Rebound in China’s Stock Market and Peripheral Ezone Sovereign Debt

October 22, 2018

China’s stock market rose 4.1%, endowing other bourses in Asia and Europe in its wake. Following Friday’s disappointing Chinese GDP report, Beijing announced tax cuts and intentions to enact other stimulus measures. The yuan is 0.2% softer against the dollar.

In other stock markets, share prices climbed 2.8% in Hong Kong, 1.1% in Indonesia, 0.6% in Taiwan, 0.5% in Singapore, 0.4% in Japan and 0.3% in South Korea. In Europe so far, equities are up 1.1% in Greece, 0.7% in Italy, 0.6% in Great Britain, 0.5% in Germany, 0.3% in Italy and Switzerland and 0.2% in France.

The Moody’s Investors Service took away its prior warning of a possible imminent downgrade in Italian debt. In response, ten-year sovereign debt yields settled back six basis points in Italy and Greece and 5 bps in Portugal and Spain but firmed a basis point in Germany.

It appears that British Prime Minister Theresa May is willing to accept softer Brexit conditions than she indicated previously. The 10-year gilt is a basis point lower, and sterling has fallen 0.3% against the dollar.

Australia’s stock market bucked the trend in other countries, falling 0.6% today. Prime Minister Morrison’s government is looking increasingly vulnerable, after a bad showing by his Liberal Party in a by-election held in Sydney. An official from the Reserve Bank of Australia, DeBelle, said he’s keeping an open mind regarding what constitutes full employment in that country.

New Zealand observed Labour Day today, so its stock market was closed.

The dollar has traded higher by 0.3% against the yen and sterling, 0.2% relative versus the Aussie dollar, kiwi, peso and yuan, and 0.1% vis-a-vis the euro and Swiss franc. The loonie strengthened 0.2% against the USD.

Gold slid 0.2% to $1,226.50 per ounce, but industrial metal prices like copper mostly strengthened. WTI oil is up 0.1% at $69.20 per barrel.

The euro area revised 2017 deficit-to-GDP and debt-to-GDP ratios. For the whole bloc, the deficit equaled 1.0% of GDP last year, down from 1.6% in 2016, 2.0% in 2015 and 2.5% in 2014. Germany had a 1.0% of GDP surplus. Deficits in other key economies were at 3.1% in Spain, 2.7% in France, 2.4% in Italy, but just 0.2% in Ireland. Greece had a 0.8% of GDP fiscal surplus, but it’s debt ratio still topped the leader board at a whopping 176.1%. Italy’s debt ratio was 131.2% last year, and France and Spain had similar debt ratios of 98.6% and 98.1%. German debt, by comparison, equaled 63.9% of GDP.

Japan’s all industry index rebounded 0.5% in August from a 0.2% dip in July, leaving the 12-month rate of increase in this monthly proxy of GDP unchanged at 0.9%.

The Greek year-to-August current account deficit of EUR 0.91 billion was 75% bigger than a year earlier.

Irish producer prices again fell on month, dropping 2.3% in September after declines of 1.3% in August and 1.7% in July. PPI deflation deepened to 2.6% from 0.9% in August and 0.8% in July.

The Chicago Fed National Activity Index will be reported later this morning. Leading French and Australian economic indicators are due also.

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


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