U.K., China, and Saudi Arabia in the News

October 16, 2018

British regular pay inflation accelerated 0.2 percentage points to 3.1% in June-August, the highest pace since the start of 2009. This has generated speculation about another Bank of England tightening and lifted the pound 0.5% above yesterday’s closing level.

Chinese consumer prices recorded their second straight monthly advance of 0.7% in September, lifting the 12-month inflation rate by 0.2 percentage points to a 7-month high of 2.5% even as PPI inflation settled back 0.5 percentage points to a 5-month low of 3.6%. This news was eclipsed, however, by reports that local governments in China may collectively have accrued off-balance sheet debts totaling almost $6 trillion. The yuan has depreciated 0.7% against the dollar since the national holiday at the start of October.

President Trump said he’s inclined to believe Saudi government denials of any role in the disappearance of  journalist Jamal Khashoggi.

The dollar has fallen 0.5% against the New Zealand dollar. New Zealand reported a 0.9% quarterly increase in consumer prices during the third quarter, lifting the on-year inflation rate by 0.4 percentage points to 1.9%, most since the third quarter of 2017.

But the dollar is steady against the euro in spite of greatly weakened investor confidence in the common currency area this month according to the latest ZEW Institute survey. Investor expectations sank 12.2 points to a new low for the move of minus 19.4 in October, having only crossed into negative territory last June. Current conditions, on the other hand, edged up to a 3-month high of 32.0. Regarding Germany, the reading for investor expectations in October of minus 24.7 followed a score of -10.6 in September and matched July’s result, which was the lowest since August 2012. The last time German expectations weakened as abruptly as now occurred in July 2016 following the surprising result of Britain’s Brexit referendum. ZEW Institute officials cited trade tensions, a less stable political situation in Germany, and fears of a hard Brexit for the latest swoon in investor confidence.

The dollar slipped 0.2% against the loonie but rose overnight by 0.1% versus the yen, Swiss franc and Aussie dollar.

Ten-year U.S., British and Japanese sovereign debt yields each edged up a basis point today. The comparable German bund yield is steady.

Among commodity prices, WTI oil fell 0.9%, and gold rose 0.2%.

Share prices in the Pacific Rim rose 1.3% in Indonesia, 0.9% in India, 0.6% in Australia and Hong Kong, 0.8% in Taiwan, and 0.3% in Japan but fell 0.9% in China and 0.5% in New Zealand. Equity markets in Europe show daily advances so far of 1.7% in Greece, 1.1% in Spain, 1.0% in Italy, 0.5% in Switzerland, 0.4% in Germany and 0.3% in Germany. The British Ftse has lost 0.3%, however.

German import price inflation remained steady in August at 4.8%, with energy posting a 33.2% 12-month rate of increase but all other import prices collectively climbing just 1.7%. Export price inflation accelerated 0.4 percentage points to 2.1%.

Euroland’s seasonally adjusted trade surplus widened in August by EUR 4 billion to match June’s EUR 16.6 billion. But the year-to-date unadjusted trade surplus of EUR 129.6 billion was EUR 10.8 billion smaller than a year earlier.

Italian industrial orders were only 0.9% greater in August than a year earlier. Italian CPI inflation slowed to 1.4% in September.

Hungary’s central bank policymakers are holding their monthly review of monetary policy today and are not expected to change key interest rates. The base rate has been at 0.90% since May 2016.

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

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