Thursday’s Menu: Central Bank Decisions, Price Data, Hurricane Florence, and a U.S. Offer for a New Round of High Level Trade Talks with China

September 13, 2018

The Central Bank of the Republic of Turkey lifted its key 0ne-week repo rate by a greater-than-expected 625 basis points to 24.0%. The dollar lost 2.8% against the lira afterward and has also fallen 1.0% against the Russian ruble, 1.6% relative to the South African rand, and 0.6% versus the Mexican peso.

The Bank of England’s Monetary Policy Committee agreed not to change its 0.75% Bank Rate but retained a projection of likely gradual yet limited rate increases in the future. There had earlier been 25-basis point increases taken last November and in August. Today’s decision was unanimous.

The Governing Council of the European Central Bank also left its interest rate structure unchanged, i.e. a zero percent refinancing rate flanked by a negative 0.40% deposit rate and a +0.25% marginal lending facility rate. No changes were made in its asset purchase program that plans EUR 30 billion of net acquisitions this month followed by EUR 15 billion per month in October, November, and December. All things being as expected, the purchases will then end but reinvestment of maturing principal will continue for an extended period. Interest rates are expected to stays at current levels at least through the summer of 2019.

A 0.1% on-month and 2.0% on-year rise in German consumer prices was confirmed for the month of August. 2.0% matches July’s 3-month low. In the year to August, energy prices climbed 6.9%, food went up 2.5%, and all other consumer prices collectively rose 1.3%, down from 1.4% in the year to July.

French CPI inflation stayed at July’s 2.3% in August.

Indian CPI inflation slowed a half percentage point in August to a 10-month low of 3.69%.

The Swiss PPI/import price index was unchanged on month and up by a 3-month low of 3.4% on year in August.

Japanese producer prices were unchanged on month in August but matched July’s 7-month on-year high of 3.0%.

Polish producer price inflation remained level at 2.0% in August.

Irish CPI inflation edged 0.1 percentage point lower to 0.7% in August.

New Zealand food prices fell 0.5% on month and by 0.1% on year in August.

U.S. consumer prices rose 0.2% last month, resulting in a 12-month advance of 2.7%, a 4-month low and down from 2.9% in both June and July. Core CPI inflation excluding food and energy also declined, reaching a 3-month low of 2.2% after 2.4% in July. Energy prices were 10.2% greater than in August 2017, and food recorded a 1.4% 12-month rate of increase.

A 3-day mega-storm will be making landfall in the Carolinas late tonight or early Friday. It’s been downgraded to a Cat 2 storm (still meaning over 100 MPH winds). But the storm surge will be typical of a Cat 4 event, and rainfall will approach Harveyesque proportions.

Stock markets today have a better tone. A sharp escalation of U.S. tariffs still looms as a potentially imminent threat but hasn’t yet happened. Instead, the U.S. has invited high level trade talks to avert this possibility. Share prices rebounded 2.8% in Hong Kong, 1.2% in China, 1.0% in Japan and Indonesia, and 0.8% in India. In Europe, equities are up so far today by 0.8% in Germany, 0.6% in France and Spain, 0.2% in Italy and 0.3% in Switzerland. However, the British Ftse shows a 0.1% dip.

Overnight movement in the dollar has been limited to rises of 0.3% against the yen and kiwi and 0.1% versus the loonie and yuan. The dollar is unchanged against the euro and sterling, and down 0.3% relative to the Aussie dollar and 0.1% vis-a-vis the Swiss franc.

Ten-year U.S. Treasury and British gilt yields edged up a basis point, while their German bund and Japanese JGB counterparts are unchanged.

Among commodities, gold is flat, copper has firmed 0.6%, but WTI oil is 1.5% weaker.

In other key data released today,

  • Australia’s jobless rate held at 5.3%, as employment jumped 44K, its second large advance in three months.
  • Japanese core private domestic machinery orders recovered 11.0% in July following an 8.8% monthly contraction in June. That left such 13.9% higher than in July 2017.
  • Swedish real GDP expanded 0.8% last quarter and was 2.5% higher than in 2Q17.
  • Factory output in Hong Kong was 1.6% greater in the second quarter than a year earlier. That marks a 4-year high and was four times larger than the 0.4% on-year rise in 2Q17.
  • The Royal Institute of Chartered Surveyors’ British housing price index fell back to a 2-month low of 2% in August.
  • South African wholesale turnover in July was just 0.1% larger than a year earlier but 0.3% above June’s level.
  • New U.S. jobless insurance claims rose only 204K last week, even less than the 205K in the prior week, resulting in a 4-week average increase of merely 208K.

Still to come: the U.S. federal budget balance in August and Treasury-compiled capital flows with the rest of the world. Peru’s central bank will reveal its latest interest rate decision.

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



Tags: , , , , ,


Comments are closed.