Between the State of the Union and Yellen’s Final FOMC Meeting

January 31, 2018

Reaction to President Trump’s first State of the Union address last night has been typically partisan. For good or bad, citizens have already solidified their impressions of him for however much longer he is their president.

The next big event will be the FOMC’s released statement at 14:00 EST (19:00 GMT). No press conference follows, and it’s the last decision of the Yellen era. The Fed is not expected to raise its fed funds target, but the statement may include guidance for markets to strongly expect an increase at the March meeting, which will be the first of the Jerome Powell era.

The dollar moved 0.4% lower overnight against the euro but rose 0.2% versus the yen. Sterling is unchanged on balance.

Back-to-back big daily losses in U.S. stocks on Monday and Tuesday following last week’s steep rise did not extend into early trading today. The DOW is up 0.8%, and the S&P shows a 0.4% advance. Elsewhere, equities fell 0.8% in Japan and are down 0.3% in Great Britain. The German Dax is unchanged. Hong Kong’s Hang Seng index rose 0.5%, and share prices moved up in China and Australia as well.

The 10-year treasury yield has firmed to a new high for the move of 1.72%. Its German and Japanese counterparts settled back a basis point.

Comex gold is trading 0.5% higher, while WTI oil slipped 0.2% to $64.39 per barrel.

CPI inflation in Australia returned to 1.9% last quarter after dipping from that level to 1.8% in the third quarter of 2017.

Japanese industrial production jumped 2.7% on  month in December and posted a 4.5% fourth quarter-0n-fourth quarter advance. Officials in the  prior month’s release upgraded their assessment of output and this time continued to appraise the trend as “picking up.”

Japanese consumer confidence remained steady in January at a reading of 44.7, which lies between November’s 44.9 and October’s 44.5 score.

Japanese housing starts (-2.1%) and construction orders (-8.1%) each were lower than year earlier levels in December, and both comparisons were less favorable than those in November.

Unemployment in the euro area stayed level at 8.7% in the final month of 2017 but was a full percentage point below the 9.7% jobless rate at the end of 2016.

Harmonized consumer price inflation in Euroland ticked down 0.1 percentage point to 1.3% in January from 1.4% in December and 1.5% in November. The year-earlier pace had been 1.8%. The culprit was energy. That component had an on-year price advance of just 2.1% in January 2018 but 8.1% in January 2017. Core inflation rose to 1.0% from 0.9% the month before and 0.9% as well in January 2017.

The U.S. quarterly employment cost index increased 0.6% on quarter and 2.6% on year. 2.6% matches the biggest on-year rise since 2008. The Chicago regional purchasing managers index slipped 2.1 points to a score of 65.7 in January, which still implies pretty robust activity.

Canadian monthly GDP and industrial production posted gains in November from October of 0.4% and 1.1%, respectively and were 3.5% and 4.6% greater than levels in November 2016. Canadian producer price inflation slowed to 2.2% in December (0.9% excluding oil products) from 2.7% in November.

German retail sales volume in December dropped back 1.9% on month following a 1.8% increase in November. There was a 2.3% rise in 2017, similar to the advance the year before. 25,000 fewer German workers were unemployed this month, depressing the jobless rate by 0.1 percentage point versus December.

The Swiss ZEW index of investor sentiment declined to 34.5 in January from 52.o in December. The UBS index of Swiss consumer confidence slid marginally to 1.69 in December from 1.73. That’s still a strong level.

Spanish CPI inflation of 0.5% in January was the lowest since September 2016.

French CPI inflation of 1.4% in January was slightly higher on December’s pace. French PPI inflation in December was also at 1.4%.

British motor vehicle output sank 3% last year, marking its first annual drop since 2009.

Italian unemployment in December of 10.8% was down from 11.8% at the end of 2016.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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