Long-Term Interest Rates Climb Higher All Around the World

October 4, 2018

Ten-year sovereign debt yields extended their recent advance by 13 basis points in Greece, 8 bps in Great Britain, 6 bps in Italy, Germany and The Netherlands, 5 bps in France, 3 bps in U.S. Treasury futures, and 2 basis points in Japan. Fed Chairman Powell expressed strong confidence in an interview yesterday that solid U.S. growth will continue. The dollar’s strength and Fed tightening has put pressure on inflation around the world. Turkish inflation, for example, is at a 15-year high, and WTI oil is now above $76 per barrel versus the high $50s last February and mid-$20s in February 2016.

The FBI inquiry into Supreme Court nominee Kavanaugh is apparently almost over amid reports that its scope had been curtailed by the White House. A final senate vote could come as early as Saturday.

Share prices fell sharply overnight in the Pacific Rim, losing 2.2% in India, 2.0% in Hong Kong, 1.9% in Indonesia, 1.3% in Taiwan, 1.1% in Singapore and 0.6% in Japan. Weakness spilled over into European trading, where equities are down so far by 1.1% in France and the U.K., 0.7% in Switzerland, 0.5% in Italy and 0.3% in Germany.

The dollar has firmed 0.6% and 0.5% against the Australian and New Zealand dollars but shows net overnight change relative to the euro, yen, sterling, loonie, or Swiss franc. China remains closed all week for its National Holiday.

The German construction purchasing managers index fell 1.3 points to a 2-month low of 50.2.

India’s service-sector PMI (50.5 in September) and composite PMI that month of 51.6 constitute 4-month lows. Input price inflation hit a 10-month high according to the PMI survey.

Hong Kong’s private PMI fell 0.6 points to a 3-month low of 47.9. It’s been below the 50 level that separates improvement from deterioration for several consecutive months.

The CBA services PMI for Australia increased from a record low of 51.8 in August to a 2-month high of 52.2 in September. This lifted the composite PMI including manufacturing and services to a 3-month high of 52.5.

Cypriot CPI inflation accelerated sharply in September to 3.13% from 2.54% the month before.

But Dutch CPI inflation, which was near a 5-year peak in August of 2.1%, slipped back to 1.9% last month.

New car sales in the U.K. during September were 20.5% lower than a year earlier, reversing a 23.1% on-year spike in August and leaving sales some 1.3% higher than a year before in the third quarter as a whole.

Australia’s goods and services trade surplus widened slightly to A$ 1.604 billion in August from A$ 1.548 billion in July but was well below a surplus of A$ 2.119 billion in June.

The Reserve Bank of India Board is holding a scheduled monetary policy review today.

U.S. factory orders data and weekly jobless insurance claims will be reported later today.

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

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