Share Prices Firm but Dollar Softer

December 27, 2019

The dollar recorded overnight declines of 0.6% against sterling, 0.5% versus the Australian dollar and Swiss franc, 0.4% relative to the euro and kiwi, 0.3% against the loonie and 0.1% versus the yen and peso.

Most stock markets firmed. In Japan and China whose markets remained open all week, by contrast, share prices fell 0.4% and 0.1%. Stocks elsewhere rose 1.3% in Hong Kong, 1.0% in India, 0.8% in Taiwan, and show gains thus far of 0.5% in France and Germany and 0.3% in Great Britain.

The price of gold is comfortably above $1500/ounce but unchanged from Thursday’s close. WTI oil strengthened 0.3%.

The ten-year U.S. Treasury and British gilt yields dipped a basis point. The 10-year Japanese JGB yield is a basis point firmer.

A bunch of Japanese data got released, and the Bank of Japan published a summary of its final Board meeting held earlier this month.

  • Core CPI inflation in Tokyo ended December at 0.8%, up from 0.6% in November and 0.5% in October when the national sales tax was raised two percentage points to 10%. Energy costs were 1.2% lower than at end-2018.
  • Unemployment dropped 0.2 percentage points to 2.2% in November, and jobs that month were 0.8% above their year-earlier level.
  • After plunging 14.2% on month in October, retail sales bounced 4.5% last month, trimming their 12-month rate of decline to 2.1% from 7.0%.
  • Industrial production in November dropped a further 0.9% on month in November and was 8.1% lower than a year earlier. This greater than expected drop elicited a trend characterization from officials of “weakening.” Output had fallen in October by 4.5% and in the third quarter by 0.5%.
  • Bank of Japan Board members turned down the IMF’s recommendation that they adopt an inflation target range rather than a point target of 2%. Officials worried that any change in the framework could jeopardize perceptions of their commitment to staying the course. At the same time, the summary of the December policy meeting that made no change in settings revealed a continuing split in the committee’s comfort with negative interest rates and heavy quantitative stimulus.

At the last scheduled Sri Lankan monetary policy review of 2019, officials retained an 8.0% lending rate and a 7.0% deposit rate.  Earlier this year in May and August, those rates had been cut by 50 basis points each time, but a released statement today  said that an accommodative stance is appropriate but also observed that policy easing among advanced economies seems to be lessening. Officials look for a gradual recovery of domestic demand and inflation staying in low single-digit territory. The inflation target is 4-6%.

South Korean consumer sentiment in December eased back to a 2-month low in December but remained almost eight index points above August’s low.

Corporate profits in China recorded an on-year rise of 5.4% in November, most since March. In January-November, profits had averaged 2.1% less than a year earlier.

A 4.9% on-year drop in producer prices in Singapore last month was the smallest 12-month decline since a decline of 2.7% in the year to last May.

Filipino PPI inflation, however, swung back into the black with a 12-month rise of 0.5%, most since August.

South Africa experienced a fourth straight monthly trade surplus in November and the largest one since last December. The January-November surplus of ZAR 5.32 billion compared favorably with a deficit of ZAR 3.70 billion a year earlier.

Spanish retail sales rose 0.5% in November, leaving the 12-month rate of increase unchanged at 2.9%.

Austria’s manufacturing purchasing managers index in December stayed at November’s 3-month high of 46.0. Readings below 50 imply a contracting sector, and a PMI of 45.1 in September had been the lowest in 83 months.

The ZEW expectations index of investor confidence in the Swiss economy, continued to rally in December, swinging to +12.5 from readings of -3.9 in November, -15.4 in October and -37.5 in September.

Finnish consumer confidence rose in December to a 3-month high and to a joint 5-month peak.

In December, Czech consumer confidence improved to a 4-month high, and business sentiment edged up marginally to a 2-month high.

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

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