Mixed U.S. Data, Lots of Other Data, and Ever-present Worries about The Mueller Investigation and U.S.-Sino Trade Strains

November 29, 2018

U.S. personal income rose 0.5% last month, a 7-month high. Personal consumption expenditures went up even more robustly, 0.6%, and the core PCE price deflator measure of U.S. inflation settled back 0.1 percentage point to 1.8%. On the other hand, U.S. pending home sales sank 2.6% to a near four-year low and recorded an on-year decline (6.7%) for a tenth straight month. Also, new U.S. jobless insurance claims unexpectedly rose 10K to 234K, most since the week ending May 19.

President Trump’s former lawyer, Michael Cohen, pleaded guilty to perjury when he said the candidate had not known about connections with Moscow.

At the summit in Buenas Aires that starts tomorrow, key trade talks between U.S. and Chinese negotiators are to take place. heTrump has dampened expectations that a breakthrough deal will be concluded.

U.S. share prices are down roughly 0.5%, trimming yesterday’s strong gains. Equity markets dropped 1.3% in China and 0.6% in Hong Kong but posted gains in New Zealand, Japan, India and Indonesia. In Europe, share prices have risen 0.6% in France and the U.K. but are little changed in Germany, Spain and Italy.

Ten-year sovereign debt yields have declined today by 7 basis points in Greece, 5 bps in the U.S. and Italy, 4 bps in France and Spain, 3 bps in the U.K., Germany and Canada, and 2 bps in Japan.

A mixed dollar overnight shows gains of 0.3% against sterling, 0.2% versus the Swiss franc, and 0.1% vis-a-vis the kiwi and loonie but losses of 0.3% against the peso and yen, 0.2% versus the euro, yuan and Aussie dollar.

WTI oil has rebounded 1.8% to $51.20 per barrel, and Comex gold is 0.3% firmer.

November became the 11th month of 2018 in which economic sentiment in the euro area weakened relative to the prior month, but the 109.5 reading was a half-index point higher than analysts were expecting. Industrial and retail sector confidence improved. Sentiment remained unchanged in construction and services, but consumer confidence weakened to its lowest reading this year. Euroland’s business climate index recovered 0.08 points to a 2-month high of 1.09.

Swiss GDP contracted 0.2% last quarter, the first quarterly decline since the final quarter  of 2016. Weakness was broadly based across components of aggregate demand and resulted in a 1.1 percentage point slide in on-year growth to 2.4%.

France confirmed the preliminary estimate of a 0.4% GDP quarterly rise in the third quarter but revised down on-year growth by 0.1 percentage point to 1.4%, which compares unfavorably with 2.3% growth in the year through 3Q17.

Swedish GDP also fell 0.2% on quarter in 3Q, resulting in the smallest on-year growth rate (1.6%) since the second quarter of last year.

German consumer  price inflation settled back 0.2 percentage points to 2.3% in November despite an acceleration in the energy component.

German labor market statistics revealed the lowest jobless rate (3.3%) since the  middle of 1980, a 16K slide in the number of unemployed workers, and on-year employment growth of 1.3%.

Adjusted British on-year M4 money growth roughly doubled to 2.3% last month, and mortgage applications unexpectedly increased.

Spanish CPI inflation slowed 0.6 percentage points to 1.7% in November, and Spanish retail sales in October were 1.8% above their year-earlier level. Moreover, business confidence in Spain improved to a six-month high in November but still showed a sub-zero reading of -0.2.

Portuguese consumer sentiment fell by 0.7 index points in November, but that economy experienced a 1.3-point rise in producer confidence during October.

Icelandic CPI inflation of 3.3% in November and PPI inflation of 8.4% in October were each higher than in the prior month.

Fed Chairman Powell, speaking late yesterday, observed that U.S. interest rates remain historically low and are now getting close to the likely neutral level. The “maestro” of Republican monetary economists, former Fed Chair Alan Greenspan, defended the job that Powell has been doing.

Bank of Japan Board member Masai defended the continuing need for a very stimulative monetary policy, lest the drive to a 2.0% inflation target be jeopardized, but he also underscored that officials are monitoring the costs as well as the benefits to the policy stance.

In Singapore, PPI inflation nudged higher into double-digit territory (12.4%) in October, whereas Malaysian and Filipino producer prices in November were 0.6% below year-earlier levels.

Total Japanese retail sales posted another on-year rise in October, this time of 3.5% versus 2.1% in September.

New Zealand’s business confidence index stayed unchanged in September.

Australian business investment last quarter contracted less sharply (0.5% after a 2Q decline of 2.5%).

Canada’s current account deficit narrowed to a 7-quarter low of C$ 10.343 billion in 3Q18, having recently topped out at C$ 17.336 billion in the first quarter of this year.

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





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