leaving it a mere 0.1% above its year-earlier level. The French current account deficit of EUR 2.749 billion in September was considerably wider than analysts were forecasting.
Two Fed officials gave different views on the third rate cut. Bostic, a non-voting member this year of the FOMC, would have dissented in favor of no change, but Daly favored the move.
Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Australian Monetary Policy Statement, Central Reserve Bank of Peru, China trade surplus, German current account