U.S. Federal Government Shutdown at Midnight Still Possible
January 19, 2018
Talks to avert a U.S. fiscal shutdown at the end of today have degenerated into a 3-way circus. House Republicans passed a short-term fix that excludes DACA but enhances CHIP child support. President Trump’s tweets endorse the CHIP enticement only as part of a long-term solution and continue to insist on funding for the Mexican border wall. Democrats will only support a deal that keeps DACA. Markets expect somebody to flinch, but who and when? The uncertainty is dampening market action.
The dollar has risen 0.3% against the kiwi and 0.1% versus the peso and sterling. The dollar fell overnight by 0.3% against the yen, 0.2% versus the yuan and Aussie dollar and 0.1% vis-a-vis the euro, while holding unchanged versus the loonie and Swiss franc.
The ten-year German bund yield rose two basis points, and the 10-year British gilt and U.S. Treasury yields are a basis point firmer.
Comex gold strengthened 0.6%, while WTI oil slipped 0.6%.
Share prices in Asia advanced by 0.9% in Hong Kong, 0.8% in Singapore, 0.7% in Taiwan and India, 0.4% in China, and 0.2% in Japan. Gains in Europe so far amount to 1.0% in Italy and Germany, 0.5% in France and Spain and 0.3% in Great Britain.
German producer price inflation slowed to a 5-month low of 2.3% in December. While energy posted a 0.6% monthly rise, non-energy producer prices only edged 0.1% higher from November.
Swiss domestic producer prices also edged just 0.1% higher on month in December, leaving its 12-month increase at a mere 0.5%. However, higher import prices (up 0.4% on month and 4.6% on year) caused the combined PPI/import price rate of inflation to remain at 1.8% in December, which is twice as much as the average increase in all 2017.
The seasonally adjusted current account surplus in the euro area widened to EUR 32.5 billion in November from EUR 30.3 billion in October. Exports and imports each recorded monthly increases of between 2% and 3%. The non-seasonally adjusted surplus over the 12-months to November, EUR 388.6 billion, was 2.5% wider than that in the previous 12-month period. The surplus equaled a robust 3.5% of GDP.
New Zealand’s manufacturing purchasing managers index slumped abruptly in December to a five-year low of 51.2 from 57.7 in November, 57.3 in October, 57.5 in September and 57.9 in August. But being still above 50, the value implies continuing positive growth.
Jens Weidmann, President of the German Bundesbank and an aspirant to be the next ECB president, asserted that Germany’s budget surplus and large current account surplus reflect demographic factors and therefore cannot be trimmed by more fiscal pump-priming.
The Dutch 4.4% jobless rate in December was a full percentage point below its level at the end of 2016.
The Reuters/U. Michigan measure of U.S. consumer sentiment will be reported later today.
Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland current account, German PPI, U.S. government shutdown threat
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