Global Stocks Down after Trump/Xi Meeting Scrapped
February 8, 2019
The revelation that President Trump will not be meeting with Chinese President Xi before March 1 dampened hopes for a trade deal, weighed on general concerns regarding global growth, and sent share prices down 2.0% in Japan, 1.2% in South Korea and India, 1.0% in Spain, and 0.9% in Germany. The Dow and S&P fell about 0.7% in the first 45 minutes of U.S. trading.
Ten-year sovereign bond yields declined three basis points in the U.S. and Germany and two bps in Japan and the U.K..
Gold and oil are 0.3% and 0.2% firmer.
The dollar is unchanged against the yen and up a mere 0.1% relative to the euro and sterling.
Japan’s current account surplus of JPY 453 billion in December was the smallest of 2018 and 43% smaller than the year-earlier surplus. The seasonally adjusted average surplus in 2018 of JPY 1.591 trillion was similar to December’s JPY 1.562 billion.
Japanese real household spending slid 0.1% on month in December and was just 0.1% greater than in the final month of 2017. On-year growth in Japanese average cash earnings accelerated for a third straight month in December, albeit by just 0.1 percentage point to 1.8%, a 6-month high. Japanese on-year growth in bank loans last month of 2.4% was 0.2 percentage points greater than in the third and fourth quarters of 2018.
Japan’s economy watchers index fell unexpectedly by 1.2 index points in January to a 27-month low of 45.6.
The German current account surplus in December was EUR 21.0 billion, 26% smaller than a year earlier. Full-2018 saw a surplus of EUR 249.1 billion, 4.6% narrower than in 2017. Merchandise exports rose 3.0% on average last year, roughly half the 5.7% increase in imports.
French industrial production rose 0.8% in December but posted a 1.4% drop from a year earlier. The 5.5% December-over-December drop in Italian industrial production was the largest 12-month slide in six years. Greek industrial production fell 1.6% to post a year-on-year rise of 1.1%, and Finnish industrial output rose 1.3% on month and 3.3% from the December 2017 level.
Swiss unemployment stayed at a seasonally adjusted 2.4% last month but edged up to 2.7% on an unadjusted basis, which was a 10-month high.
Norwegian GDP grew 0.5% last quarter and was 1.7% greater than in the final quarter of 2017.
Indonesia’s current account deficit nearly doubled to $31.06 billion in 2018, equal to 3.0% of GDP.
Canada’s jobless rate rose more than forecast to 5.8% last month from 5.6% in December and was just 0.1 percentage point lower than in January 2018. On a brighter note, employment advanced 66.8K on month and by 1.7% on year in January.
The Central Bank of Russia’s one-week repo rate was left unchanged after today’s monetary policy review at 7.75%. Such had previously been lifted by 25 basis points each last September and December. According to a released statement, officials want to wait now to assess the disinflationary impact of those moves and do not expect to know the impact of a recent increase in VAT tax before April. But they concede that inflationary risk is skewed to the upside.
The Reserve Bank of Australia’s quarterly Monetary Policy Statement was released today. The report opens the door to a possible rate reduction if there is a sustained increase of unemployment or if inflation fails to rise from its low level as officials project. Projected GDP growth in coming years was revised downward.
Numerous other central bank policy decisions were revealed our last post:
- The Reserve Bank of India unexpectedly duct its repo and reverse repo rates by 25 basis points to 6.25% and 6.0% at the first policy review overseen by a new governor. Previous increases had been implemented last June and August.
- The Central Bank of Brazil’s Selic rate was kept at a record low of 6.5%, but a released statement hints that a future cut is possible. Inflation risk has moderated, and growth risks are skewed asymmetrically. The Selic rate was cut by a total of 725 basis points from October 2016 to March 2018.
- The Monetary Policy Committee of the Bank of England left its Bank Rate at 0.75%, releasing a statement that warned of a possible recession if the U.K. leaves the EU without working out a Brexit deal.
- The Central Reserve Bank of Peru retained a monetary policy rate of 2.75%. The rate was last moved via 25-basis point cuts in January and March of 2018.
- Romania’s 2.5% monetary policy rates wasn’t changed either. It’s been at that level since a 25-basis point hike last May.
- The Czech two-week repo rate was kept at 1.75%. Czech National Bank officials foresee sub-2% inflation in the coming two years. The rate was raised 25 basis points in November to the current level. That was seventh rise of the tightening cycle begun in August 2017. In May 2017, a cap was removed preventing the kurona from rising past 26 per euro.
- At Bangko Sentral ng Pilipinas, the overnight Filipino reverse repo rate was left unchanged at 4.75%. Monetary policy officials there consider inflation more manageable, with price risks now skewed to the downside. This rate level was attained after a hike last November culminating increases totaling 175 basis points in the space of six months.
- The Bank of Mexico’s overnight deposit rate was left at 8.25%. Four 25-basis point increases were implemented in 2018, most recently in December. Total tightening since December 2015 amounts to 525 basis points from a 3.0% cyclical low. Inflation risks are still skewed to the upside according to a released statement.
- The National Bank of Serbia’s key interest rate was kept at 3.0%, its level since a 25-basis point hike last April. That was the second of a pair of moves begun in March. Inflation is now low and stable, and global growth prospects have weakened.
Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: ---------------------------------, Central Bank of Russia, German current account, Japanese current account