Last Meaningful Week of 2015

December 14, 2015

A lot of information including a likely first federal funds rate hike since June 2006 will be crammed into this third week of December.  Such will clear the decks for the end-of-year holiday season, and trading desks will be closing their 2015 books.  Back in the day, there was no more consistent reliable bias in the dollar than a tendency to depreciate against the German mark and euro in the final half of December.  This pattern was showcased in a post on this blog in 2010.

This week kicked off with better-than-expected Chinese data, news of a rebound in eurozone industrial production, a further slide in oil prices, and a mixed Bank of Japan quarterly survey of businesses.

Chinese industrial production accelerated in November to a 6.2% year-over-year increase, up from 5.6% in October and the best result since January-February 2015.

Chinese retail sales growth accelerated to 11.2%, an 11-month high, from 11.0%.  Like industrial production, the result was better than forecast.

Fixed asset investment in China recorded on-year growth of 10.2% in the first eleven months of 2015, same as in January-October but down from 15.7% in full 2014.

Industrial production in the eurozone rebounded 0.6% in October following monthly declines of 0.4% in August and 0.3% in September.  Output advanced 4.3% in The Netherlands, 3.4% in Ireland, 0.5% in France and Italy and 0.1% in Germany but fell on month by 1.2% in Greece and 0.9% in Finland.  October output was 0.4% greater than the third-quarter average level and 1.4% above the October 2014 level.

West Texas Intermediate oil is trading at $35.21 per barrel, down another 1.2% compared to Friday’s close.

The Bank of Japan Tankan survey of companies was released, showing diffusion indices for large firms and small manufacturers that were each unchanged from those measured in September.  Earnings prospects have improved, and significant capital spending growth is planned.  However, the outlook over the coming three months foresees across-the-board deterioration.

The dollar has declined by 0.7% against the Australian dollar, 0.6% relative to the New Zealand dollar, 0.2% versus the loonie, and 0.1% against the yen, but it also strengthened 0.5% relative to sterling and 0.1% against the yuan. The key EUR/USD relationship is unchanged.

Comex gold dipped 0.2% to $1,072.90 per troy ounce.

The ten-year U.S. Treasury yield is five basis points firmer, and yields on comparable German bunds and British gilts have moved up two basis points each.  The Japanese 10-year JGB yields dipped two bps, however.

U.S. stocks opened modestly lower.  Share prices jumped 2.5% in China, but there were losses elsewhere in the Pacific Rim of 1.5% (347 points) in Japan, 2.0% in Australia, 1.1% in South Korea, 0.7% in Singapore, 0.9% in Taiwan, 0.6% in Hong Kong and New Zealand, and 0.4% in India and Indonesia.  In Europe, stocks have fallen 0.9% in Italy, 0.7% in the U.K., 0.6% in Spain, 0.4% in Germany and Switzerland, and 0.2% in France.

ECB President Draghi confidently predicted a return to in-target inflation next year.  There are no interest rate policy announcements today, but a slew of such follow in the remainder of this week, including from the Fed, Indonesia, Chile, Japan, Colombia, Norway, Taiwan, Hungary, the Czech Republic, Mexico, Thailand, and Sweden.

Ireland’s construction purchasing managers index fell 0.8 points in November to an 8-month low of 55.5, but the subcomponent measuring new business showed the fastest growth in five months.  Irish construction has been expanding without interruption for somewhat over two years.

Growth in Japanese industrial production in October was unrevised at 1.4% from September but a drop of 1.4% from a year earlier.  The ratio of inventories to shipments declined by 3.0% on month, while capacity usage went up 1.3%.

Japan’s tertiary index, a gauge of service-sector activity, jumped 0.9% in October.  The October level was 0.7% above the third-quarter mean and 1.5% higher than a year earlier.

Britain’s Rightmove home price index dropped 1.1% in December, a month than invariably sees a decline.  The Rightmove index’s 12-month rate of increase accelerated to 7.4% from 6.2% posted in November.

In the year to October, industrial production rose 12.7% in Hungary and 2.8% in Romania.

Hong Kong industrial production in the third quarter was 1.9% lower than a year earlier, and producer prices in that former British colony posted a 4.4% drop in the same 12-month span.

In the year to November, Indian wholesale prices declined 2.0%.  Finnish consumer prices dipped 0.2%, Italy’s CPI edged up 0.1%.  Greek import prices plunged 10.4% in the year through October.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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