Fairly Wild Day after Fed Tightens
December 17, 2015
The Argentine peso dived about 30% to 13.95 per USD following the new Macri governments lifting of capital controls and withdrawal of intervention support. Officials reserve the right to intervene again in the future if deemed needed.
The U.S. currency has advanced broadly and especially against commodity-sensitive currencies. The U.S. dollar rose 1.3%, 1.0% and 0.9% against the Australian, New Zealand and Canadian dollars. The greenback also gained 0.6% versus sterling, 0.5% vis-a-vis the euro, 0.4% relative to the yen and Swiss franc and 0.2% against the yuan.
Comex gold dropped 1.6% to $1,054.88 per ounce, and WTI oil, though up 0.4%, remains historically very weak at $35.67 per barrel.
Ten-year sovereign debt yields declined overnight by 6 basis points in Canada, 4 bps in the U.S. and Britain and 3 bps in Germany. The 10-year Japanese JGB yield is steady by very low at 0.28% on this first day of a two-day Bank of Japan Board meeting. Japanese monetary policy settings, which last got modified in October 2014, are not expected to be changed.
U.S. share prices lost a comparatively small part of Wednesday’s post-FOMC advance. Several U.S. economic indicators got released.
- The U.S. current account deficit increased $13 billion to $124.1 billion last quarter, equal to 2.7% of GDP. Compared to a year earlier, the deficit is up by $26.2 billion of 27%.
- The quality of U.S. capital inflows also deteriorated in the third quarter. There was a net $149 billion adverfse swing in long-term portfolio and direct investment flows between 2Q and 3Q.
- The index of U.S. leading economic indicators went up 0.4% in November versus an expected 0.1% rise.
- But the Philly Fed manufacturing index, which printed at +15.2 last June, swung back under zero to print at -5.9 in December. That was the third sub-zero result in the last four months.
- New jobless insurance claims declined 11K to 271K last week. The four-week average of 270.5K was virtually unchanged from the 270.75K average during the previous eight weeks.
Share prices in the Pacific Rim advanced 1.9% in China, 1.6% in Japan and Indonesia, 1.5% in Australia, 1.7% in Taiwan but just 0.4% in New Zealand and South Korea. Equities in Europe have traded up by 3.2% in Germany, 2.6% in Spain, 2.1% in Italy, 2.2% in France, 1.3% in Switzerland and 0.4% in Britain.
The Central Bank of the Republic of China in Taiwan unexpectedly lopped another 12.5 basis points of the discount rate to 1.625%. This central bank reviews its stance on a quarterly basis, and an initial cut of 12.5 basis points this past September had been the first change since a 12.5-bp hike in June 2011.
The reverse repo rate in the Philippines, a central bank borrowing rate, was left unchanged at 4.0%, its level since hikes of 25 basis points each in July and September of 2014.
Bank Indonesia’s BI interest rate was retained at 7.5%, the tenth straight monthly meeting to yield no change.
Norges Bank officials left the key Norwegian central bank policy rate at 0.75%, but officials indicated that such may be reduced further in coming months. Three 25-basis point reductions have been made since December 2014, most recently in September.
Germany’s IFO Institute reported a 0.3 point dip in the German business climate index (BCI) to a 2-month low of 108.7 in December. Compared to a year earlier, the BCI and its two main sub-components for the current situation and expectations have each risen roughly three points. December’s manufacturing reading was at a 7-month high, while the scores for wholesale activity, retail, and construction were respectively at 6-, 5- and 2-month lows.
Total hourly labor costs in the eurozone rose 1.1% in the year to 3Q, down from 1.6% in 2Q and 1.4% in the third quarter of 2014.
Construction output in Euroland increased 0.5% in October. That was the third monthly rise in four months. October’s level was 0.2% above the third-quarter average and 1.1% greater than a year earlier.
British retain sales volume increased 1.7% on month in November both including and excluding auto fuel, which beat analyst expectations by far and more than reversed declines in October.
The Confederation of British Industries published results of the December U.K. industrial trends survey, whose overall index, -7, was four points better than November’s reading and 11 points better than in October.
Two sets of new Swiss macroeconomic forecasts were reported, one by the government statistical arm (SECO) and the other from the KOF Economic Institute. For next year, SECO projects 1.5% GDP growth and a 0.1% dip in consumer prices, while KOF anticipates 1.1% growth and a downwardly revised 0.5% decline in consumer prices.
Italy’s EUR 4.8 billion trade surplus in October was more than twice the size of September’s surplus but EUR 0.5 billion less than in October 2014.
Greek unemployment fell more than expected to 24.0% in the third quarter from 25.5% a year earlier, but the Greek jobless rate for workers under the age of 24 continues to hover close to 50%. The Swedish and Dutch seasonally adjusted unemployment rates in November were respectively 7.0% and 6.8%, each being below its year-earlier rate.
Icelandic consumer price inflation was at 0.5% last month. Polish producer prices fell 1.8% between November 2014 and last month, while retail sales and industrial production in that economy respectively fell 5.9% and increased 7.8% in the same statement year.
New Zealand real GDP grew 0.9% last quarter, three times the pace in 2Q and marginally faster than forecast. GDP was 2.3% higher than a year earlier.
Japanese stock and bond transactions generated a JPY 445 net capital outflow last week versus an inflow of JPY 168 billion in the previous week.
Central bank interest rate announcements are also due today in Mexico and Chile.
Copyright 2015, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Argentine peso devaluation, German business climate index, U.S. current account