Thursday Rundown of Overnight News, Data Reports, and Central Bank Decisions
December 19, 2019
President Trump has been impeached by a House of Representatives partisan vote of 229-197. He will get a trial in the senate.
Market movements today are mostly unremarkable. Sovereign debt yields are up. Equities are down a bit in Europe but started on an up note in the United States. New Zealand’s stock market rallied 1.5% on better GDP news. Oil and gold firmed 0.1%. The dollar hasn’t moved much.
The Executive Board of the Swedish Riksbank raised the repo rate to zero percent from -0.25%. Sweden’s central bank had been the first to experiment with a negative policy interest rate. Last January, such had been raised 25 basis points to -0.25%. A released statement from policymakers said policy remains expansionary. The repo rate is not expected to be lifted into positive territory until 2022, and asset purchases will continue until the end of 2020. Officials anticipate inflation hovering near the 2% target and foresee a gradual acceleration of economic growth from 1.1% this year to 1.9% in 2022. Should the economy deviate from these expectations, officials are prepared to change the course monetary policy. Policy risk is two-sided. Two of the Executive Board members preferred a steeper path of rate rises in the future.
Japanese monetary policy was left unchanged after the final scheduled review of 2019. The short-term policy rate remains at -0.1%, and sovereign debt purchases will continue at a pace of 80 trillion yen a year to keep the 10-year JGB yield around zero percent. The Bank of Japan‘s released statement downgraded views on industrial production, exports, and business confidence, however.
By a 7-2 vote, the Bank of England‘s Monetary Policy Committee again voted to leave its Bank Rate at 0.75%. That’s been the level since hikes of 25 basis points in August 2018 and November 2017. Haskel and Saunders again favored a 25-basis point rate cut. The MPC remains in wait-and-see mode. According to a statement, real GDP growth is pretty non-existent this quarter, but they expect future acceleration and a gradual incline of inflation toward and above the 2% target by the end of the forecast horizon. Brexit uncertainties and slower global growth pose considerable downside risks.
Bank Indonesia’s 7-day reverse repo rate was left at 5.0%, matching the decision at the previous meeting and following a string of four straight hikes of 25 basis points from the meeting in July through the meeting of October. A released statement sees decent growth above 5.0%, a manageable current account deficit not exceeding 3.0% of GDP, and inflation remaining within the 2-4% target range. The rupiah has risen since the November meeting, but monetary easing since July has not yet been transmitted to other rates as completely as hoped.
The Bank of Norway‘s policy rate was kept unchanged at 1.5%. Four hikes of 25 basis points were implemented between September 2018 and September 2019, which offset more than half of the 175 basis points of increase between February 2011 and March 2016. A released statement from the Executive Board affirmed that monetary policy is now less expansionary and foresees inflation in the future staying close to target, capacity usage becoming somewhat above normal, wage growth remaining moderate, GDP growth slowing, and the krone a bit softer. Officials see the same interest rate path as outlined in September, that is staying at the current level for now. Until the latest rate increase, Norway’s central bank had been the only one within the the G10 group of industrial economies that was still raising its interest rate. But tightening is now on hold.
British retail sales volume fell 0.6% in November, defying expectations of a slight increase. Compared to a year earlier, sales rose 1.0% overall and 0.8% excluding auto fuel. In a separate release, the CBI’s monthly index of distributive trades rose to an 8-month high of zero in December from -3 in November, -10 in October, and -16 in September.
The U.S. current account deficit of $124.1 billion in the third quarter printed just slightly above expectations, and the second quarter shortfall was revised a bit lower. As a percent of GDP, such was at -2.3% in each period, which is a manageable size.
Other U.S. data reported today showed
- A huge 10.1-point drop in the Philly Fed manufacturing index to a 6-month low of 0.3 in December.
- New jobless claims of 234k last week, which like the 252k in the prior week was above recent trends.
- An unexpected 1.7% decrease in existing home sales to 5.35 million annualized in November.
- No change in the index of leading economic indicators during November after drops of 0.2% in both September and October.
French business sentiment stayed unchanged overall and in both construction and manufacturing during December and improved marginally in services.
Belgian business sentiment improved half an index point to -3.4 this month.
The Swiss trade surplus rose to a 2-month high of CHF 3.915 billion last month.
New Zealand GDP growth rebounded to a quarterly 0.7% increase in the third quarter from 0.1% in 2Q, resulting in on-year growth there of 2.3%. New Zealand’s trade deficit of NZD 753 million in November was at a four-month high. There’s been a NZD 4.816 billion deficit over the last 12 reported months.
Australian unemployment slid 0.1 percentage point to 5.2% in November, and jobs expanded by 39.9k after shrinking 19k in the previous months.
Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank Indonesia, Bank of England, Bank of Japan, Bank of Norway, British retail sales, Swedish Riksbank, U.S. current account