Lots of Monthend Data, Fresh Covid Records, Disappointing Tech Earnings, and Home Stretch of the U.S. Election Campaign

October 30, 2020

Almost 600,000 new Covid cases worldwide have been identified in the past day, and the U.S. count exceeded 90,000 for the day and more than 9 million since the first case was reported.

U.S. stock futures are down about 1% after several high tech firms reported weaker-than-forecast earnings for 3Q. Share prices in the Pacific Rim closed down 2.6% in South Korea, 2.1% in Hong Kong and 1.5% in both Japan and China. There were also losses of 1.1% in Singapore and 0.9% in New Zealand and Taiwan. By comparison, losses in Europe are small, for example just 0.4% so far in Germany.

The dollar is unchanged against the euro but has recorded overnight declines of 0.4% relative to the yuan, 0.3% versus sterling, 0.2% vis-a-vis the yen, Australian dollar, and Mexican peso, and 0.1% against the loonie and kiwi.

The price of WTI oil slid another 0.2% so far today and is poised to record its largest monthly drop since April. Gold is 0.6% firmer.

British gilt and Japanese 10-year JGB yields edged a basis point higher, while their U.S. and German sovereign debt counterparts show no net change on the day.

Real GDP in Euroland bounced up 12.7% last quarter. This is not an annualized rate but if expressed in that way, the quarter-on-quarter gain of about 60% would dwarf the U.S. rebound of 33.1% that was reported a day ago. GDP had previously stagnated in 4Q19, then dropped 3.7% in the first quarter and 11.8% in 2Q. As a result, Euroland GDP’s latest year-on-year contraction of 4.3% exceeds the U.S. on-year drop of 2.9%. Moreover, a second wave of the Covid pandemic has struck parts of Europe, producing record daily cases in Sweden, Italy and Spain and leading ECB officials to indicate that a return to negative growth in the current quarter cannot be ruled out.

Within the euro area, German GDP climbed 8.2% in 3Q but was 4.2% weaker than a year earlier. Quarterly and year-0n-year GDP growth rates were +18.2% and -4.3% in France, +16.1% and -4.3% in Italy, +16.7% and -8.7% in Spain, +13.2% and -5.8% in Portugal, +10.7% and -5.2% in Belgium and +11.1% and -5.8% in Austria. In the Czech Republic, which is part of the European Union but does not use the euro, real GDP increased 6.2% on quarter but fell 5.8% on year.

Euroland’s unemployment rate in September stayed at August’s 28-month high of 8.3%. Consumer price inflation in the euro area remained unchanged at -0.3% in October. Energy prices rose 0.2% on month but fell 8.4% on year, and core inflation this month amounted to just 0.2%, down from 1.1% in October 2019.

French consumer prices dipped 0.1% in October and were unchanged from a year earlier, while the French PPI in September recorded the smallest on-year decline (2.4%) since February. In Italy, consumer prices recorded a 0.3% on-year decline in October, half as much as in the year to September.

French household consumption experienced the worst performance in five months, dropping 5.1% in September

German retail sales volume fell 2.2% on month in September, more than twice as fast as analysts were anticipating, but sales were 6.5% higher than a year earlier.

Swiss retail sales plunged 3.6% in September, imploding their year-on-year growth to 0.3% from 4.0% in August and 4.6% in July. The Swiss KOF leaders index fell to a 3-month low in October.

Britain’s Nationwide house price inflation index printed in October at a 69-month high of 5.8%.

In Hong Kong and Taiwan, real GDP advanced between 2Q and 3Q by 3.0% and 4.4%. Hong Kong GDP posted a fifth consecutive year-on-year contraction, this time of 3.4%. In Taiwan, GDP was 3.33% higher than a year earlier, which was even a tad more than 3.03% growth posted in the previous four quarters through 3Q19.

Japanese industrial production continues to pick up, climbing 4.0% in September after monthly gains of 1.0% in August and 8.7% in July. Nonetheless, industrial output was still 9.0% less in September than a year earlier. Japanese housing starts (-9.9%) and construction orders (-10.6%) also recorded large 12-month declines in September. Total and core consumer prices in Tokyo were 0.3% and 0.5% lower in October than a year earlier.

In South Korea, retail sales and industrial production each grew in September and were 4.4% and 8.0% above year-earlier levels.

Canadian monthly GDP went up 1.2% in August. This was the fourth straight advance but still left GDP 3.8% below its year-earlier level. Canadian GDP appears headed for a third quarter-over-second quarter 10% jump. Canadian producer prices dipped 0.1% last month, producing the eighth straight sub-zero on-year change, this time amounting to -2.2%.

Mexican GDP rebounded 12.0% last quarter following a 17.1% dive in the second quarter, resulting in a decline of 8.6% compared to the third quarter of 2019.

The U.S. employment cost index rose 0.5% last quarter but recorded a smaller 2.4% four-quarter rate of advance. In the year through 3Q19, the ECI had risen 2.8%.

September increases of 0.9% and 1.4% in U.S. personal income and personal consumption expenditures both surpassed expectations. The PCE price deflator went up 0.2% on month and 1.4% on year. The latest core PCE inflation rate was 1.5%.

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

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