The Usual Month-End Flood of Economic Data but Little Overnight Movement in the dollar

October 31, 2018

The dollar is unchanged against the euro and loonie, 0.1% firmer relative to the yuan and Swiss franc, 0.2% higher vis-a-vis the yen, Aussie dollar and kiwi. Somewhat larger moves have happened against sterling (a drop of 0.5%) and the Mexican peso (a rise of 0.5%). Gold fell 0.6%.

Following the rebound Tuesday of U.S. stocks, share prices in the Pacific Rim rebounded 2.9% in Taiwan, 2.2% in Japan, 1.9% in Hong Kong, 1.8% in Singapore, 1.6% in India, and 1.4% in New Zealand and China. Equities in Europe thus far show daily advances of 2.2% in France, 1.4% in the U.K., 1.2% in Switzerland, 1.3% in Germany, 1.1% in Spain, but just 0.5% in Italy.

Ten-year sovereign debt yields have climbed mostly but fallen in the fiscally vulnerable members of the euro zone like Italy, Greece and Spain.

WTI oil has firmed 0.4%.

The Bank of Japan left its policy settings unchanged. These include a negative policy short-term rate of -0.1%, a 10-year JGB yield goal of around zero percent enforced with JGB purchases of about 80 trillion yen a year, and forward guidance that endows a certain amount of flexible discretion in daily operations and a pledge to continue aggressive quantitative and qualitative monetary stimulus with yield curve control for as long as necessary to secure the 2.0% core CPI inflation target. That is expected to entail letting core inflation exceed 2.0% for a while until officials are confident that the target will be maintained even as policy stimulus is throttled back. Officials qualitatively maintained the confident economic prognosis of continuing above-potential economic growth and a gradual rise of inflation toward target but conceded that the return to target is evolving more slowly than expected. The 4 hour 11 minute Board meeting over two days was accompanied by the release of a quarterly Outlook for Economic Activity and PricesĀ with updated forecasts of marginally less growth and a more significant downgrade to the projected path of inflation.

Officials at the Central Bank of Brazil are also holding a monetary policy meeting today.

A plentiful menu of economic data was reported this final day of October. Highlights include:

Disappointing Japanese industrial production, which fell by a much larger-than-expected 1.1% in September. Industrial shipments sank 2.9%, so the ratio of inventories to shipments jumped 7.8% on month and 11.5% on year. Comparing 3Q to 2Q, industrial production dropped 1.6% on quarter and 0.2% on year.

Other Japanese data showed a 21-month low in consumer confidence during October and year-on-year declines of 1.5% in housing starts and 0.3% in motor vehicle output. Construction orders were 1.0% greater than a year earlier, however.

Australian CPI inflation slowed 0.2 percentage points last quarter to 1.9%. Two measures of Australian core inflation were at a lower-than-forecast 1.7-1.8%.

China’s government-authorized purchasing managers indices for October were at a 27-month low of 50.2 in the case of manufacturing and a 14-month low of 53.9 for services. China appears to be experiencing broadly slower economic activity.

The latest measures of on-year producer price change in the Philippines and Malaysia each showed a dip of 0.2%. South Korean industrial production posted an enormous 8.4% on-year plunge in September, its biggest such drop since February 2013, and retail sales were just 0.5% greater than a year earlier, the smallest rise in 11 months.

Euroland consumer price inflation as expected edged up 0.1 percentage point to 2.2% in October, with core inflation advancing to a 3-month high of 1.1%. Energy accelerated to 10.6%.

Euroland’s jobless rate was at 8.1% in September, matching July and August results but down from 8.9% in September 2017.

German retail sales volume in September rose much less than forecast — just 0.1% after back-to-back declines in July and August. Sales were 2.6% smaller in September than a year earlier, and the January-September on-year sales increase was merely 1.0%.

Spanish GDP grew 0.6% for a third straight quarter and posted an unchanged 2.5% rise from a year earlier. Prior to the second quarter, on-year growth had not been so low since late 2014.

French CPI inflation held steady at 2.2% in October, but Portuguese CPI inflation settled back to 1.0% from 1.4% in the prior month.

Italian CPI inflation rose by a smaller-than-forecast 0.2 percentage points to 1.6% in October. Italian unemployment rose 0.3 percentage points to 10.1% in September.

The Swiss ZEW expectations measure of investor sentiment toward the Swiss economy fell sharply again to a reading of -39.1 in September from –3.08 in August, -14.3 in July and +28 last April.

British consumer confidence measured by GFK slipped a point to a reading in October of -10, matching this year’s low seen also in February and then again in July. U.K. shop price inflation compiled by the BRC was negative 0.2% in October, a three-month low.

Turkey recorded a $51.1 billion trade deficit in January-September, 5.2% smaller than a year earlier.

South Africa’s trade balance swung back to a ZAR 2.95 billion deficit in September from a ZAR 8.77 billion surplus the month before. There have been 4 monthly deficits and 5 surpluses so far in 2018, for a year-to-date surplus of ZAR 2.66 billion.

Canadian PPI inflation accelerated to 6.2% in August from 5.7% in July. Monthly GDP and industrial production each grew merely 0.1% in August, which was down from the pace in July.

ADP’s measure of U.S. private-sector jobs growth in October is 227K, some 40K greater than analysts were anticipating. The Labor Department reports the monthly jobs data tomorrow. Meanwhile, the Labor Department’s quarterly employment cost index advanced 0.8% in the third quarter versus 2Q and by an unchanged 2.8% on year. Some 20 minutes after today’s open, the DOW is up 1.1% and has moved back above 25,000.

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

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