Late 2019 Equity Rally Extended
December 16, 2019
Last week’s apparent Phase I trade agreement between the United States and China continued to fuel a rally in global stocks this Monday. Share prices are up 2.6% in the U.K., 1.4% in France, and 1.0% in Germany, and markets close up 1.6% in Australia and 0.6% in China. The Hong Kong and Japan markets lost 0.7% and 0.3%, but U.S. equities have been well bid.
The 10-year British gilt yield increased five basis points. The Conservatives securing of a parliamentary majority has removed some Brexit-related uncertainty, leading to an investor move into riskier assets in spite of disappointing British preliminary December purchasing manager survey findings. The composite British PMI reading was a 41-month low of 48.5. Manufacturing fell to a 4-month low of 47.4, and the services PMI sank to a 9-month low of 49.0. The data suggest that fourth-quarter GDP growth will be negative.
West Texas Intermediate crude oil climbed 0.4% overnight.
In the wake of the MCA trade accord among the U.S., Canada and Mexico, the dollar today eased 0.3% against both the peso and Canadian dollar. The greenback also fell 0.3% versus the Australian currency, 0.2% versus the loonie and 0.1% relative to the Swiss franc.
Japan’s monthly tertiary index of service sector activity took a big hit in October, the month when the national sales tax was raised to 10% from 8%. The tertiary index slumped 4.6% on month and 2.3% on year in October following respective increases in the third quarter of 0.9% versus 2Q and 2.1% relative to the same quarter a year earlier.
Japan’s December composite purchasing managers index (PMI) remained at November’s 2-month high of 49.8 but was the third straight reading below the 50 threshold between deterioration and improvement. A dip in the manufacturing index offset a slight uptick in service sector conditions.
There was some upbeat U.S. data reported today. The National Association of Home Builders index increased six points to a reading of 76 this month, most since July 1999. The Empire State manufacturing index rose 0.6 index points to a 2-month high of 3.5. And the IHS-compiled U.S. composite PMI scored a 52.2, 0.2 points better than in November and above analyst expectations.
China reported a bunch of data. A 7.1% on-year rise in housing prices in November was the smallest since August 2018. On-year growth in industrial production accelerated 1.5 percentage points to a 5-month high of 6.2%. The 12-month rise in retail sales of 8.0% was also the most since midyear. Unemployment stayed at 5.1%, having not been lower than that level since May, and the year-to-November rise of fixed asset investment, 5.2%, was not different than the January-October increase.
Euroland’s preliminary estimate of the composite purchasing managers index printed at a near-stagnant 50.6 in December, matching its October and November readings and suggesting that real GDP this quarter is unlikely to exceed 0.1%. While a resilient services sector’s reading improved half a point to a 4-month high of 52.4, the manufacturing PMI fell a full point to a 2-month low of 45.9. Manufacturing output contracted at the fastest pace in 86 months. A French composite PMI reading of 52.0 suggests that GDP is likely to post growth of 0.4% in the quarter, Germany’s composite PMI for a fourth straight month was below the 50 level that separates growth from contraction. Other economies using the euro seem to have had a collective PMI score near 50.
Hourly labor costs in the euro area were 2.6% higher in the third quarter than a year earlier. That’s a deceleration compared to second and first quarter results.
The Commonwealth Bank of Australia’s manufacturing PMI (49.4) was at a 44-month low in December, while the services PMI of 49.5 was the lowest score since August.
New Zealand’s services purchasing managers index for November dropped 2.0 points to a 5-month low of 53.3.
Indonesia accrued a $3.11 billion trade deficit in January-November, less than half the $7.62 billion deficit a year earlier.
Wholesale price inflation in India rose to a 3-month high in November but remained well below 1% at 0.58%.
Italian CPI inflation remained unchanged at 0.2% in November, which is down from the initial estimate of 0.4%.
In November, Danish producer prices were 2.7% lower than a year earlier, while Czech producer prices posted an on-year rise of 0.9%.
Turkish unemployment of 13.8% in September was up from 11.4% a year earlier but marginally lower than 14.0% in August. On a brighter note, Turkish retail sales recorded the greatest on-year advance (5.9%) in October since April of 2018.
Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Chinese industrial production and retail sales, December purchasing managers surveys, Euroland labor costs, U.S. NAHB index
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