Share Prices Tumble in Tandem with Proliferating Coronavirus Cases

February 28, 2020

Stock markets tumbled 3.7% in Japan and China, 3.6% in India, 3.3% in South Korea, 3.3% in Australia, 2.4% in Hong Kong and 3.2% in Singapore. Declines today in Europe so far exceed 2.5% in the U.K., Germany, France, Switzerland and Italy. Spain’s drop is almost there at 2.3%.

10-year sovereign debt yields plumbed deeper record lows, with daily drops of 5 basis points in the U.S., Japan, and Germany and 4 bps in the U.K. and France.

A sell-everything mindset extended to commodities, with prices for oil and gold showing losses so far today of 3.2% and 1.2%, respectively.

The dollar made further big gains against commodity-sensitive currencies like the peso (1.5%), kiwi (1.1%) and Aussie dollar (0.4%) and with the usual vulnerable currency suspects of authoritarian-ruled developing economies like Russia, Turkey, and India. But the greenback also fell 0.8% relative to the yen.

Being the last business day of February, a considerable number of economic data reports came out today, but market participants paid such little attention, choosing instead to focus on every bit of COVID-19 information and the toxic mix of arrogance and incompetence running the governments that ordinarily would be counted upon to contain such a crisis.

Japanese data out today:

  • Industrial production recorded a second straight significant monthly advance, 0.8% in January after 1.2% in December. This resulted in a 2.5% 12-month rate of drop versus a 6.3% on-year slide last quarter.
  • Retail sales increased 0.6% in January, trimming the 12-month decline to 0.4% from 2.6% in December.
  • CPI inflation appears to have slowed. February Tokyo CPI inflation, a leading indicator of nationwide trends, fell 0.2 percentage points overall to 0.4% and by a similar extent to 0.5% on core CPI.
  • On-year growth in jobs picked up to 0.9% in January from 0.6% in December, but the jobless rate increased to 2.4%, and there were fewer job offers for each job seeker.
  • Housing starts and construction orders in January were 10.1% and 17.0% weaker than a year earlier in January.

Other Asian economic data released today included the following:

  • 12-month changes in South Korean retail sales of +1.8% and industrial production of -2.4% in January represented the weakest observations in 7 and 6 months.
  • Indian on-year GDP last quarter of 4.7% was the lowest since the first quarter of 2013.
  • Turkish real GDP advanced 1.9% last quarter, lifting the on-year pace to 6.0%, best since the first quarter of 2018. Growth in 2019 only averaged 0.9%, however.

South Africa experienced a smaller trade deficit of ZAR 1.87 billion in January than was expected, and on-year growth that month in private credit growth was the least in 20 months.

Mexico’s trade deficit of $2.416 billion last month was only half as big as the $4.643 billion deficit in the first month of 2019.

Australian producer prices were 0.3% lower than a year earlier in January, the 8th straight month with a 12-month decline. Consumer confidence in New Zealand fell in both January and February.

European data reported today:

  • German consumer price inflation rate in February of 1.7% matched January’s 6-month high. The number of German unemployed workers fell 10k in February, confounding analysts looking for a rise of 4-5k.
  • Swedish GDP rose 0.2% on quarter and 0.8% on year last quarter, marking the slowest on-year pace since 3Q18 and resulting in just 1.2% average growth in 2019.
  • French GDP dipped 0.1% last quarter and was 0.9% greater than a year earlier. GDP advanced 1.3% on average in 2019, down from 1.3% in 2018. The monthly measure of consumer spending in January fell 1.1% on month and 0.8% on year. French CPI inflation slowed to a 3-month low of 1.4% in February mainly due to lower energy prices, while PPI inflation of 0.3% in January was down from December’s 0.7% and at a 2-month low.
  • Italian CPI inflation flat-lined in February, trimming its on-year increase to 0.4%.
  • GDP in Hungary grew 1.0% in 4Q, reducing on-year growth to a 9-quarter low of 4.6%.
  • Despite accelerating in the final quarter of the year, Icelandic GDP growth in 2019 of 1.9% was only half the 2018 pace.
  • Portuguese GDP in 4Q rose 0.7% on quarter and 2.2% on year (a 3-quarter high). Portuguese CPI inflation fell from a 9-month high of 0.8% in January to 0.4% this month.
  • Polish on-year GDP growth of 3.2% last quarter was the least in three years and down from 4.9% in the final quarter of 2018.
  • British consumer confidence posted a third straight monthly improvement in February and with a reading of -7 was only half as negative as in October-November, when sentiment bottomed at its weakest since 2013. Britain’s Nationwide house price index increased 2.3% in the twelve months through February, a 19-month high.
  • The Swiss leading economic indicators improved to a 17-month high in February. Swiss retail sales volume fell 0.6% in January, the biggest monthly drop in 5 months, which resulted in the first on-year decline (albeit just 0.1%) since the spring of 2016.
  • Spain’s current account surplus last year of EUR 23.94 billion was similar to the EUR 23.28 surplus in the prior year.
  • Irish retail sales plunged 3.4% on month in January, their biggest monthly slide in half a year.
  • Danish GDP rose just 0.2% last quarter, weakest in 9 quarters and resulting in on-year growth of 1.8%, smallest since the second quarter of 2018.
  • Producer prices in the year through January fell 0.3% in Austria and rose 0.3% in Belgium. Greek PPI inflation dropped 1.4 percentage points to 3.3% in January.

U.S. personal income rose 0.6% in January, which exceeded expectations, but a 0.2% uptick in personal spending (0.1% real) fell short of analyst forecasts. The inflation measures of total and core PCE price deflators each ticked higher 0.1 percentage point to 1.7% and 1.6%, respectively.

The U.S. early bird estimate of January’s goods and services trade deficit narrowed $2.8 billion to 65.5 billion dollars.

The Chicago regional  purchasing managers index swung from a 49-month low in January of 42.9 to an 8-month high in February of 49.0. And the U. Michigan/Reuters index of U.S. consumer sentiment printed in February at a 10-month high of 101.0.

Quarter-on-quarter Canadian GDP growth expressed at an annual rate slowed to 0.3% last quarter from 1.1% last summer and 3.4% in the spring of 2019. GDP grew 1.6% in 2019, down from 2.0% in 2018, and 3.2% in 2017. Monthly GDP rose 0.3% in December and 1.9% from a year earlier. Although up 0.5% on month, industrial production in December was 0.8% lower than at end-2018. Canadian producer price inflation accelerated to 1.9% in December.

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

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