Uneasy Financial Markets and Lower Dollar
January 11, 2019
Investors perceive many trouble spots, and none are getting resolved. Talks between President Trump and Congressional democrats have broken down, raising expectations that a border emergency situation will be declared. The federal government shutdown is now the longest on record. Fed Vice Chairman Clarida and Chicago Fed President Evans are the latest to signal fewer, rather than more, interest rate hikes in 2019 because of lessening inflationary pressure and global growth depressants. Britain is engaged in a high-stakes political standoff with less than 12 weeks remaining to avert Brexit without a deal, which would hurt both the British and EU economies. Japan, Britain, Australia, India and Italy reported more weak data today.
The dollar overnight softhened 0.8% against the kiwi, 0.5% versus the Australian dollar, Chinese yuan, and sterling, 0.3% vis-a-vis the euro, 0.2% against the yen and Swiss franc, and 0.1% relative to the loonie.
European share prices are trading mostly lower, and a drop in the U.S. market at the open also seems in the cards. Earlier, markets in the Pacific Rim had performed decently, with gains of 1.0% in Japan, 0.7% in China, 0.6% in Hong Kong and South Korea, 0.5% in Indonesia and Singapore, and 0.4% in Australian and New Zealand.
Ten-year sovereign debt yields slid 3 and 1 basis points in the U.S. and Germany, are flat in Japan, and a basis point higher in Great Britain.
WTI oil is 0.2% lower. Gold is 0.4% firmer.
Japanese household spending in November posted a third straight year-on-year decline, this time of 0.6% after slides of 1.6% in September and 0.3% in October, which highlights the continuing softness of consumer spending. Japan’s economy watchers index fell 3.0 points in December to a 5-month low of 48.0, and the economy watchers outlook index also slipped below the 50 level. The Japanese current account surplus in November of JPY 757 billion was 44% smaller than a year earlier and embodied a merchandise trade deficit of JPY 559 billion versus a JPY 199 billion surplus one year earlier. Seasonally adjusted exports and imports were each smaller in November than October.
British industrial production sank 0.4% in November, defying forecasts of a small rise and following a 0.5% slide in October. Output was 1.5% lower than a year earlier. Real GDP in the U.K. during the three months through November was only 0.3% higher than in the prior 3-month period. Britain also recorded a GBP 12.023 billion merchandise trade deficit in in November. One bright spot was that construction output that month rebounded 0.6% and was 3.0% greater than in November 2017.
Australia’s construction purchasing managers index, in contrast, fell 1.9 points in December to a 5-1/2 year low of 42.6, signifying a strong rate of contraction. And Aussie building permits plunged in November by 9.1% from October and 18.3% from a year earlier. On-year growth in Australian retail sales remained steady at 3.6% in November.
Industrial production in India were only 0.5% higher than a year before in October.
Italian industrial production dropped 1.6% in November, the third monthly decline in a row, and this resulted in the greatest on-year slide (2.6%) since October of 2014.
In other economic news today,
- U.S. consumer prices in December performed as expected, dropping 0.1% on month and by 0.3 percentage points to a 12-month increase of 1.9%. Core inflation remained steady at 2.2% last month, but a 0.7% monthly jump in real average earnings was twice what had been expected.
- The Bank of France’s manufacturing sector business confidence index unexpectedly rebounded 2 points to 103 in December, while business confidence in construction and services each printed at their same November readings. Officials at France’s central bank continue to anticipated that French GDP will have risen 0.2% on quarter in 4Q.
- Portuguese CPI inflation slid to 0.7% in December from 0.9% in November and 1.4% in September. Greek CPI inflation fell 0.4 percentage points to 0.6% last month.
- Spanish industrial production dropped 1.5% on month and 2.6% on year in November.
- Romanian on-year GDP growth accelerated to 4.4% in the third quarter of 2018 from 4.1% in 2Q but was well below 8.8% recorded in the summer of 2017. Czech on-year GDP growth remained at 2.4% last quarter.
- Brazilian CPI inflation slowed to a 7-month low of 3.75% last month.
- Turkey’s January-November current account deficit of $26.19 billion was 34% narrower than a year earlier.
- Retail sales in Singapore remained weak in November, ticking just 0.2% higher on month but posting a 3.0% on-year decline.
- Danish industrial production fell 0.5% in November, more than halving the on-year increase to 3.0%.
- On-year growth in Japanese bank lending of 2.2% last quarter matched the 3Q18 result.
Officials at the Central Reserve Bank of Peru kept its policy interest rate at 2.75% at this month’s review. Such was last changed in the first quarter of 2018 via two 25-basis point cuts, and such followed four such reductions made between May and November of 2017. A released statement today from Peru’s central bank projects in-target inflation and observes that growth last quarter was more dynamic than in the previous quarter. But global risks and financial market volatility are also noted in the statement.
Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British trade and industrial production, Central Reserve Bank of Peru, Japanese current account, U.S. consumer price inflation