Getting Down to Crunch Time in Sino-U.S. Trade Talks

February 22, 2019

Stocks fell Thursday on some disappointing U.S. economic data but have rebounded Friday, as investors are choosing to believe that Sino-U.S. trade talks will reach an agreement averting an escalation of the tariff war. 

Share prices rose 1.9% in China, 1.2% in Hong Kong, and 0.5% in Australia, and European bourses are up by 0.5% in Germany, 0.6% in the U.K. and 0.4% in Switzerland. A higher U.S. open is indicated, but Japan’s Nikkei dipped 0.2%.

The dollar strengthened 0.2% overnight against the yen and sterling but fell 0.3% relative to the Australian dollar, 0.2% vis-a-vis the peso and 0.1% against the euro, Swissie, loonie and yuan.

Ten-year sovereign debt yields reversed Thursday’s upticks, dropping by 4 basis points in the U.K., 2 bps in Germany, and 1 basis point in the United States.

WTI oil has risen 0.9% today, but gold is 0.2% softer.

Reserve Bank of Australia Governor Lowe said the directional risk on the next central bank interest rate change is evenly balanced and that the decision hinges on future inflation and labor market data.

The Central Bank of Sri Lanka left its key interest rates unchanged after today’s Monetary Board meeting, but officials cut the reserve requirement on rupee deposits by a percentage point to 5.0%. Last November, the Standing Lending Facility rate had been lifted 50 basis points to 9.0%, while the Standing Deposit Facility rate was raised by 75 bps to 8.0%. A statement released after this month’s review predicts below-trend economic growth and in-target CPI inflation in the medium term. Officials note some recent improvement in the external sector but also acknowledge that global economic conditions remain challenging.

Overall Japanese consumer price inflation fell to just 0.2% in January as energy posted a further 0.7% on-month decline. Core CPI inflation, which excludes perishable food, ticked up 0.1 percentage point to 0.8% after falling from 1.0% as recently as October. Inflation that excludes energy as well as fresh food stood at a mere 0.4% in January.

Euroland CPI inflation last month was confirmed at 1.4%, down from 1.5% in December, 1.9% in November and 2.3% in October. Core CPI inflation climbed 0.2 percentage points to 1.1%, but energy and non-energy industrial goods prices recorded month-on-month drops of 0.9% and 3.3%.

German real GDP stagnated last quarter and was just 0.9% greater than in the final quarter of 2017. Inventory run-offs exerted a 0.6 percentage point drag on the quarter-on-quarter growth rate, and faster on-year growth of imports (3.2%) than exports (0.4%) depressed year-on-year GDP growth by 1.1 percentage points. Business investment grew decently, but personal consumption rose just 0.2% on quarter and 1.0% on year despite a healthy labor market.

The German IFO Institute’s business climate index dropped 0.8 points to it’s weakest reading in February (98.5) since the end of 2014. Current conditions weakened for a fifth straight month, and the reading for business expectations recorded a sixth straight decline. The data suggest only modest GDP growth this quarter.

Chinese property prices rose 0.6% on month in January and accelerated to a 10.0% year-on-year advance, most in 19 months.

Malaysian CPI inflation dropped below zero percent for the first time since November 2009, posting a 0.7% 12-month rate of decline in January. Core inflation was halved to 0.2%.

Consumer prices in Hong Kong slid 0.2% on month but were 2.4% higher than a year earlier in January.

South Korean producer prices in January dipped 0.2% from December. This sliced on-year PPI inflation all the way to 0.2% from 0.9% in December, 1.5% in November, and 3.1% as recently as last August.

Irish producer prices in December-January were on average 9.4% lower than a year earlier in contrast to a 3.1% average on-year decline in October-November.

Austrian CPI inflation slipped to 1.7% in January from 1.9% in December and 2.2% in November.

In Britain, the CBI’s monthly distributive trades index remained at zero in February as it was in January. The index, which crested at 32 last June, at the end of 2018 had imploded from +19 in November to a 14-month low of negative 13 in December.

Canadian retail sales get reported a little later today.

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

Tags: , , ,


Comments are closed.