Stock Prices Heading South

September 11, 2018

Fears that the Sino-U.S. trade war is about to escalate sharply weighed on global stock markets.

Another concern is Hurricane Florence, a category 4 storm in the Atlantic that’s headed for landfall in the Carolinas sometime around Friday. Over 1 million people are fleeing their homes.

Today is the 17th anniversary of the Al Qaeda suicide attacks on the United States, even as Indonesia’s market is closed in celebration of the Islamic New Year holiday.

Share price losses in the Pacific Rim amounted to 1.3% in India, 1.2% in Hong Kong, 0.6% in Australia, 0.4% in Singapore and 0.2% in China, but Japan’s Nikkei was an exception with a rise of 1.3%. In Europe, stocks are down 0.8% in Germany, 0.7% in the U.K. and Italy, 0.6% in Spain, 0.5% in France and Greece and 0.3% in Switzerland.

There’s been little change in the dollar, which is down 0.2% against the Swiss franc and 0.1% versus the loonie but up 0.2% vis-a-vis the Aussie dollar and yuan and 0.1% relative to the peso, sterling, yen, euro and kiwi.

Ten-year U.S. Treasury, German bund and British gilt yields firmed two basis points.

WTI crude oil rose 0.4%. Gold is flat.

Argentina’s central bank, which jacked up its key interest rate to a globally high 60% after an emergency session at end-August, has a scheduled monetary policy review today but is not expected to tighten further.

The Japanese tertiary index, a measure of service sector activity edged up merely 0.1% in July following a 0.6% drop in June and a 0.3% uptick in May. Its 1.0% 12-month rate of rise was a tad under 1.1% in the first half of 2018 but a shade above calendar year increases of 0.8% in 2017, 0.7% in 2016, and 0.9% in 2015.

On-year growth in Japanese machine tool orders slowed more than in half to 5.3% in August, lowest in over a year and down from 48.8% way back in January. Japanese on-year M2 money growth remained subdued in August at July’s 2.9%. Such rose between 3.1% and 3.2% in the first half of 2018 after a 4.0% advance in 2017.

The German ZEW Institute published results from its September survey of investors. Attitudes improved regarding both Germany and the whole euro area, reflecting perhaps the tentative trade accord with the United States. The ZEW expectations index for all of Euroland climbed 3.9 points to a 4-month high and was accompanied by a 2-month high in perceived current conditions. Regarding just Germany, expectations improved 3.1 points to a 4-month high as well, and the current situation index was at a 3-month peak.

Euroland employment grew 0.4% last quarter, matching the first-quarter pace. Likewise, on-year growth in jobs was at 1.5% in each of the quarters in the first half of this year.

British labor statistics showed that jobless insurance claims went up 8.7K in August. The ILO-basis unemployment rate stayed at 4.0% in May-July, but jobs only edged up 3K in that period. Average weekly earnings growth accelerated a bit more than forecast but remained below 3.0% in May-July.

Russian GDP growth last quarter was revised upward by 0.1 percentage point to an on-year 1.9%, highest since the third quarter of 2017.

Australia’s intra-party coup that recently resulted in a replacement of Prime Minister Scott by Morrison took a toll on business confidence. The NAB measure of Australian business confidence fell 3 points to a 25-month low of +4 in August. Business conditions were not immediately affected, as that index rose 3 points to a 2-month high of +15. That’s well above its long-term average.

Manufacturing output in South Africa rose 1.6% in July, lifting the 12-month rate of rise sharply to 2.9%, which constitutes a 25-month high.

CPI inflation accelerated to 5.1% in August in Romania but remained steady at 3.4% in Hungary.

U.S. small business confidence jumped another 0.9 points to an NFIB reading of 108.8 in August, best so far this year. Small companies like deregulation.

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

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