A Better Market Tone

November 16, 2017

There’s been a respite from the recent slide of equities. Japan’s Nikkei closed 1.5% higher, and the German Dax and Paris Cac are up 0.5% and 0.6%.

The dollar shows mixed overnight changes, with drops of 0.6% against the Swissie, 0.2% relative to the peso and sterling and 0.1% versus the loonie but upticks of 0.5% against the kiwi, 0.3% vis-a-vis the yen and 0.2% against the euro and yuan.

Ten-year sovereign debt yields have rebounded 2 basis points in the U.K. and a basis point each in Japan and Germany. Futures trading also points to a higher Treasury yield.

Commodity prices have slipped slightly. WTI oil is down 0.3%, and gold has edged 0.1% lower.

British retail sales volume in October beat expectations but nonetheless posted the first 0n-year decline (0.3%) since March 2013. Some of this softness reflected a strong performance in October 2016, and weather seems to have played a role. But the main cause is the squeeze on real wages since the Brexit referendum.

Several Bank of England officials made public remarks. Governor Carney stressed the need for a deal to handle Britain’s exit from the EU and said the central bank aims to do what it can to assist this transition. Broadbent said the effect of Brexit on the path of U.K. interest rates is not clear, and Haldane predicted inflation would stay above the 2% target for the next couple of years.

The long string of monthly declines in Britain’s index of leading economic indicators was extended into September when such fell 0.2%. The LEI was 1.1% lower than its level six months earlier. The index of coincident economic indicators meanwhile stagnated in the latest reported month.

Australian labor statistics for October are mixed. The jobless rate unexpectedly fell to 5.4% from 5.5% in September and 5.6% in August, but a decline in part-time workers of 24.3K held the overall growth of employment to a smaller-than-forecast 3.7K.

The flash Euroland consumer price inflation rate of 1.4% in October has been confirmed. This is down from 1.5% in September and August. Core inflation eased to 0.9% from 1.1% in September and 1.2% in August and was just 0.1 percentage point higher than in October 2016. In month-on-month terms, total CPI rose 0.1%, thanks to rises of 0.7% in energy and 0.5% in food, but core CPI dipped 0.1% and services declined 0.5%.

Another rich plate of U.S. indicators arrive today. Industrial production, the Philly Fed manufacturing index, import prices, the National Home Builders monthly housing index, and weekly jobless insurance claims get reported later. Yesterday’s menu of U.S. data included a respectable 0.2% further rise of retail sales (+4.6% on year), October consumer prices (which rose 0.1% on month and 2.0% on year), real weekly average wages (which dipped 0.1% on month and rose just 0.4% on year versus 0.8% in the year to October 2016), and Treasury-compiled outflows. America’s net long-term inflow in August-September soared to a whopping $154 billion.

Italy posted a wider EUR 4.93 billion trade surplus in September.

French ILO-basis unemployment swelled to 9.7% last quarter from 9.5% in 2Q.

Czech PPI inflation declined 0.6 percentage points to 1.1% in October, and Austrian CPI inflation eased to 2.2% from 2.4%.

Wholesale turnover in South Africa was 9.1% weaker in September than a year earlier.

Senior Deputy Governor Wilkins of the Bank of Canada said low inflation and weak wage pressure will enable policymakers to be cautiously prudent as they steer interest rates higher.

Indonesia’s central bank interest rate structure was not changed at this month’s Board meeting. The 4.25% 7-day reverse repo rate will continue to be flanked by a 3.5% overnight deposit facility rate and a 5.0% lending facility rate.

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

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