Rise in Dollar and Share Prices

October 12, 2020

The People’s Bank of China over the weekend slashed reserve requirements on foreign exchange deposits to zero percent in a move to counter recent strength in the yuan, which gained 0.8% overnight. The move also buoyed China’s stock market by 2.6%.

Other dollar gains overnight amount to 0.7% versus the Mexican peso, 0.4% relative to the Australian dollar, 0.3% against the euro and kiwi, 0.2% vis-a-vis sterling and 0.1% against the Swiss franc. The dollar is flat against the loonie and 0.1% softer against the yen.

U.S. stock markets will be open this Columbus Day. In other overnight equity price action, markets rose 2.2% in Hong Kong, 0.8% in Singapore and Indonesia, 0.5% in South Korea and Australia, but slid 0.3% in Japan. Share prices in Europe so far show gains of 0.6% in France, 0.5% in Italy and Switzerland, and 0.4% in Germany. U.S. futures point to a rise, too.

Ten-year German bund and British gilt yields are a basis point softer, while their U.S. and Japanese counterparts remain unchanged. WTI oil has slumped 1.3%.

Senate Judiciary Committee confirmation hearings of Amy Coney Barrett as a Supreme Court Justice begin at 09:00 EDT today, just three weeks and a day before the U.S. election.

Economic data released today involve second-tier indicators.

Japanese domestic producer prices fell 0.2% on month and 0.8% on year in September. Import prices rose 0.2% on month but were 10.1% lower than a year earlier. Japanese bank lending growth accelerated further to 7.8% in September from 7.1% in the third quarter and 2.9% in 2Q. Core domestic machinery orders rose only 0.2% in August and were still 15.2% below the August 2019 level. A 15% on-year drop in machine tool orders was the smallest 12-month decrease since November 2018.

German wholesale prices were unchanged in September from the prior month and 1.8% lower than a year earlier. That was the smallest 12-month decline since a drop of 1.5% in February.

Ireland’s construction purchasing managers index recovered 3 index points in September but at 47.0 posted the second straight sub-50 reading, signaling a contraction of activity.

Danish CPI inflation of 0.6% in September constituted a 7-month high. But CPI inflation of 5.2% in the Czech Republic and 2.5% in Romania were at 4-month lows.

The Swiss government revised upward 2020 growth and CPI inflation projections to -3.8% and -0.7%. Officials expect GDP to then rise 3.8% next year.

Turkey recorded its largest monthly current account deficit since April in August, $4.631 billion, and that was $7.9 billion weaker than a surplus of  $3.314 billion in August 2019. Turkey’s 13.4% jobless rate in July matched June’s result.

Mexican industrial production rose 3.3% in August, which was considerably less than the recoveries in June and July, and output remained 9.0% below its year-earlier level.

South African factory output posted a fourth straight increase in August, but the gain of 3.6% was smaller than in the prior months and left output 10.8% below the August 2019 level.

The Dutch trade surplus in January-August of EUR 35.77 billion was 0.7% wider than a year earlier.

Malaysian industrial production and retail sales were respectively 0.3% greater and 1.5% less than year-earlier levels in August.

Indian above-target CPI inflation accelerated 0.65 percentage points to 7.34% to an 8-month high in September. Indian industrial production recorded an on-year drop for a sixth straight month in August, this time of 8.0%. India has experienced the second most number of identified Covid-19 cases and the third highest number of deaths from that disease.

Canada is observing its Thanksgiving holiday today.

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

 

 

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