Only Marginal Net Dollar Movement on a Newsworthy Friday
December 22, 2017
The approaching Christmas holiday, which has some markets closing early today, appears to have muted changes in the dollar, which has moved up 0.3% against the loonie, 0.2% relative to the euro, Swissie, and peso, and 0.1% vis-a-vis the yen and kiwi while slipping 0.2% relative to the Aussie dollar, 0.1% against the yuan and staying flat versus sterling.
Stocks climbed mostly in Asia but have fallen 1.2% in Spain, 0.5% in France, 0.3% in Germany and 0.2% in the U.K..
The 10-year British gilt and Japanese JGB yields slipped two and one basis points.
West Texas Intermediate crude oil fell 0.7% to just under $58.00 per barrel, while gold edged marginally higher.
The Catalan legislative election, called by the national government to quell the independence vote, has backfired, throwing the separatist crisis back to square one. Three independent separatist parties captured 70 of 135 seats, while Spanish Prime Minister Rajoy’s People’s Party won only 3 seats. But the rub is that no single party has a majority alone, and the separatist parties are bickering and may not manage to form a stable coalition. Turnout was heavy at 82%.
Republicans in Congress avoided a shutdown but only that, as their accord covers only a month and failed to raise the debt ceiling or resolve any of the other contentious issues. The can has merely been kicked down the road to January 19.
U.S. data reported at 08:30 EST today were robust. Personal spending jumped 0.6% in November (0.4% in volume terms). Income went up 0.3%. The PCE price deflator’s measure of on-year inflation climbed 0.2 percentage points to 1.8%, and the core PCE deflator edged up 0.1 percentage point to 1.5%. Durable goods orders rebounded 1.3% in November (9% from a year earlier) following a 0.4% drop in October and a 2.4% upsurge in September.
Canadian GDP again disappointed, holding unchanged in October after a rise of 0.2% in September, a dip of 0.1% in August, and an uptick of just 0.1% in July.
Revised data show a 0.4% on-quarter increase in British real GDP in 3Q and upward revisions of on-year growth of 1.9% in 2Q17 and 1.7% in the latest quarter. Growth in the third quarter was powered by service sector activity. Britain’s current account deficit narrowed to GBP 22.8 billion in the third quarter from GBP 25.8 billion in 2Q. As a percent of GDP even before taking the coming hit from Brexit, such will be close to 4% and more than 1.5 percentage points greater than the relative size of the U.S. imbalance.
French GDP grew 0.6% for a third straight quarter in 3Q17 despite a 0.6 percentage point drag from net exports. Domestic demand and inventories each accounted for a tad more than a half percentage point of GDP growth. In separate releases, French producer price inflation accelerated a whole percentage point to 2.4% in November, and French consumer spending jumped 2.2% on month (1.2% on year), which is the largest monthly move in a year.
Italian consumer confidence leaped 2.2 points to a reading in December of 116.6, which is the most since January 2015. Business sentiment in manufacturing slipped 0.2 points to a 3-month low.
German consumer confidence improved to a 3-month high in January. German import price inflation, which had settled back to 2.6% in October from a 3.0% high in September, edged back to 2.7% last month. Import prices rose 0.8% on month after increases of 0.6% in October and 0.9% in September. The energy component leaped 6.6% on month and 19.8% on year, while non-energy import prices were tame with a monthly 0.1% uptick and a 12-month 1.1% rate of rise.
The Swiss index of leading economic indicators had by November already improved to an 89-month high and in December jumped 1.0-point further to a reading of 111.3.
Dutch GDP expanded 0.5% on quarter and 3.1% on year in 3Q, and the current account surplus widened over 20% on quarter to EUR 18.1 billion in the summer period.
In the year to November, Spanish, Finnish, Icelandic and Swedish producer prices went up by 3.1%, 3.6%, 1.8% and 2.7%, respectively.
On-year Danish GDP growth slowed to 1.5% last quarter from 2.7% in the second quarter of 2017.
The final U. Michigan/Reuters monthly U.S. consumer sentiment index for December printed at 95.9, a 3-month low and revised sharply downward from a preliminary reading of 96.8 measured two weeks earlier. What’s changed is the certainty of a tax overhaul in 2018, which Republicans are promising will spur consumption, investment and overall GDP growth. This is an early sign that consumers do not believe this spin and, in an economy where personal spending accounts for 70% of GDP, suggests that growth will underperform and the fiscal deficit will be even higher than predicted. December’s reading constitutes a 3-month low and 2.6 points below the U. Michigan consumer confidence level way back in January 2017 when President Trump was sworn in.
U.S. new home sales in November, on the other hand, beat analyst forecasts, leaping 17.5%. Even here, however, there is a overhanging cloud. Limits on the federal tax deductions that can be taken for mortgage interest and local property taxes, which will pose new challenges for residential housing going forward.
Still to come: Kansas City manufacturing index.
Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Catalan vote, French GDP, German import prices, UK current account