Time Running Out on Several Matters

February 11, 2019

The temporary suspension of the U.S. Federal Government shutdown ends on Friday. A deal between the White House and Congressional Democrats that meets President Trump’s insistence on border wall funding is not in sight. Perhaps he should bankroll the project out  of his personal wealth or establish a Go-Fund-Me campaign to raise the money.

Chinese and U.S. trade negotiators still do not have a deal to extend their tariff truce. Escalating tariff warfare could occur after March 2.

Also, there’s no deal on Brexit terms between Prime Minister May’s government and the rest of the EU. She will be updating parliament this week. The U.K. is set to leave the EU March 29 with or without a deal.

Upcoming monthly Chinese data on bank lending, industrial production, retail sales, business investment, and inflation are eagerly awaited. China’s slowdown is one of the global economy’s major risks, and these data could persuade the People’s Bank of China to ease monetary policy further in hopes of stimulating personal consumption.

The dollar has opened this third week of February on an upward note, with gains of 0.9% against the peso, 0.7% relative to the yuan, 0.6% vis-a-vis the yen, 0.4% versus the euro and Swiss franc, 0.3% against the loonie and Aussie dollar, and 0.2% versus the kiwi. Sterling has performed even better, rising by 0.2% against the dollar.

U.S. share prices are narrowly mixed. European equities have risen 1.0% in Germany, 1.2% in France and 0.9% in Great Britain. China’s stock market also advanced after a week’s closure for the Lunar New Year, but Japan’s market was closed today for National Foundation Day.

Ten-year sovereign debt yields firmed two basis points in the U.K., U.S., and Germany.

West Texas Intermediate crude oil sank 1.9%, and Comex gold traded 0.5% lower.

Finance ministers in the euro area are meeting today.

President Trump has made another provocative personnel choice, nominating David Malpass to be the next president of the World Bank. Aside from being a critic of that institution, he has a poor forecasting track record including notoriously failing to anticipate the danger of the subprime mortgage crisis to the general U.S. and world economies.

British GDP growth last quarter, 0.2%, was only a third as strong as that in the third quarter of last year. On-year growth slowed to a 3-quarter low of 1.3% and has not been weaker than that figure since 2012. GDP maintained this 0.2% pace in January. In 4Q18, net exports and business investment each exerted a drag on GDP growth.

U.K. industrial production, down 0.5% in December, fell for a fifth straight month, resulting in a 12-month 0.9% rate of decline. Factory output dropped 0.7% on month and 2.1% on year.

British construction output dived 2.8% on month in December and was below its year-earlier level for the first time in eight months. The 12-month rate of decrease exceeded 2% at 2.4%.

The British merchandise trade deficit narrowed slightly to GBP 12.1 billion  in December, and the goods and services deficit (GBP 3.229) billion was at a 3-month low.

Ireland’s construction purchasing managers index fell 1.9 index points to a 3-month low of 54.6 in January.

The Bank of France’s monthly index of business sentiment among French manufacturers slid back 3 points to 99 in January. Sentiment in services dipped a single point to 100, while construction sentiment remained unchanged. The data persuaded monetary officials to  predict that GDP will rise about 0.4% this quarter.

January consumer price data were released today in Switzerland, Norway and Denmark, revealing 12-month inflation rates of 0.6%, 3.1% and 1.3%, respectively.

China’s foreign exchange reserves rose $15.2 billion to $3.088 trillion in January.

Norwegian industrial  production contracted in every month of last quarter, including a 0.4% drop in December, whose level was also 2.5% lower than at the end of 2017.

Spain’s index of leading economic indicators only rose 0.1% in December.

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


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