Weakening Growth Prospects, Persistent Uncertainties, and a U.S. Holiday

January 21, 2019

U.S. markets are closed today, depriving global markets of their leadership. Martin Luther King’s birthday is being observed.

The International Monetary Fund published its quarterly World Economic Update, revising projected global growth in 2019 down 0.2 percentage points to 3.5% and projected global growth in 2020 down 0.1 percentage point to 3.6%. The new growth forecasts for 2019 for the United States, Euroland, Japan, Great Britain, India and China are respectively 2.5%, 1.6%, 1.1%, 1.5%, 7.5% and 6.2%.

There have been no huge breakthroughs to resolve Brexit, U.S.-Sino trade strains,  or America’s government shutdown. These three persistent uncertainties, as well as President Trump’s political problems now seem to be depressing global economic activity and investor confidence.

Ten-year sovereign debt yields fell today by four basis points in the U.K. and one basis point in Japan and Germany.

EUR/USD is unchanged from Friday’s closing quote. Movement in the dollar has been minimal relative to the yen, sterling, loonie, and Swiss franc. The dollar has firmed 0.4% versus the peso and 0.3% relative to the kiwi, Aussie dollar and yuan.

Share prices advanced 0.6% overnight in China and Hong Kong and by 0.5% in India, New Zealand and Taiwan. In Europe, however, stocks are so far down 0.4% in Germany, 0.2% in France, and 0.1% in Spain.

Gold is 0.4% softer, while WTI oil is flat.

As expected, Chinese GDP expanded at a 28-year low of 6.6% in 2018 versus 6.9% in 2017. GDP went up 1.5% last quarter and 6.4% from the final quarter in 2017. December-over-December growth in industrial production of 5.7% was higher than forecast but depressed the full-2018 average increase to 6.2%. Retail sales posted as-expected on-year increases of 8.2% in December and 9.0% in 2018. Fixed asset investment went up 5.9% last year, 1.3 percentage points less than in 2017. On-year growth in Chinese property prices of 9.5% in December constitutes a 2-month high. Finally, China’s jobless rate edged back up to 4.9% in December after dipping 0.1 percentage point in November to 4.8%.

German PPI inflation fell 0.6 percentage points in December to a 7-month low of 2.7%. Producer prices in Germany were 0.4% lower than in December, as energy sank 1.4% and all other items in the PPI index recorded no collective change from the month before.

The British Rightmove house price index rose 0.4% in January both compared to levels in December and to January 2018.

The stock of Swiss M3 money was 3.1% larger in December than a year earlier.

Australian new home sales plunged 6.7% last month, their biggest monthly drop in roughly six years.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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