Dollar Up, Stocks Down on MLK Holiday

January 16, 2017

The United States is observing Martin Luther King’s birthday. The stock exchange and banks will be closed. But President-Elect Trump continues to make lots of news. In a wide-ranging interview with the European press, Trump did not back away from well-rehearsed previous themes.

  • NATO is outdated. The U.S. will not remain its prime financier.
  • Radical Islamist terrorism, unchecked immigration, and foreign trade, not Russia,¬†are America’s prime geopolitical threats.
  • Britain was wise to vote for Brexit. Others will follow.
  • He hopes to lift sanctions against Russia in exchange for a Nuke-reduction deal and to partner with Russia to destroy ISIS.
  • Merkel’s immigration policy is wrong.
  • Tariffs will be imposed on European companies that expand productive facilities in Mexico.
  • Suggested closer U.S. ties with post-Brexit Britain at the EU’s expense.
  • Doubled down on the accusation that U.S. intelligence agencies leaked the accusations about him and Russia.

British Prime Minister May made remarks over the weekend consistent with a hard Brexit. Freedom to control immigration with not be compromised to secure special commercial favor vis-a-vis Europe’s single market.

Share prices in Europe are down 1.3% in Italy, 1.2% in Greece, 0.9% in Spain, 0.8% in Switzerland, 0.7% in Germany and 0.6% in France. But the British Ftse has edged 0.1% higher.

Stocks in the Pacific Rim fell 1.0% in Japan, 1.2% in Hong Kong, 0.4% in Singapore and 0.6% in China.

The dollar strengthened briefly past the 1.2000 level against sterling and shows a net advance of 1.2% compared to Friday’s close. The greenback is also up 0.5% against the kiwi, 0.4% relative to the peso, euro, and Aussie currency, and 0.3% versus the Swiss franc. The dollar dropped 0.3% against the yen and is unchanged against the yuan. The Turkish lira slumped over 1%, abruptly ending its rally late last week.

The 10-year gilt yield declined five basis points. Its German counterpart slipped two bps, and the JGB yield is steady.

Comex gold rose 0.6% to $1,203.50 per ounce. West Texas Intermediate oil fell 0.4% to $52.15 per barrel.

Released Japanese data contained some interesting results.

  • Machinery orders from abroad and the public sector recorded huge month-on-month jumps of 37.3% and 21.6% in November. Core private domestic machinery orders fell by a greater-than-forecast 5.1%, but total machinery orders still went up 20.6% on month and 16.0% on year.
  • Corporate goods prices, essentially Japan’s PPI, advanced 0.6% on month in December, cutting the 12-month decline to 1.2% from 2.2% in November. Import prices, which had slumped 18.3% between end-2014 and end-2015, recorded a 0.4% increase in the subsequent 12 months.
  • Machine tool orders were 4.4% greater in December than a year earlier. On-year declines had amounted to 5.6% in November, 8.9% in October, 6.3% in September, 8.4% in August, and 19.7% in July.
  • The tertiary index of service-sector activity rose 0.2% on month and 1.3% on year in November.

Britain’s Rightmove house price index was 3.2% greater than a year earlier in January, down from a 12-month increase of 3.4% in December and 5.8% in November.

The Irish construction purchasing managers index slipped to a 3-month low in December but, at 58.9, still signaled a brisk rate of expansion. Readings of 50 in this diffusion index delineate contraction from expansion, and it has been above 50 without interruption since March 2012.

Euroland’s seasonally adjusted trade surplus widened from EUR 19.9 billion in October to EUR 22.7 billion in November. Export growth of 3.2% was almost twice as fast as the monthly rise in imports. The eleven-month surplus was EUR 248.2 billion, up from EUR 214.3 billion in January-November 2015.

India posted a $10.37 billion trade deficit in December. In that same month, Indonesia ran a $992 million trade surplus. Wholesale price inflation in India accelerated to 3.39% in December from 3.15% the month before.

Food prices in New Zealand fell 0.5% on month in December but showed the same 12-month increase, 0.6%, as in November.

Italian consumer price changes in December were confirmed to have recorded a 0.4% increase from November and a 0.5% rise from a year earlier.

Danish and Czech producer prices between end-2015 and end-2016 respectively rose 3.2% and fell 0.4%.

Chinese foreign direct investment increased 4.1% last year.

Norway’s trade surplus widened to a 17-month high in December but recorded a 17-month low in 2016 of NOK 140.4 billion. The 2015 surplus had been NOK 220.4 billion.

Bank of England Governor Carney speaks publicly tonight. The World Economic Forum in Davos, Switzerland begins tomorrow. The Trump presidency begins in four days. The transfer of power takes place at noon EST on Friday.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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