Digesting the Debate and a Slew of Quarter-End Data
September 30, 2020
Last night’s U.S. presidential debate was violently repulsive and leaves an embarrassing after-taste. The dollar hasn’t reacted discernibly, however, with gains of 0.3% against the euro and Swiss franc and 0.2% relative to sterling, no net change relative to the Japanese yen, and dips of 0.1% vis-a-vis the loonie, Aussie dollar and yuan. There have been over 45k reported new Covid cases and a bit more than 1000 deaths reported in the United States over the past 24 hours. Much of the pandemic relief is about to expire, but sides remain wide apart on talks over a new fiscal package.
The Dow rose 1.1% in the first half-hour of trading. In overnight stock market action, share prices had lost 2.3% in Australia (topping off a weak September), 1.5% in Japan, and 1.2% in Singapore. But most other markets showed unremarkable changes.
Likewise, sovereign debt yields and prices for oil and and gold dipped negligibly overnight.
Revised data reveal that U.S. GDP plunged 31.4% at an annualized rate in the second quarter following a 5.0% drop in the first quarter, and second-quarter GDP was 9.0% weaker than a year earlier. On-year rises in the PCE price deflator slumped to 0.6% overall and 1.0% for core items last quarter.
Non-U.S. data highlights today reveal:
- A rise in Japanese industrial production in August prompted a trend upgrade to “picking up” but left output 13.3% lower than a year earlier.
- Japanese retail sales (+4.6%) more than reversed July’s 3.4% contraction and recorded a smaller-than-forecast 1.9% contraction from the August 2019 level.
- A 9.1% on-year drop in Japanese housing starts last month was the smallest since April and was accompanied by an increase of 28.3% in construction orders, most in 17 months.
- German retail sales volume jumped 3.1% in August versus expectations of no change and resulted in a 3.7% advance from a year earlier.
- German import prices edged 0.1% higher in August but were down 4.0% on year, thanks in large part to a 26.2% plunge in energy costs. German unemployment dipped 0.1 percentage point to 6.3%.
- British GDP growth last quarter was revised from negative 20.4% to negative 19.8%, resulting in a year-on-year contraction of 21.5%.
- A British current account deficit last quarter of GBP 2.764 billion was the smallest shortfall in nine years and equivalent to only -0.6% of GDP, down from -3.8% of GDP in 1Q and 3.9% of GDP in full-2019.
- The U.K. Nationwide house price index was 5.0% above its year-earlier level in September versus a 0.1% 12-month dip posted in June.
- French consumer prices in September recorded their biggest monthly drop (0.5%) in several years, which depressed the 12-month increase to a 52-month low of 0.1%. French PPI deflation in August remained at July’s -2.5% level.
- Italian CPI deflation in September matched August’s outcome of -0.5%.
- Financial market sentiment toward Switzerland suffered a setback, as attested by the ZEW expectations index to 26.2 in September from 45.6 in August. The index had bottomed previously at -45.8 last March. On a brighter note, the KOF Swiss leaders index rose 3.6 points to its best level since mid-2010.
- India’s $19.8 billion current account surplus in the second quarter equaled 3.9% of GDP and was the largest quarterly black ink figure in over 70 years.
- Turkey’s trade deficit widened 166% on year to $6.28 billion in August, bringing the eight-month cumulative deficit to $33 billion from $19.4 billion a year earlier.
- South Africa’s trade position swung to a surplus of 134 billion rand in January-August from a deficit of ZAR 4 billion a year earlier.
- China’s NBS-compiled manufacturing PMI improved 0.5 points to a 6-month high of 51.5 in September and was accompanied by an 81-month peak of 55.9 in the non-manufacturing PMI. China’s Caixin-compiled manufacturing PMI dipped 0.1 to a 2-month low of 53.0.
- Canadian monthly GDP continued to recover in July rising 3.0% on month but remained about 6% below its February pre-pandemic level. Industrial production went up 4.7% but stayed 7.6% below its year earlier level.
Contrary to President Trump’s blisteringly negative remarks last night about Chicago, the regional Chicago purchasing managers index unexpected leaped to a 21-month high of 62.4 in September from 51.2 in August and a pandemic low of 32.3.
Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British GDP and current account, China PMI, German retail sales and unemployment, Japanese retail sales and industrial production, Trump-Biden debate, U.S. GDP