Dollar Down, Stocks Mostly Up Overseas

November 1, 2018

The dollar fell overnight on this first day of November by 1.5% against the kiwi, 1.3% relative to the Australian dollar, 1.0% vis-a-vis the peso and sterling, 0.7% versus the euro, 0.6% against the Swiss franc, and 0.4% relative to the loonie and yuan. The yen, in contrast, remains unchanged against the dollar.

Share prices in the Pacific Rim climbed 1.4% in Singapore, 1.9% in Hong Kong, 1.1% in New Zealand, 0.4% in Taiwan, 0.3% in South Korea, 0.2% in Australia, and 0.1% in China. Again, Japan’s market marched to a different drum, as the Nikkei fell by 1.1%. European stock markets have thus far advanced 0.8% in Spain and Germany, 1.0% in Italy, and 0.4% in the U.K., Switzerland, and France. Greek share prices have lost 0.9%, by contrast.

Among commodity prices, gold is trading 0.8% higher, while WTI oil has dropped 0.7%.

Ten-year sovereign debt yields firmed by 2 basis points in Germany, the U.K. and the United States but are down 7 bps in Italy and a basis point each in Japan, Greece, Portugal, and Spain.

Today is November 1st, All Saints Day in several European countries which means that manufacturing purchasing manager surveys that ordinarily get released on the first day of the month have been delayed in some instance.

Today also is the 40th anniversary of the unveiling of a dollar rescue package during the Carter Administration that featured a one percentage point hike in the Fed’s interest rate, the announcement of Carter bonds to be issued, and the assembly of massive resources to finance stepped-up currency market intervention. The plan achieved initial success, but a true turnaround in the beleaguered dollar would have to wait until late 1979 after the Fed adopted a policy of quantitative monetary tightening.

Japan’s manufacturing purchasing managers index rose to a four-month high of 52.9 in October from 52.5 in September. The result nonetheless was a bit lower than its preliminary indication.

The privately compiled Chinese manufacturing PMI printed 0.1 point higher at 50.1, still signaling near stagnation, and was accompanied by an 11-month low in business expectations.

Elsewhere in Asia, manufacturing PMI readings fell in October to a 23-month low of 48.9 in Thailand, a 29-month low of 48.7 in Taiwan, a 3-month low of 50.5 in Indonesia, a 5-month low of 49.2 in Malaysia, and a 2-month low of 51.0 in South Korea. Higher PMI scores were recorded in Vietnam (a 3-month high of 53.9) and India (4-month high of 53.1).

Turning to Europe,

  • The British manufacturing purchasing managers index plunged 2.7 points to to 51.1, signaling the slowest improvement in conditions in 27 months since July 2016.
  • The Dutch factory PMI reading of 57.1 after 59.8 the month before was a 21-month low.
  • Ireland’s PMI dropped 1.4 points to a 7-month low of 54.9.
  • The Greek PMI of 53.1 was its lowest level in 6 months.
  • The Czech PMI fell 0.9 to 52.5, a 23-month low.
  • The Swiss PMI of 57.4 remained well above the 50 line of separation between deteriorating and improving conditions but constitutes a 17-month low.
  • Sweden’s PMI slid 0.2 points to a 2-month low of 55.0.
  • But Russia’s manufacturing PMI increased by 1.3 points to a 6-month high of 51.3.
  • And the Norwegian manufacturing PMI ticked up 0.3 to a 2-month high of 56.0.

The two Australian manufacturing PMI measures diverged. The CBA-compiled PMI rose 0.5 to a 4-month high of 54.5, while the AIG index edged down 0.4 points to a 2-month low of 58.3.

In South Africa, the ABSA-compiled PMI slumped deeper into contractionary territory, dorpping 2.1 points to a 15-month low of 42.4.

Britain’s Nationwide house price inflation index was unchanged on month in October and recorded the smallest 12-month rate of increase (just 1.6%) since May 2013.

Swiss consumer confidence in the 3-months to October had a minus six reading after -7 in the prior three-month period but still well below sentiment late in 2017 and early this year.

Swiss CPI inflation of 1.1% in October continues a pattern of narrow fluctuation, having ranged only between 1.0% and 1.2% for the past six months. Core CPI held steady at a mere 0.4%.

New Zealand business confidence improved for a third straight month to a 5-month high in August.

Australia recorded a considerably larger-than-expected A$ 3.017 billion trade surplus in September. In the four quarters ending in 3Q18, Aussie export price inflation accelerated to 14.0%. Import price inflation of 9.8% also represented an acceleration.

South Korean CPI inflation ticked up 0.1 percentage point to a 13-month high of 2.0% in October and was associated with a core inflation rate of 1.1%, which was a tad less than in September. South Korea’s trade surplus narrowed to a 4-month low of $6.55 billion in October. The year-to-date trade surplus of $61.6 billion was 24.9% smaller than in January-October 2017.

Retail sales in Hong Kong were just 2.4% greater than a year earlier, the smallest on-year rise in 15 months. Year-to-date sales remained 11.1% above the year-earlier total.

CPI inflation in Indonesia accelerated to 3.16% in October from 2.88% in September.

The Bank of Brazil’s Selic interest rate was left unchanged at 6.50% as had been expected. Between October 2016 and March 2018, such had been slashed by 725% to a record low. CPI inflation reaccelerated to 4.55% in September. Brazil continues to experience a weaker-than-assumed recovery according to a released statement, but the country faces both domestic and external challenges. The statement reiterates “that economic conditions still prescribe stimulative monetary policy, i.e., interest rates below the structural level. This stimulus will begin to be removed gradually if the outlook for inflation at the relevant horizon for the conduct of monetary policy and/or its balance of risks worsen.” The central bank has an inflation target of 3-6%.

The Bank of England’s Monetary Policy Committee also left its base rate level (0.75%) and other policy settings unchanged by a unanimous vote. Its statement asserts, “that the current stance of monetary policy remained appropriate. The Committee also judges that, were the economy to continue to develop broadly in line with the November Inflation Report projections, an ongoing tightening of monetary policy over the forecast period would be appropriate to return inflation sustainably to the 2% target at a conventional horizon. Any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent.”¬† A new quarterly Inflation Report was also released today.

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