Coronavirus Infections Climb and Negotiations Stumble

October 16, 2020

Global and U.S. Covid-19 cases rose over the last day by 434k and 65k, while the possibility of a vaccine before the U.S. election is growing more doubtful.

British Prime Minister Boris Johnson said the U.K. will opt for no trade deal with the EU unless European leaders make substantial further concessions. That’s not going to happen, but EU negotiators hope talks continue into next week.

A near-term U.S. fiscal stimulus also remains very unlikely. Separate and unequal town hall meetings televised at the same time last night by Joe Biden and Donald Trump were very contrasting in tone and substance. Analysts widely agreed that nothing occurred in either to narrow Biden’s lead in opinion polls.

Japan’s finance minister has dismissed calls by some for a further large fiscal stimulus now.

Stock market action overnight improved on their recent performance. Share prices in Europe now show daily advances of 1.6% in France, 1.3% in the U.K., and 1.0% in Germany. Markets earlier closed up 0.9% in Hong Kong and 0.6% in India but down 0.4% in Japan, 0.6% in Taiwan and 0.8% in South Korea.

The dollar fell so far today by 0.7% against the peso, 0.4% relative to the yuan, 0.2% versus the yen, euro, kiwi and loonie and 0.1% vis-a-vis sterling.

Ten-year sovereign debt yields in many European countries including France, Germany, and the U.K. have slipped two basis points, and the 10-year U.S. Treasury yield is a basis point lower.

The price of West Texas Intermediate oil fell 0.9%, while that of gold rose 0.3%.

Final September consumer price data in the euro area matched preliminary estimates of a monthly 0.1% uptick and a 12-month 0.3% rate of decline, which is the most negative in 53 months. Core inflation slowed 1.0% in September 2019 to 0.4% in August 2020 and 0.2% last month. Italian CPI inflation was revised downward by 0.1 percentage point to -0.6%. Austrian CPI inflation in September rose 0.1 percentage point to a 2-month high of 1.5%.

Euroland’s seasonally adjusted trade surplus widened for a fourth straight month to a five-month high of EUR 21.9 billion. Monthly growth in both exports and imports slowed, however, and August exports and imports were still 11.0% and 10.7% below the pre-pandemic levels of last February.

By a unanimous vote, officials at the Central Bank of Chile agreed yesterday to maintain their record low policy interest rate of 0.5%. Back in March, such had been cut initially by 75 basis points and later in the month by another 50 bps to the current level. A released statement by the bank’s Board

reiterates that the high monetary impulse will remain in place for an extended period of time, so as to ensure compliance with the Bank’s objectives. In particular, the Board foresees that it will hold the MPR at its minimum level over a big part of the two-year monetary policy horizon and will maintain the unconventional measures in place, thus continuing with the current asset purchase program. In addition, should the evolution of the economy so advise, it will continue to explore options to adjust this impulse and sustain financial stability.

South Korean unemployment increased 0.7 percentage points in September to 3.9% and was also a half percentage point above its year-earlier level.

Producer prices in the Czech Republic fell 0.2% in September, but their 12-month rate of decline narrowed to a 2-month low of 0.4%.

British new car sales continue to track below year-earlier levels, but the 4.4% on-year drop in September was down from decreases of 5.8% in August and 89% last May. EU new car sales in September were, by contrast, 3.1% greater than a year before.

Chinese foreign direct investment in September was 25.1% greater than a year earlier. Six months earlier in March, the on-year changes was minus 18.1%. Whereas foreign direct investment in the first quarter had been 10.8% lower than in the first quarter of 2019, the January-September level of FDI was up 5.2% from a year before.

New Zealand’s manufacturing purchasing managers index rose 3.0 index points to a 2-month high of 54.0 in September, having bottomed last April at 25.8.

U.S. retail sales in September were considerably more robust than had been anticipated. Such rose 1.9% on month, more than twice expectations, and almost doubled year-on-year sales growth to 5.4%.

U.S. data still to come: U.S. industrial production, capacity utilization, U. Michigan index of consumer sentiment, and Treasury-compiled capital flows. Also IMF/World Bank meetings continue today in a virtual format.

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

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