Political Spectacles and Some Data of Interest

December 12, 2018

President Trump is in engaged in a last ditch effort this month to attain funding for construction of his promised wall along the Mexican border before the Democrats gain control of the House of Representatives. The peso rose 0.8% overnight against the dollar. Trump is believed to be making more progress in trade talks with China.

An even bigger dollar loss, 1.4%, has occurred against sterling. Investors believe Prime Minister Theresa May will survive a parliamentary vote of confidence later today.

India wasted little time installing Shakitanka Das as the new governor of the Reserve Bank of India. His predecessor unexpectedly resigned yesterday amid escalating tensions between the central bank and the government. The rupee lost further ground against the dollar today.

Equities have recorded broad and sizable gains today, rising so far over 1.0% in the United States, Japan, Britain, France, Germany, Switzerland, Spain, Italy, Australia, Hong Kong, South Korea, Taiwan, India and Singapore.

Among key commodity prices, oil and gold have advanced by 0.8% and 0.3%.

Ten-year sovereign debt yields are up 7 basis points in the U.K., 4 bps in Germany, 2 bps  in the United States and 1 basis point in Japan, but there’s been an 11-basis point drop in Italy.

The U.S. dollar has also lost 0.5% against the loonie and euro, 0.4% relative to the Australian dollar, 0.2% versus the Swiss franc, and 0.1% vis-a-vis the yen.

U.S. consumer prices were unchanged on month during November, their first non-positive monthly change in 8 months, and that depressed on-year CPI inflation to a 9-month low of 2.2%. Energy prices plunged 2.2% on month to their smallest 12-month increase since mid-2017, whereas core inflation edged 0.1 percentage point higher to match the 2.2% total inflation rate.

Industrial production in the euro area rose just 0.2% in October following a 0.6% decline in September. This resulted in a 1.2% 12-month rate of increase, most since August.

Japanese machinery orders roared back 19.5% in October after falling 17.8% in September. Core machinery orders were 7.6% higher than in September and 4.5% greater than a year earlier. Public sector orders for machinery (25.0%) and foreign orders (+15.5%) also recorded very robust on-year gains.

Japanese domestic producer prices fell 0.3% in November, reducing their 12-month rate of increase by 0.7 percentage points to 2.3%. Import prices rose 0.9% on month and 9.5% on year.

Today’s biggest Japanese data surprise today came from the October tertiary index, a gauge of service sector activity that jumped more than twice what analysts were expecting — 1.9% on month and 2.2% on year.

Canadian capacity utilization fell 1.5 percentage points to a five-quarter low of 82.6% in 3Q18.

U.S. real average hourly earnings were 0.8% higher in November than a year earlier.

The Westpac measure of Australian consumer confidence, which had risen by 1.0% in October and then 2.8% last month, edged up another 0.1% in December.

On-year Russian GDP growth slipped 0.4 percentage points to a 2-quarter low of 1.5% in 3Q18, which is also a tad less than the 1.6% average on-year growth rate of the first three quarters of 2018.

Mexican industrial production dropped 1.6% in October but retained a 1.0% increase from a year earlier.

Indian CPI inflation slumped a full percentage point to a 17-month low of 2.33% in November, whereas South African CPI inflation accelerated to an 18-month high of 5.2% in the same month.

Many analysts thought that the Central Bank of Iceland, which had increased its benchmark 7-day term deposit rate by 25 basis points at the prior November policy review, would enact a follow-up 25-basis point hike this month as well. Instead, the Monetary Policy Committee kept the interest rate at 4.5% but released a statement that leaves the door open to more tightening if actual and expected inflation continue to rise. The hope is this will not happen since excess demand in Iceland’s economy is projected to shrink. GDP last quarter was flat versus 2Q and up by a less sharp 2.6% compared to a year earlier. Also, the krona lately has been more resilient than earlier this year. The rate increase in November was the first in three years.

In the 12 months through October, industrial production went up 8.1% in India, most in 11 months, but only 1.0% in Italy. South African retail sales rose 1.8% in the same period.

The index of leading economic indicators in troubled Germany dipped 0.1% in October following no change the month before. The index of coincident German economic indicators was unchanged in both September and October.

Swedish CPI inflation slowed to 2.0% overall last month and to a core rate of 2.1%.

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

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