Sterling Falters but Equities Performed Better in the U.K. than Elsewhere

November 13, 2017

British Prime Minister May’s own-party support continues to erode, leaving her with only a flimsy hold on power. The pound dropped 0.8% overnight, and the 10-year gilt yield is four basis points lower. However, whereas stocks in most markets overnight fell, the Ftse shows no net change.

Equities declined 300 points or 1.3% in Japan, 0.8% in India, and 0.5% in South Korea and Taiwan. Stocks in Continental Europe are down 1.8% in Greece, 0.6% in Germany, France and Italy, and 0.2% in Spain.

The dollar fell 0.3% against the kiwi, 0.2% versus the Swissie, and 0.1% against the euro. The greenback lost another 0.2% against the yen, reaching a 2-week low, but rose 0.3% vis-a-vis the peso and 0.2% relative to the Australian dollar.

Gold and oil are up 0.4% and 0.2% at $1,279.20 per ounce and $56.83 per barrel.

The 10-year German bund yield is 2 basis points softer, while its Japanese counterpart edged a basis point higher.

At the final stop in Manila on President Trump’s Asian trip, Filipino President Duerte and he engaged in a great deal of mutual admiration, finding common ground in their mutual hatred for Trump’s predecessor. Trump is in Manila to attend the Asean annual conference.

There have been two earthquakes overnight, the more deadly being a 7.3 tremor between Iran and Iraq and the other measuring 6.5 on the Richter scale off the coast of Costa Rica. After several days of comparative silence, President Trump unleashed a torrent of tweets, creating a different kind of disruption.

The fate of the U.S. tax cut bill remains uncertain due to key differences in the senate and house treatments of the deduction for state and municipal income and property taxes and concerns over the implications of both bills for the federal deficit and debt.

Chinese money and lending growth slowed in October. New yuan lending of CNY 663 billion was about half a much as seen in September and the smallest monthly amount so far in 2017. M2 and M1 growth from a year earlier of 8.8% and 13.0% were each less than forecast and the weakest increases recorded so far this year. M0 rose 6.3%, down from 7.2% in the year to September and the smallest on-year gain since July.

German wholesale prices were unchanged on month in October, dampening the on-year increase to a 3-month low of 2.7%. A 2.8% on-year advance in mineral oil products and solid fuel was down from 6.8% in September and 8.2% in the 12 months to August.

Japanese domestic producer goods prices increased 0.3% in October and 3.4% on year. Export and import prices were respectively 9.7% and 3.8% greater than in October 2016.

A 49.9% on-year jump in Japanese machine tool orders in October surpassed the rise of 45.0% in September and was the biggest gain so far of the year. Back last January, machine tool orders had recorded only a 3.5% on-year rise.

Britain’s Rightmove house price index fell 0.8% on month in November, trimming the 12-month rate of increase to 1.1%, down from 1.4% in October and 3.1% in August.

Portuguese harmonized producer price inflation accelerated to a 6-month high of 1.9% last month.

The Irish construction purchasing managers index dropped 2.0 points to a 31-month low reading of 54.5, which is still enough above “50” to signify decent conditions.

Canadian markets will be closed for Remembrance Day.

Industrial production in the year to September rose 7.6% in Romania and 5.4% in Hungary. Dutch retail sales over the same span rose 5.2%.

Turkey’s current account deficit rose 4.6-fold on month to $4.527 in September.

ECB Vice President Constancio defended the need for keeping monetary policy very accommodative so long as inflation continues to lag the central bank’s mandate.

Philadelphia Fed President Harker conceded that the persistently low inflation rate is a source of concern but said he nonetheless favors doing a third 2017 interest rate hike next month. He stressed the need to get rates higher, so that the Fed has room to ease when the economy hits its next recession.

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

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