Chinese Data Dominate Monday Newswire

October 19, 2020

Chinese real GDP expanded at a solid, albeit less-than-forecast 2.7%, rate in the third quarter, supported by strengthening exports, consumption and business expenditures. This lifted the year-on-year growth rate to 4.9% from 3.2% in 2Q and negative 6.8% in 1Q when many activities were locked down.

Chinese industrial production and retail sales in September were 6.9% and 3.3% above year-earlier levels. Both increases marked 9-month highs.

China’s jobless rate dropped 0.2 percentage points to an 8-month low of 5.4% in September.

Chinese fixed asset investment (FAI) and foreign direct investment during January-September were respectively 0.8% and 5.2% greater than their average levels during the first nine months of 2019. Such was the first positive year-to-date advance in FAI of 2020. Fixed asset investment began this year with a 24.5% plunge compared to a year earlier.

Chinese capacity utilization increased an additional 2.3 percentage points in 3Q to 76.7% after bottoming at 67.3% in the first quarter of 2020.

Policy and political news today feature

  • Optimistic remarks by Pelosi and Mnuchin about their fiscal stimulus talks, but Pelosi has set a deadline of tomorrow for the White House to sign off on a deal.
  • A continuing deadlock in trade talks between the U.K. and European Union. Moody’s cut its sovereign debt credit rating for Britain to Aa3.
  • New Zealand Prime minister Jacinda Ardern achieved a landslide victory for a second term in Saturday’s election. Her Labour Party caputed 49.1% of the popular vote and 64 of 120 parliamentary seats versus 26.8% and 35 seats secured by the National Party. New Zealand’s handling of the coronavirus has been among the most successful in the world.
  • Joe Biden continues to lead Donald Trump by close to 10 percentage points in U.S. opinion polls with just two weeks and a day before that election. With over 8 million Covid-19 cases and more than 220,000 resulting deaths, America has experienced the greatest per capita infections among industrialized economies and is in the midst of a third upward wave in those trends. Many governments in Europe have tightened restraints against social gathering.
  • European Central Bank President Lagarde suggested that monetary stimulus may be augmented, while Bank of Japan Governor Kuroda defended maintaining present policy settings. The People’s Bank of China injected CNY 50 billion of liquidity today viea 7-day reverse repo operations.

The dollar kicked off the new week on its back foot, sliding by 0.7% against sterling, 0.5% versus the euro, Swiss franc, and kiwi, 0.4% relative to the Mexican peso and Australian dollar, 0.2% vis-a-vis the Chinese yuan and 0.1% against the loonie and yen.

Ten-year sovereign debt yields increased today by six basis points in Spain and Italy, three bps in U.S. futures, and two bps in Germany, France and Great Britain.

Share prices in the Pacific Rim closed mixed, with advances of 1.1% in Japan, 1.2% in Taiwan, 0.9% in Australia, and 0.6% in Hong Kong but losses of 0.7% in China and 0.4% in New Zealand. In European trading thus far, stocks are flat in Germany and Italy, up 0.3-0.4% in France, Spain and Switzerland, and off 0.2% in Great Britain.

The price of West Texas Intermediate crude oil slipped 0.2%, while gold is up 0.5%.

Japan’s JPY 675 billion customs trade surplus in September was the largest in seven months and compares with a JPY 129 billion deficit in September 2019. Imports posted another big on-year drop (17.2%), but the 12-month drop of exports narrowed considerably to 4.9%. Exports were also 4.5% greater than in August on a seasonally adjusted basis. The JPY 1.306 trillion trade deficit in January-September was 8.7% smaller than a year earlier.

Construction output in the euro area rose for a fourth straight month, climbing 2.6% on month in August and shaving the year-on-year decline to 0.9% from 3.4% in July and 15.9% in the second quarter.

On-year growth in Britain’s Rightmove gauge of house prices increased to a 52-month high of 5.5% in October.

New Zealand’s service sector purchasing managers index rebounded to 50.3 last month and has been above the 50 level that separates improvement from contraction in three of the past four months.

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

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