Dollar and Sterling Strengthen but Oil Steps Back

December 6, 2016

The dollar is unchanged against the pound but up 0.4% against the yen, loonie, kiwi and Australian dollar. The U.S. currency also rose 0.2% overnight relative to the euro and Swiss franc.

  • An appeal is being heard in British courts regarding the legality of leaving the EU based solely on a voter referendum. Sterling has benefited from the possibility that Brexit might have to pass additional hurdles.
  • Thursday’s meeting of ECB governing council is thought likely to extend quantitative easing past March.

Doubts have emerged about the effectiveness of the recent OPEC accord to stabilize or lift prices by cutting cartel production. The concern is that reduced OPEC production might be offset by increased output from non-cartel members. West Texas Intermediate crude oil fell 1.8% to $50.84 per barrel overnight. Gold has dipped 0.3%.

Ten-year sovereign debt yields are up four basis points in Germany and a basis point in Japan and Britain. The 10-year Treasury is a basis point lower.

Japan’s Nikkei climbed 0.5%. Stocks elsewhere in the Pacific Rim rose 1.4% in South Korea, 1.0% in Taiwan and 0.8% in both New Zealand and Hong Kong. The Paris Cac, German Dax and British Ftse show gains of 1.1%, 0.7% and 0.3% so far. The U.S. market is little changed.

U.S. factory orders advanced 2.7% in October and 0.5% on year. Durables climbed 4.6%, while other orders rose 0.9% for a second straight month.

U.S. labor productivity broke a three-quarter losing streak with a 3.1% increase in the summer quarter but was unchanged from a year earlier. Productivity only grew 0.8% in 2014 and 0.7% in 2015. Unit labor costs grew 3.0% between 3Q15 and 3Q16.

The U.S. goods and services trade deficit was $42.601 in October, similar to street expectations.

Canada’s trade deficit fell sharply to a 9-month low in October of C$ 1.13 billion from C$ 4.375 billion the month before.

The Reserve Bank of Australia’s monthly board meeting ended with a decision to leave the Official Cash Rate unchanged at a record low of 1.5% and a statement from Governor Lowe that calls the global inflation outlook more balanced, Australian inflation quite low, Aussie growth this quarter in a temporary slowdown, housing stronger, and the terms of trade partly recovered. All in all, officials seems satisfied with the current policy stance and progress in Australia’s transition away from resource sector-led growth. The statement, like the prior one, warns that Aussie dollar appreciation would be a complicating factor. There were earlier rate cuts this year of 25 basis points each in May and August.

Australia’s current account deficit narrowed to A$ 11.358 billion in the third quarter from A$ 15.943 billion in 2Q and A$ 18.848 billion in the third quarter of 2015.

German industrial orders shot up 4.9% on month in October, most since around mid-2014. The 12-month increase of 4.0% was more than twice expectations. Domestic orders for capital goods soared 17.8%, and all foreign orders were 3.9% higher than in September.

Euroland real GDP recorded back-to-back 0.3% increases in the second and third quarters. On-year growth was 1.7% in that period. Third quarter growth stemmed from personal consumption and inventory building, while net exports exerted some drag in the quarter.

Euroland’s retail purchasing managers index in November was unchanged from October’s 4-month low of 48.6. The reading has been below the 50 no change line for three straight months. Retail activity contracted during November in Germany, France and Italy.

Germany’s construction purchasing managers index climbed a whole point to a robust 53.9 reading in November, which was the best score since March.

A global composite manufacturing plus services purchasing managers index compiled by J.P. Morgan remained steady in November at October’s 11-month high of 53.3.

Swiss consumer prices fell 0.3% in the year to November versus an on-year 0.2% dip in October. Inflation has been negative since 4Q14.

In the year between 3Q15 and 3Q16, real GDP rose 2.2% in Hungary, 4.6% in Romania and 0.7% in South Africa.

Labor cash earnings in Japan posted a disappointing 0.1% on-year rise in October.

British same store retail sales growth from a year earlier slowed to 0.6% in November from 1.7% in October.

Canada’s IVEY-PMI index of 56.8 in November reflects positive growth ┬áin business activity but at the slowest pace since August.

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

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