Dollar, Pound and Most Equities Falter as a Ton of Economic Data Got Released

November 14, 2017

The dollar rose 0.7% against sterling while posting losses overnight of 0.7% against the euro, 0.4% versus the Swiss franc, 0.2% vis-a-vis the Australian dollar, and 0.1% relative to the yen, loonie, peso and yuan. The kiwi fell 0.5%.

Share prices declined 0.9% in Australia, 0.6% in Indonesia, Singapore and Hong Kong, and 0.5% in India. Stocks in Europe are down 0.4% in France, 0.5% in Switzerland and 0.2% in Germany, Spain and Italy. Japan’s Nikkei closed unchanged, but U.S. futures are lower ahead of PPI data.

The ten-year Treasury and German bund yields dipped a basis point. British gilts and Japanese JGB yields are steady. China’s 10-year yield touched a 3+ year high.

Gold and WTI oil fell 0.4% apiece to $1,273.90 per ounce and $56.51 per barrel.

The ZEW expectations index, a gauge of financial expert confidence in the German economy climbed 1.1 points to a six-month high in November, and the companion index for perceived current conditions went up 1.8 points to a 76-month high.

Euroland’s ZEW expectations index rebounded 4.2 points to a 2-month high, and Ezone current conditions leaped 11.3 points to print at 47.8 versus a reading six months earlier of only 18.3.

Real GDP in the euro area advanced by an as-expected 0.6% in the third quarter, lifting on-year growth by to 2.5%. That exceeded U.S. on-year growth of 2.3%. Over the previous four quarters through 3Q16, Euroland GDP growth of 1.7% also had been 0.2 percentage points faster than U.S. GDP (1.5%).

Among Euroland member nations last quarter,

  • German GDP rose 0.8% on quarter and 2.8% on year. Quarterly growth was led by strengthening net foreign demand and supported by faster business investment, too.
  • French GDP went up 0.5% from 2Q and 2.2% from a year earlier.
  • Italian GDP also climbed 0.5% from 2Q, along with 1.8% on year.
  • So did Portuguese GDP, bringing its on-year rise to 2.5%.
  • Spanish GDP matched Germany’s 0.8% quarter GDP rise and advanced 3.1% on year.
  • Dutch quarterly GDP growth slowed 0.4% quarterly and 3.0% on year.
  • Belgian GDP rose 0.3% on quarter and 1.7% on year.

In Eastern Europe, GDP climbed between 2Q and 3Q by 1.1% in Poland, 0.5% in the Czech Republic, 0.8% in Hungary and 2.6% in Romania, producing respective four-quarter growth rates of 5.0%, 5.0%, 3.8% and 8.6%.

Industrial production in the euro area dropped back 0.6% in September following a 1.4% August advance. That still left output 3.3% above its year-earlier level and average production in the third quarter 1.1% above the 2Q mean.

The index of Australian business conditions, compiled by National Australia Bank, leaped to a reading of 21 last month from a score of 14 in each of the prior 3 months. Needless to say, this was the best result of 2017 but accompanied by unchanged business confidence, which had a reading of 8.

German CPI inflation eased to 1.6% in October, a four-month low. Core inflation of 1.2% was down from 1.6% in September.

British CPI inflation held steady at 3.0% in October instead of ticking up to 3.1% as analysts were anticipating. Core CPI was at 2.7% for a third straight month. Retail price inflation ticked upward by 0.1 percentage point to 4.0% overall and 4.2% excluding mortgage & interest payments. Producer price inflation, both output and input, decelerated in October to 2.8% and 4.6%, respectively.

The British government’s house price index showed an 11-month on-year high of 5.4% in September after 4.8% in August. Home prices rose 0.4% on month.

At a panel discussion, Fed Chair Yellen expressed concern that differences in speeches given by individuals on the 19-person Federal Open Market Committee may hurt the effectiveness of the Federal Reserves rhetorical communication of monetary policy. ECB President Draghi said forward guidance has been a successful policy tool. Bank of England Governor Carney said that in light of the unique circumstances due to Brexit, Bank of England policymakers are inclined to allow greater-than-usual time for inflation to settle back to its target. And Bank of Japan Governor Kuroda asserted that expected inflation in his economy seems to have picked up but just slightly, and it will be necessary to continue an ultra-loose policy stance.

Chicago Fed President Evans warned that interest rate cut may not be a sufficient central bank response to the next time that stimulus is required.

A 0.4% rise in U.S. producer prices in October surpassed expectations and lifted PPI inflation to 2.8% from 2.6% in September and 1.9% in July. Core PPI inflation has risen to 2.4% from 2.2% in September and 1.8% in July. Back to back PPI increases of 0.4% in September and October make a rate hike in December look probable.

Swedish CPI inflation, in contrast, slowed to 1.7% in October from 2.3% in September. Finnish CPI inflation slowed to 0.5% from 0.8%, and Spanish CPI inflation of 1.6% in October was down from 1.8% the month before. Polish CPI inflation also dipped by 0.2 percentage points to 0.8%.

Indian wholesale price inflation, which had slowed to 2.6% in September from 3.2% in August, rebounded to 3.6% in October on accelerating food and fuel costs.

Brazilian retail sales grew 0.5% in September and were 6.4% higher than a year earlier.

U.S. small business sentiment, according to the NFIB index, recovered 0.8 points to 103.8, a 2-month high.

U.S. lawmakers continue to scramble in efforts to find common ground on a tax cut bill.

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




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