A Fresh Political Mandate in Japan, While U.K. and Spain Stay Embroiled in Uncertainty

October 23, 2017

The Japanese Nikkei jumped 239 point or 1.1% following Sunday’s lower house election that gave Prime Minister Abe a resounding mandate and his LDP-led ruling coalition with Komeito more than a two-thirds majority in both houses of parliament. Abe now has the wherewithal to enact constitutional revisions that will affect foreign policy. The ten-year JGB yield dipped a basis point to 0.06%, and the yen fell 0.4% against the dollar.

A showdown looms in Catalonia between regional separatists and the central Spanish government of Prime Minister Rajoy. The Spanish Ibex fell 0.3%.

Following last week’s EU Council meeting, Brexit talks with Great Britain remain stalled pretty much at the starting line. The longer progress stays lacking, the more dire the outlook for the British economy becomes. The Confederation of British Industries released its monthly industrial trends survey for October, showing a 9-point slide in the key index to minus 2, the first negative result since November of 2016.

The ongoing 19th Communist Party Congress in China has solidified President Xi Jinping’s power. A successor to him has not been announced. Likewise, U.S. President Trump has still not revealed his nominee for the next chair of the Federal Reserve.

The dollar rose overnight by 0.3% against the euro, Swissie, and yuan and 0.1% relative to the loonie, Australian dollar and Kiwi. New Zealand is observing its Labor Day holiday.

Among Pacific Rim stock markets, equities climbed 0.4% in India and Indonesia and 0.3% in Singapore but fell 0.3% in Hong Kong and 0.2% in Australia. Greek share prices fell 1.6%, while markets rose by 0.5% in France and Germany and by 0.4% in Switzerland. The British Ftse and Milan bourse are 0.2% firmer.

The 10-year German bund and Japanese JGB yields slid by 2 and 1 basis points.

Gold declined 0.3% to $1,276.90 per ounce. WTI oil edged up 0.1% to $51.89 per barrel.

Japan’s August index of leading economic indicators was revised upward by 0.4 points to a 42-month high of 107.2. The index of coincident economic indicators printed at 117.7, best since October 2007. Japanese department store sales in September posted a larger on-year increase of 4.4% versus a 12-month increase of 2.0% in August and a 1.4% decline in July.

Chinese property price inflation slowed to 6.3% in September from 8.3% in August. Fewer cities (44 out of 70) reported month-on-month increases.

Euroland’s fiscal deficit to GDP ratio declined to 1.5% in 2016 from 2.1% in 2015, 2.6% in 2014 and 3.0% in 2013. The common currency outstanding public sector debt last year slipped back to 88.9% of GDP from 89.9% in 2015 and 91.8% in 2014. Italy, Portugal, Cyprus and especially Greece (180.8%) had a fiscal debt that exceeds the size of GDP.

Swiss M3 money growth accelerated to a 42-month high of 4.4% in September. Icelandic wage cost inflation rose further to 7.4% in September (6.0% in inflation-adjusted terms).

In the year to September, producer prices in South Korea advanced 3.6%, but consumer prices in Singapore went up by just 0.4%, matching August’s result. Taiwanese industrial production in September was 5.24% greater than a year earlier, and the jobless rate of that economy stood at 3.7%.

The Chicago Fed National Activity Index and Euroland consumer sentiment index will be released later today.

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


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