Digesting More Data

September 13, 2016

The dollar is holding steady against the euro, Swiss franc and yuan, down 0.5% versus the loonie, but 0.6% stronger against sterling. The dollar has also advanced 0.4% against the yen and Australian dollar and 0.3% vis-a-vis the kiwi.

Share prices had recovered in the U.S. yesterday after Governor Brainard of the Federal Reserve made comments dampening expectations that the federal funds rate might be raised next week. Stocks in the Pacific Rim closed down 1.9% in Singapore, 1.3% in Indonesia, 0.8% in New Zealand and 0.2% in Australia and Hong Kong but rose 0.4% in South Korea, 0.3% in Japan and 0.1% in China. European equities have recovered slightly with gains thus far of 0.5% in Germany, 0.4% in Switzerland, 0.3% in the U.K. and Greece and 0.2% in France.

The most notable market move today has been a 2.4% slump in WTI crude oil to $45.16 per barrel in reaction to an IEA prediction that it will take longer than imagined previously for excess oil supplies to be reabsorbed. Comex gold has firmed 0.3% to $1,320.50 per ounce.

The ten-year German bund and British gilt yields dropped 3 and 4 basis points, and the 10-year Japanese JGB is a basis point softer.

Chinese data beat expectations, suggesting the slowdown there may have flattened. Industrial production rose 6.3% on year in August, up 0.3 percentage points and the strongest 12-month gain since March. Retail sales growth quickened from 10.2% in July to 10.6%, a 2-month high, in August. Fixed asset investment growth in January-August was 8.1%, no different from the increase over the first seven months of this year.

British CPI inflation held steady at 0.6% in August instead of edging higher as analysts had predicted. Core CPI also remained unchanged at a pace of 1.3%. RPIX inflation of 1.9% likewise stayed level. Producer output price inflation accelerated to 0.8% from 0.3%, and core PPI-O picked up to 1.3% from 1.0%. Producer input price inflation intensified to 7.6% in August from 4.1% in July. Finally, the government’s house price index showed a smaller 8.3% 12-month increase in July, least since April.

Switzerland’s PPI/import price index fell 0.3% on month and 0.4% on year in August. Import prices were 1.2% less than a year earlier, while domestic producer prices dipped 0.1% on year.

The final report of German consumer prices in August confirmed the earlier estimate of no change from the month before and a 0.4% 12-month rate of increase. Energy price deflation slowed to 5.9% from 7.0%, but food and service consumer prices posted smaller on-year increases. The harmonized CPI inflation rate was 0.3%.

German wholesale prices fell 0.7% on month and 1.2% on year in August. The 12-month drop in the prior year to August 2015 had been 1.1%.

The German ZEW Institute reported investor sentiment toward Germany and the euro area for September. Regarding Germany, expectations printed at 0.5, same as in August and still closer to July’s low reading of -6.8 (a response to the Brexit vote) than June’s 19.2 score. Current conditions in Germany slipped to a 2-month low of 55.1. In the case of Euroland, the expectations index rebounded less than anticipated to 5.4 in September from 4.6 in August, and current conditions slid 0.2 points to a reading of negative 10.5.

Swedish CPI inflation held steady at 1.1% last month.

The British index of leading economic indicators was unchanged in July. Such also had failed to increase in the four previous months. The index of coincident economic indicators, according to the Conference Board, rose 0.3% versus no change recorded in June.

Italian industrial production rose 0.4% in July, breaking a string of declines. The 12-month rate of decrease in output was 0.3% after a drop of 0.9% posted between June 2015 and June 2016.

Spanish consumer prices in August, a monthly uptick of 0.1% and an on-year dip of 0.1%, confirmed the flash estimate.

Jobs in the euro area increased 0.4% on quarter and 1.4% on year in the second quarter, matching the results from 1Q16.

Japan’s Ministry of Finance reported business sentiment in the third quarter. Among large firms such printed 9.8 points higher at +1.9 and is expected to recover further in the final quarter of 2016. Sentiment improved in 3Q for both manufacturers and non-manufacturers.

National Australia Bank reported a two-point drop in Australian business conditions to a reading in August of +7 but a 2-point rise in business confidence to +6. The Assistant Governor of the Reserve Bank of Australia gave an optimistic assessment of the economy’s prospects, suggesting that the steep fall in mining sector investment is ending and expressing optimism that export commodity prices are stabilizing. Unemployment should improve.

New Zealand food prices in August were 0.5% greater than a year earlier.

Indian consumer price inflation slowed a whole percentage point to 5.05% in August.

As a percent of GDP, South Africa’s current account dropped to 3.1% last quarter from 5.3% in the first quarter.

South Korea’s jobless rate rose to 3.8% last month from 3.6% in July.

The NFIB measure of U.S. small business sentiment dipped 0.2 points to 94.4 in August, a 3-month low.

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


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