Big Drop in Chinese Share Prices Doesn’t Set Today’s Global Market Tone

February 25, 2016

China’s Shanghai Composite index plunged 6.4% this Thursday after a sharp rise in overnight money rates there.

But elsewhere, stocks climbed 1.4% in Japan, 1.0% in Taiwan, 0.3% in South Korea and in Europe now show gains of 3.2% in Greece, 2.6% in Spain, 2.3% in Italy, 2.4% in the U.K., 2.3% in France, 1.6% in Germany and 1.2% in Switzerland.

The ten-year German bund and Japanese JGB yields are unchanged, while the 10-year British gilt yield is 4 basis points higher.

A mixed dollar is down 0.4% against the kiwi, 0.3% versus sterling 0.2% relative to the euro, and 0.1% vis-a-vis the Aussie dollar and yuan.  The dollar shows overnight appreciation of 0.3% against the loonie and yen and 0.2% versus the Swiss franc.

West Texas Intermediate oil is marginally above $32 per barrel, and this is helping other markets.  Gold at $1,232.66 per ounce and zinc have firmed.

Consumer price inflation in the eurozone picked up to 0.3% in January from 0.2% in December, 0.1% in November and -0.6% in January 2015.  Core inflation edged up 0.1 percentage point to 1.0%.  Energy posted a 5.4% on-year decline versus a 9.2% plunge between January 2014 and January 2015.

After dropping 0.3 percentage points in December, Euroland M3 money growth returned to November’s 5.0% in January.  M3 in November-January was 4.9% greater than a year earlier.  Loans to non-financial firms also accelerated, reaching 0.6% in January after just a 0.1% uptick in the year to December.

British GDP growth last quarter was confirmed at 0.5% from 3Q and 1.9% year over year.  Real GDP grew 2.2% in 2015 after 2.9% in 2014.  Last quarter saw prsonal consumption expand 0.7%, but business investment contracted by 2.1%.  Net exports depressed GDP growth, but inventories were a positive influence.

Spanish real GDP increased 0.8% on quarter and 3.5% on year in the final quarter of 2015.  GDP in 2015 as a whole rose 3.2%.

Swiss consumer prices fell 1.5% on year in January.  Industrial production dropped 4.5% between 4Q14 and 4Q15.

German consumer confidence improved unexpectedly to a 5-month high in the latest month.  Harmonized German inflation doubled to 0.4% last month.

Italian consumer confidence sank 4.1 points to 114.5 in February, a 5-month low.  Overall economic sentiment dropped 1.7 points to a score of 101.4.  Italian retail sales dipped 0.1% in December and were merely 0.6% higher than a year earlier.

Swedish economic sentiment dropped sharply to a reading of 108.4 in February from 112.1 in January.  The factory component fell by 5.8 points, but consumer confidence rose 0.4 points.  Separately, Swedish producer prices posted a larger 3.1% on-year decline in January, and the economy’s trade surplus of SEK 1.6 billion that month was greater than forecast though below SEK 2.3 billion recorded a year earlier.

Icelandic consumer price inflation edged 0.1 percentage point higher to 2.2% in February. 

Austrian industrial production posted on-year declines of 1.9% in November followed by 1.7% in December.  Consumer price inflation hit a 6-month high of 1.2% in January.

Stock and bond transactions in Japan last week generated a 5.37 trillion yen net outflow after posting an inflow of JPY 1.82 trillion in the prior week.

Australian private investment rose 0.8% last quarter but nonetheless fell 17.7% relative to the final quarter of 2014.

South Korean consumer sentiment fell two points to a 98 reading in February.  Thailand’s trade surplus narrowed sharply to a 7-month low of $240 million in January, but Hong Kong’s trade deficit that month of HKD 17.48 billion was considerably less than expected or than the December deficit of HKD 45.7 billion.

South African producer price inflation accelerated from 4.8% in December to an 18-month high of 7.6% in January.  South Africa had a 24.5% jobless rate last quarter.

Brazilian consumer sentiment rebounded to a six-month high in February.

U.S. new jobless claims increased 10K last week to 272K, and the 4-week average, also 272K, was down from 283K on average in the prior four weeks to January 23.  After plunging 4.6% in December, U.S. durable goods orders rebounded 4.9% in January and were 0.6% higher than a year earlier.

Still to come:  the Kansas City Fed manufacturing index, the FHFA house price index, and public comments from three Federal Reserve district presidents –Bullard, Lockhart, and Williams.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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