Markets Guided by Fresh Urge to Seek Safety

January 3, 2020

Safe haven currencies like the dollar and yen rose overnight.

Investors shifted funds out of stocks, which had soared Thursday, into fixed income securities. 10-year sovereign debt yields fell five basis points each in the U.S., Germany and Great Britain.

Equity markets dropped 0.8% in Japan, 0.6% in Indonesia and Australia, and 0.4% in India and Singapore. Markets in Europe are down 1.4% in Germany and 0.8% in Spain. The DOW has relinquished over 200 points of yesterday’s rally.

Comex gold jumped 1.4%, and WTI oil catapulted 3.4% on the news that the Trump Administration has been enticed into another escalating middle eastern conflict.

Inflation appears to have ended 2019 on an upward note.

  • German CPI inflation accelerated from 1.1% in both October and November to a 5-month high of 1.5% last month. Energy posted almost no on-year decline, and food costs were 2.1% greater than in December 2018.
  • Cypriot CPI inflation swung to 0.7% in December from -0.5% in November and -1.0% in October.
  • French CPI inflation accelerated to an 11-month high of 1.4% in December from 1.0% in November and 0.8% in both September and October.
  • The British Nationwide house price index ended 2019 1.4% above the December 2018 level. That’s the largest year-on-year advance in 13 months. But British shop prices remained down 0.4% on year.
  • Turkish CPI inflation increased 1-1/4 percentage points to a 4-month high of 11.84% in December after bottoming at 8.5% in October. Turkish PPI inflation of 7.36% was also at a 4-month high.
  • In Thailand, CPI inflation in December of 0.9% was 0.7 percentage points higher than November’s on-year pace and the most since June.
  • The price component of the U.S. manufacturing purchasing managers survey (PMI), which is compiled by the Institute of Supply Management, jumped five full points to a reading of 51.7 last month.

But the ISM’s overall PMI reading unexpectedly fell 0.9 points to 47.2, indicating the fastest rate of contraction in U.S. manufacturing since mid-2009 when the Great Recession ended. Production tumbled 5.9 index points to a depressed score of 43.2.

The British construction PMI reading in December was also very low at 44.4, a 2-month low.

Australia’s service-sector PMI, compiled by Commonwealth Bank of Australia, dropped 0.2 points to a 4-month and sub-50 level of 49.5.

Singapore’s manufacturing PMI reading in December of 50.1 was 50.0 or more for just the first time since April.

Hong Kong retail sales data in November continued to reflect the havoc caused by street riots. Sales were 25.4% lower than a year earlier, their fourth straight 12-month decline of more than 20.0%.

Portuguese consumer confidence dipped 0.3 index points to -7.2 in December after touching a 2019 high in November.

There were 8k more unemployed German workers in December. That was a small enough increase to leave the German jobless rate at 5.0%.

Euroland’s M3 stock of money decelerated to a marginally lower on-year increase of 5.6% in November. Credit growth remained at a lowly 2.0%. Lending to households and to non-financial firms were respectively 3.5% and 3.4% greater than in November 2018.

The New York regional purchasing managers index known as NAPM slumped 11.3 points in December to 39.1, which was nearly half the size of the best reading of 2019, 77.3 back in April.

U.S. construction spending increased 0.6% in November after edging only 0.1% higher in the prior month.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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