All Eyes on the Senate Judiciary Committee

September 27, 2018

The testimonies of Kavanaugh and Blassey Ford start at 10:00 EDT (14:00 GMT).

This has been a busy day already from a central banking and data release standpoint.

The dollar overnight firmed by 0.7% against the Swiss franc, 0.6% relative to the Aussie dollar, 0.5% vis-a-vis the euro and loonie, 0.3% against the kiwi, 0.2% versus the yen and 0.1% against sterling, the yuan and the peso.

Share prices in the Pacific Rim fell 1.0% in Japan and New Zealand, 0.6% in India, and 0.5% in China and Hong Kong but rose 0.7% in South Korea and 0.6% in Taiwan. Share prices in Europe are down 0.7% in the U.K., 0.5% in Switzerland, and 0.4% in Spain but flat in Germany and France.

Ten-year German bund, British gilt and Japanese JGB yields slid a basis point, but the U.S. Treasury edged a basis point higher.

Oil is 1.1% firmer at $72.34 per barrel. Gold fell 0.2%.

Central banks in New Zealand and Taiwan left key interest rates unchanged.

Central banks in The Philippines and Indonesia tightened monetary policies.

  • Officials at Bangko Sentral ng Pilipinas lifted the overnight reverse repo rate by 50 basis points to 4.5% in order to counter rising inflation and higher expected inflation, which have been in part fueled by the peso’s depreciation. The key interest rate was also raised a half percentage point in August and by 25 bps each in June and May. These were the first tightenings since 2004.
  • Bank Indonesia’s seven-day reverse repo rate has been increased by another 25 basis points to 5.75%. This was the fifth hike in six meetings. The rate was raised by 25 bps on two occasions in May as well as once in August and by 50 basis points at the July meeting. Similar to the Filipino instance, rising inflation and rupiah depreciation have been reinforcing one another.

The final estimate of U.S. GDP last quarter showed an unrevised 4.2% annualized rate of growth, associated with a 2.9% rise from a year earlier. Consumption, non-residential investment, net exports, and government spending enhanced growth, while inventories and residential spending exerted drags. The core PCE price deflator is hovering near 2.0%, the Fed’s target.

The advanced U.S. merchandise trade deficit in August of $75.8 billion was 5.2% wider than in July. High trade deficits are driving Trump’s tariff policy.

U.S. durable goods orders leaped 3.5% in August and were 13.1% greater than a year earlier.

The four-week average of U.S. new jobless insurance claims edged marginally higher to 206.25K.

Economic sentiment in the euro area fell 0.7 points to a 15-month low reading of 110.9 in September. Industrial sector sentiment and consumer confidence were at 14- and 16-month lows, but sentiment improved in construction, retail and services.

German CPI inflation accelerated 0.3 percentage points to 2.3% in September (2.2% harmonized) with both food and energy price inflation climbing to 7.7% and 2.8%.

German consumer confidence rose to a 2-month high in October.

Finnish and Portuguese consumer sentiment fell in September to 21- and 17-month lows. Swedish consumer confidence improved to a 7-month high, by contrast.

Italian consumer confidence climbed 0.7 points to a 2-month high of 116.0, but business sentiment slipped 0.2 points. Italian PPI inflation in August of 4.4% was the highest since February 2012.

Icelandic consumer price inflation in September of 2.7% reversed the 0.1 percentage point dip seen in August.

On-year M3 money growth in the euro area decelerated to 3.5% in August from 4.0% in July and 4.5% in June. Slower M1 was the cause. Bank lending growth to firms and households each edged slightly higher.

Spanish business sentiment recovered to a 2-month high in September but remained weak with a reading of minus 3.7.

South African producer price inflation accelerated to a 21-month high in August of 6.3%. It was as low as 3.7% five months earlier.

Chinese industrial profits in August were just 9.2% higher than a year earlier. That was the smallest on-year increase since March and down from 16.2% in July and 20.0% in June.

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



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