A Scramble to Tie Up Loose Ends

December 7, 2017

Politicians around the world are in a rush to complete unfinished business. Republicans in the U.S. House and Senate are negotiating a compromise of their separate bills to get a law signed before the Christmas recess. The process is proceeding informally and without Democratic Party involvement to compress the timetable. A risk continues that the federal government could shut down on Saturday if the debt limit is not extended. President Trump made good on a pledge to move to recognize Jerusalem, not Tel Aviv, as Israel’s capital; this has led to rising strains in the Middle East. The Brexit talks between Theresa May’s government and the rest of the EU remain stymied.

Japan’s Nikkei rebounded 1.5% overnight. Elsewhere in the Pacific Rim, stock markets fell 0.7% in China, 0.6% in Australia, 0.5% in South Korea and Indonesia but rose 1.1% in India and 0.6% in New Zealand. Share prices are down 0.5% in Switzerland and 0.2% in the U.K. but up 0.5% in Canada, 0.4% in Spain and Italy, and 0.2% in Germany. U.S. market indices show a marginal uptick.

The 10-year British gilt yield firmed 2 basis points, whereas the U.S. 10-year Treasury is off a basis point. No change has occurred in German bunds or Japanese JGBs.

Comex gold fell back 0.8%, as the trade-weighted dollar rose. WTI  oil is 0.8% stronger.

Revised data show an unchanged 0.6% quarterly rise in Euroland GDP in 3Q, with a 2.6% on-year rate of increase that is 0.1 percentage point higher than reported initially. Consumption, investment, and government spending grew more slowly than in the prior quarter, while net exports provided more impetus to growth. Inventories had a positive effect on economic growth. On-year GDP in the bloc’s four biggest economies was 3.1% in Spain, 2.8% in Germany, 2.2% in France and 1.7% in Italy.

German industrial production tumbled 1.4% in October, even more than September’s 0.9% drop, and this left October’s level 1.2% below the third-quarter average and 2.7% higher than in October 2016.

Swiss unemployment dipped 0.1 percentage point to 3.0% in November.

The British Halifax house price index in November experienced a 3.9% on-year increase, 0.6 percentage points less than in October and a 3-month low.

The French current account deficit narrowed to EUR 2.2 billion in October from EUR 3.1 billion in September.

Italy’s jobless rate of 11.2% last quarter was the same as that in 2Q17 but down from 11.6% in the first quarter.

Dutch CPI inflation edged up 0.2 percentage points to 1.5% last month.

The National Bank of Serbia’s key policy interest rate was kept at 3.5% after the latest central bank Executive Board meeting. Such had been reduced in October by 50 basis points, which was its first change in 15 months.

Japan’s index of leading economic indicators fell by 0.4 points to 116.5 in October, a 3-month low. The index of coincident economic indicators increased slightly, and officials said it’s trend is “improving.” Japanese international reserves rose $317 million to $1.165 trillion in November, while Chinese reserves advanced $10 billion to $3.119 trillion.

Australia’s Performance of Construction index climbed from 53.2 in October to a 4-month high of 57.5 in November. Australia had a A$ 1.05 billion trade surplus in October, while lay between September’s surplus of A$1.604 billion and August’s of $0.81 billion.

New U.S. jobless insurance claims of 236K last week were 2K less than in the prior week, producing a 4-week average of 241.5K per week versus 231.25K per week during the prior four weeks through November 4. The core trend has hovered around these historically low levels for several months, convincing policymakers that inflation will rise toward target and that interest rate normalization  mustn’t be halted until that happens. The U.S. IBD/TIPP Optimism index slipped to a 2-month low in October of 51.9 from 53.6 in September.

Canadian building permits jumped 3.5% in October after advancing 4.9% in the prior month. Another very strong Canadian PMI-IVEY reading of 63.0 was reported for November following 63.8 in October and 59.6 in September. In spite of these robust data findings, the C-dollar slipped somewhat more than 0.5% overnight.

Mexican CPI inflation accelerated to 6.63% last month from 6.37% in October.

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


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