Week Opens with A Focus on U.K. and Global Equity Selloff

December 10, 2018

After the European Court of Justice ruled that Britain has the right to unilaterally revoke plans to leave the EU without the permission of other members, British Prime Minister cancelled tomorrow’s scheduled vote on her Brexit plan. She lacks the votes.

Several released British data today underscore the huge toll that Brexit and domestic political uncertainty has lately been taking on the economy.

Stock markets fell 2.1% in Japan, 2.0% in India, 1.8% in Hong Kong, 2.3% in Australia, 1.3% in New Zealand, 0.8% in China and 1.2% in Singapore. In Europe, share prices are down 0.8% in Spain, 0.7% in Germany, and 0.6% in Switzerland, France and Italy but up 0.2% in Great Britain.

The dollar is unchanged against the euro, Swiss franc and Aussie dollar but up 1.0% relative to sterling, 0.7% vis-a-vis the peso, 0.6% versus the yuan and 0.3% against the yen and loonie.

WTI oil fell back 2.0% to $51.54 per barrel. Gold edged 0.2% lower.

The 10-year British gilt yield fell five basis points, and the 10-year Japanese JGB dropped 2 bps on news of a downward revision in third-quarter Japanese GDP growth to negative 2.5% from negative 1.2% estimated initially. In contrast, the 10-year U.S. Treasury and German bund yields firmed a basis point.

In other Japanese economic news, another seasonally adjusted trade deficit was posted in October, and that month’s current account surplus of JPY 1.31 trillion was 40% smaller than a year earlier. There were 6.05% more bankruptcies reported in November than a year earlier, but the economy watchers index climbed 1.5 index points to a 2018 high of 51.0 in November. On-year growth in bank lending slowed to 2.1% in November from 2.2% in both October and the third quarter. Last quarter’s GDP price deflator was 0.3% lower than a year earlier.

Chinese CPI inflation declined 0.3 percentage points in November to a 4-month low of 2.2%, with prices dropping on month by 0.3%. PPI inflation of 2.7% was down from October’s 3.3% and a recent high of 4.7% in June. China’s trade surplus ballooned from $34.02 billionĀ  in October to an 11-month high of $44.74 billion in November.

British industrial production, which had been unchanged in both August and September, fell 0.6% on month in October, its weakest showing since March, and that left output 0.8% below the year-earlier level.

British construction output dropped 0.2% in October but still managed to score a bigger 3.8% year-on-year advance.

U.K. monthly GDP rose just 0.1% in October, and the goods and services trade deficit of GBP 4.25 billion was about 33% wider than forecast. The merchandise trade deficit climbed to GBP 11.87 billion from GBP 10.68 billion the month before.

The German current account surplus narrowed to EUR 15.9 billionĀ  in October from EUR 19.5 billion in October 2017 even though the seasonally adjusted trade surplus of EUR 17.3 billion was very close to its third-quarter average.

Investor sentiment toward the euro area economy according to the monthly Sentix index plummeted to a 4-year low of -0.3 in October from 8.8 in September, 11.4 in October and 32.9 way back last January.

Ireland’s construction PMI rebounded from October’s 43-month low of 52.9 to a 2-month high in November of 55.5 but remained 6.3 points below its reading last May.

Italian industrial production in October reversed a 0.1% dip the month before, leaving such just 1.0% above its year-earlier level.

Turkish GDP grew 1.1 % on quarter and 2.1% on year in the third quarter.

Industrial production in Finland dropped 2.5% on month and rose only 0.8% on year in October.

Swiss unemployment edged down 0.1 percentage point to 2.4% in October.

Danish CPI inflation held steady at 0.8% last month, but Norwegian CPI inflation accelerated 0.4 percentage points to 3.5%. Norwegian producer prices were 14.9% higher than a year earlier, down from a 22.5% advance in October.

Canadian housing starts unexpectedly grew to a 5-month high in November of 215.9K at an annual rate. But building permits were 0.2% lower in October than in September.

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

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