Stocks Rebound Somewhat but Situation Still Unstable

November 13, 2018

With the G20 summit in Argentina on November 30 – December 1 fast approaching, U.S. Treasury Secretary Mnuchin and Chinese Vice Premier Liu Yandong discussed trade issues in a phone conversation, the first high-level U.S.-Sino talks of any sort on this explosive issue. A breakthrough was not reported, but some equity markets bounced higher after Monday’s thumping on the possibility that Trump and Xi will reach a truce by the summit.

Share prices currently show gains of 1.9% in Greece, 0.9% in Germany, 0.6% in France, 0.2% in the U.K. and 0.4% in Italy and Spain. Earlier in the Pacific Rim, stocks rose 0.9% in China, 0.7% in Hong Kong, and 1.0% in India and Indonesia. However, not all markets partook in this rally. Stocks fell 2.1% in Japan, 1.8% in Australia, 1.2% in New Zealand, 0.6% in Taiwan, 0.5% in Singapore and 0.4% in South Korea.

In another sign of concern about the global economic outlook, West Texas Intermediate crude oil extended its drop by 2.0% to $58.73 per barrel. There have been a record number of consecutive daily declines. Since October 3rd, oil has plunged 23%. Gold, meanwhile, dipped 0.2% this morning.

Ten-year sovereign debt yields are up 4 basis points in Italy and the U.K. and 3 bps in Greece. But the Japanese JGB and German bund are unchanged, and the U.S. 10-year Treasury yield has dipped a basis point, in contrast.

Investor confidence regarding the German economy rebounded 0.6 to a 2-month high of -24.1 in November according to the ZEW expectations index. That’s still weaker than this measures long-term average. Moreover, current conditions were marked lower to a 26-month low, and the ZEW expectations index for the whole euro area fell 2.6 points further to a reading of minus 22.0 this month versus -7.2 as recently as September. And Euroland’s current conditions index was nearly halved to 18.2 this month from a score of 32.0 in October.

German CPI inflation in October was confirmed to have risen to the preliminary estimate of 2.5%, most since September 2008. Energy prices rose 1.0% on month and 2.4% on year, while all other consumer prices collectively ticked up 0.1% on month and rose 1.7% on year.

British monthly labor statistics revealed a 20.2K rise in jobless claims in October associated with a 0.1 percentage point uptick in the jobless rate; a 0.1 percentage point rise in the ILO-basis unemployment rate to 4.1% after posting the lowest level since 1975 in both July and August; and some acceleration in average wage earnings in September to 3.2% for regular pay and 3.0% for pay plus benefits.

Switzerland’s producer price/import price combined index rose 0.2% on month in October, trimming its 12-month rate of rise to 2.3% from 2.6% in September and 3.4% in August. Domestic producer price were unchanged on month and 1.4% higher compared to October 2017.

Norwegian real GDP grew 0.6% last quarter, but year-on-year growth slowed sharply to 1.1%.

On-year growth in Dutch retail sales of 1.7% in September was the least since March and only half as much as recorded in August.

Portuguese CPI inflation slowed 0.4 percentage points to 1.0% in October.

Indian CPI inflation also slowed in October, reaching 3.31% versus 3.7% in September, 4.92% in June, and 5.21% at the end of 2017.

The National Australia Bank’s monthly measures of business confidence and business conditions┬áin Australia each fell in October by two points.

New Zealand food prices fell on month in October and were merely 0.6% above their year-earlier level.

The NFIB index of small business optimism fell to a 4-month low of 107.4 in October.

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

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