Global Equities and Sovereign Debt Prices Drop Further

November 10, 2017

Share prices around the Pacific Rim declined 0.8% (or 187 points) in Japan, 0.7% in New Zealand, and 0.3% in Australia, South Korea and Indonesia. European markets are down 0.8% in Greece, 0.4% in Spain, and 0.3% in the U.K., France and Switzerland, but the German Dax and Milan exchange are unchanged.

A narrowly mixed dollar shows gains of 0.2% and 0.1% against the Australian and New Zealand currencies, dips of 0.3% versus sterling and 0.1% relative to the loonie and no change vis-a-vis the yen, euro, yuan or Swiss franc.

The 10-year British gilt yield rose four basis points, and the comparable German bund and Japanese JGB yields are a basis point firmer. In futures trading, the 10-year U.S. Treasury yield rose 2 bps to 2.37%.

Gold slipped 0.3% to $1,284.2 per ounce. WTI oil is steady at $57.16 per barrel.

The Central Reserve Bank of Peru implemented another cut of its key interest rate, lowering such by 25 basis points to 3.25%. This was the fourth reduction since May, thus unwinding all four hikes of same size done between September 2015 and February 2016.

The Bank of Mexico retained a 7.0% benchmark interest rate, citing continuing high inflation. The rate was last lifted in June and is four percentage points above the cyclical low of 3% prior to a hike in December 2015.

British data reported today are mixed. The pleasant surprise involved industrial production (+0.7% on month in September and +2.5% on year, which is a 7-month high). A 0.7% in manufacturing output was led by transportation equipment. Trade data were mixed. While the deficits in September ofGBP 2.754 billion overall and GBP 11.25 billion on goods only were lower than in August, that didn’t prevent the third-quarter imbalances from exceeding those from the second quarter. Moreover, the sheer size of the deficits remains excessive, and the outlook for the final quarter of 2017 is not good. Finally, construction output sank by 1.6% in September, producing only a 1.1% on-year advance versus a 3.9% August-over-August increase.

Industrial production in the 12 months through September climbed 2.7% in France, 2.4% in Italy and 4.2% in Finland.

Consumer prices in the year to October rose 2.6% in Romania, 1.4% in Denmark and 1.2% in Norway.

Japan’s tertiary index, a monthly gauge of service sector activity, again disappointed in September, dipping 0.2% on month for an on-year increase of just 0.6%. That’s lower than the rises of 0.7% in 2016 or 0.9% in 2015. A 1.1% quarterly increase in the second quarter had seemed to mark the onset of faster service-sector activity, but the tertiary index in 3Q was 0.1% lower than the 2Q average.

Japanese M2 money grew 4.2% in the year to October, up from 4.0% in the third quarter, 3.4% in 2016 and 3.6% in 2015.

Hong Kong GDP growth slowed to a quarterly pace of 0.5% in 3Q from 1.1% in 2Q, depressing the on-year increase to 3.6% from 3.8%.

South Korea’s indices of leading and coincident economic indicators climbed 0.6% and 0.4% in September, not bad for a country living under the threat of a catastrophic attack.

Indonesia’s current account deficit narrowed to 1.65% of GDP last quarter.

Singapore retail sales underperformed expectations by a large margin in September, sliding 4.2% on month and 0.5% on year.

The last stop of President Trump’s Asian trip is Danang, the site of a major U.S. airbase during the Vietnam War and the venue for an APEC summit that he will be attending. Scheduling conflicts are being blamed for why no formal bilateral meeting with Russian President Putin, who’s also attending the summit, is planned.

It has not been a good week from Trump domestically while he’s been traveling through Asia. Confidence that the Congress will pass tax cut legislation is lower now than at the start of the week.

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



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