Eye on The Fed, Alabama, and Some Data Releases

December 12, 2017

The Federal Open Market Committee begins a 2-day policy review that almost surely will lead to the third interest rate hike of 2017. The first two moves were enacted in March and June. This will be the final FOMC meeting presided over by Janet Yellen. A press conference is scheduled tomorrow, and new forecasts will be unveiled.

Alabama’s special senatorial race today is a microcosm of the polarizing political forces in America and has important implications for the finely balanced senate on key issues.

The dollar is mostly somewhat softer this Tuesday, with declines overnight of 0.4% against the Aussie currencies, 0.3% relative to the kiwi, 0.2% vis-a-vis the euro and 0.1% against the yen.

In the Pacific Rim, share prices dropped 1.3% in China, 1.0% in Hong Kong, and 0.7% in India, but the U.S. Dow Jones Industrial Index opened higher after data reports showing stronger small business sentiment and PPI inflation. The NIFB small business sentiment index jumped 3.7 points to a reading of 107.5, best since July 1983. Producer prices posted a third consecutive monthly 0.4% advance, which lifted the 12-month rate of increase by 0.3 percentage points to 3.1%. Core PPI inflation stayed level at 2.4%.

Share prices in Europe are up 0.4% in France but down 0.4% in Spain. The German Dax and British Ftse rose by 0.1% and 0.3%.

Ten-year U.S. Treasury, German bund and British gilt yields moved two basis points higher. British CPI inflation accelerated, while the ZEW index of financial market sentiment toward Germany slipped a bit.

Gold is 0.3% softer at $1,243.1 per ounce. WTI oil edged down 0.2% to $57.87 per barrel.

British CPI inflation of 3.1% in November was the highest since March 2012. But core CPI was unchanged at 2.7%, and RPI dipped back to 3.9% from October’s 4.0% reading. Producer output price inflation climbed 0.4 percentage points to 3.0%, and producer input price inflation accelerated even more sharply to 7.3%. The government’s official house price index posted the smallest 12-month advance (4.5% in October) in six months.

The ZEW Institute December sentiment readings for Germany and the whole euro area showed lessening confidence in the future but stronger perceptions about current conditions. The German expectations index fell 1.3 points to 17.4, which remains below its long-term average. Brexit appeared to be a negative factor.

Japan’s tertiary index of service sector activity posted a better 0.3% month-on-month increase, lifting the on-year advance to a still small 1.1%. Japanese domestic corporate goods prices, akin to a PPI, went up 0.4% on month in November and 3.5% on year. On-year gains of export prices (6.8%) and import prices (10.2%) were each less than posted in October.

House prices in Australia slipped slightly on quarter and recorded a smaller 8.3% advance from a year earlier in the third quarter of 2017. The National Australia Bank’s monthly measures of business conditions (12) and business confidence (6) were 9 and 3 points lower in November than their October readings.

Mexico’s index of leading economic indicators tumbled 0.9% in October, while Germany’s LEI that month rose 0.5%.

Mexican industrial output dipped 0.1% in October and was 1.1% below its year-earlier level.

In the year to November, consumer prices rose 2.0% in Sweden, 3.2% in Romania, 4.88% in India, but just 0.2% in Cyprus.

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


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