Markets Jittery Again over Uncertainties Related to Trade Tensions and British Brexit

December 4, 2018

Share prices fell  539 points  or 2.4% in Japan, 1.0% in Australia, 0.8% in South Korea, 0.7% in Singapore and 0.5% in Taiwan. European markets have lost 1.4% in the U.K., 1.0% in Germany, 1.2% in Spain, 0.9% in Italy and 0.7% in France. In the U.S., the DOW and S&P 500 each lost 0.6% in the first hour of trading.

Ten-year sovereign debt yields extended their recent downtrends with drops today of 5 basis points in Switzerland, 3 bps in Germany, 2 bps in the United States and a basis point in Japan.

Commodity prices are higher today, with gains of 1.1% in West Texas Intermediate crude oil and 0.5% in Comex gold.

And the dollar has mostly weakened with overnight losses of 0.7% against the yuan, 0.6% versus the yen, 0.3% relative to the Swiss franc, and 0.2% vis-a-vis the euro and kiwi.

Trump Administration officials have become vaguer about the likelihood that the temporary 3-month date push-back on the threatened escalation of import tariffs against Chinese goods will become permanent. 

Bank of England Governor Carney and his predecessor Mervyn King are on opposite side of the Brexit debate, making the issue all the  more contentious and British parliamentary approval of Prime Minister May’s soft deal even less likely. Bank of England analysts believe that if there is no Brexit deal, the adverse economic repercussions might be even worse than the 2008-09 major recession.

The Reserve Bank of Australia’s Board’s latest review of monetary policy once again resulted in no change being made to the 1.5% official cash rate. In a released statement, officials observed continuing sluggish wage and  price inflation and reiterated that “holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.” The OCR has been at 1.5% since a 25-basis point cut in August 2016.

The Central Bank of Chile is also reviewing  monetary  policy today.

Producer prices in the euro area posted a larger-than-forecast 0.8% monthly increase in October due to a 2.7% surge in the energy component. The PPI has risen 4.9% over the last 12 reported months but by only 1.5% excluding energy. On-year PPI inflation among countries using the euro now ranges from minus 2.7% in Ireland to 10.4% in Belgium and among the group’s largest economies is at 7.1% in Italy, 3.9% in France and 3.6% in Germany.

Romanian PPI inflation of 6.3% in October was the highest in six years.

Swiss consumer prices fell 0.3% in November, their first monthly drop since July, resulting in a 7-month low for their 12-month rate of increase, a mere o.9% (0.2% for core CPI).

South Korean CPI inflation accelerated 0.4 percentage points to 1.3% in November, but core inflation remained at 2.0%. South Korean GDP grew 0.6% last quarter, which lowered on-year growth to a nine-year low of 2.0%.

South African real GDP advanced 2.2% at an annualized rate (AR)between the second and third quarters of 2018. That followed back-to-back contractions of 2.6% AR in 1Q and 0.4% in 2Q, leaving the level of GDP just 1.1% higher than a year earlier.

Greek GDP grew at a 5-quarter high of 1.0% in the third quarter, which lifted the on-year growth rate to a 2-quarter high of 2.2%.

The Irish 5.3% jobless rate in November was 1.1 percentage points lower than a year earlier.

Australia’s A$ 10.688 billion current account deficit last quarter followed a A$ 12.056 billion deficit in 2Q and a shortfall of A$ 13.251 billion in the third quarter of 2017.

Sweden experienced a similarly sized SEK 38.6 billion current account surplus last quarter to one of SEK 40.8 billion in the summer quarter of 2017.

Singapore’s manufacturing purchasing managers index compiled by SIPMA slipped to a 16-month low of 51.5 in November from 51.9 in October and 53.1 at the start of 2018.

The British construction PMI index rose to a 4-month high of 53.4 last month but remained over 2.0 index points below last July’s high of 55.8.

The global manufacturing PMI in November was unchanged from October’s reading but included a 15-month low in the input  price pressure component.

On-year growth in Japan’s monetary base averaged 6.0% in October- edged up 0.2% in October following three straight month-on-month declines. Output was 1.1% higher than a year earlier.

Canadian labor productivity rose 0.3% in the third quarter and by 1.0% from a year earlier. The on-year pace was not as strong as the average 1.8% increase on average in 2017. Unit labor costs ticked up 0.2% on quarter and rose 1.5% on year. On a U.S. dollar basis, unit labor costs fell 2.7% on year, resulting in enhanced competitiveness vis-a-vis its southern neighbor where unit labor costs were 1.5% higher in 3Q than a year before.

The IBD/TIPP optimism index, a gauge of investor sentiment toward the U.S., fell by a large 3.8 points to an 8-month low in November. New York’s NAPM index dropped 2.0 points to a 5-month low of 67.8 in America’s largest city. Total U.S. motor vehicle sales of 17.49 million at an annual rate in November slightly exceeded analyst expectations.

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


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