Soft Data and Event Risk

February 27, 2019

It’s been a mixed morning for the dollar, which is unchanged against the yen and euro, 0.4% firmer against the Australian and New Zealand currencies, but down 0.5% versus sterling, 0.3% relative to the yuan and loonie, 0.2% vis-a-vis the Swiss franc, and 0.1% against the peso.

WTI oil advanced 2.1%, while the price of gold is little changed.

Share prices declined 0.8% in Hong Kong, 0.5% in Japan and New Zealand, and 0.2% in Indonesia and India but rose 0.4% in China, South Korea and Australia. European stock markets have slipped 0.7% in the U.K., 0.5% in Switzerland, 0.4% in Germany and 0.3% in Spain.

The U.S. and JGB 10-year sovereign debt yields are unchanged. The 10-year German bund yield is a basis point softer, but the 10-year gilt yield rose a basis point.

The advance estimate of the U.S. merchandise trade deficit in December is $79.492 billion, significantly wider than forecast and $7 billion greater than a year earlier. Exports fell 2.8% on month, while imports rose 2.4%. Punitive U.S. trade barriers in 2018 were the wrong tool for addressing America’s external deficit, and the tax bill passed in late 2017 predictably boosted the imbalance.

Construction completions in Australia fell 3.1% last quarter following a 3.6% drop in 3Q, and such were 2.6% lower than in the final quarter of 2017. New Zealand recorded its greatest January trade deficit since 2012, a gap of NZD 914 million that was 38% wider than in January 2018.

Economic sentiment in the euro area (ESI) continued to weaken in February. The ESI printed 0.2 index points lower at 106.1. Way back in April, the ESI was robust at 112.2.

Consumer confidence and business sentiment in Italy weakened in February. Consumer confidence this month in Portugal and Finland sank to respective 2-year and 29-month lows. Spanish business confidence slid to a 49-month low.

After expanding just 0.1% on quarter in 3Q18, Hong Kong’s real GDP contracted last quarter by 0.3%, and this depressed year-on-year growth to an 11-quarter low of 1.3%.

M3 money and private credit growth in the euro area recorded slower on-year increases in January of 3.8% and 2.5%.

Not all released data were disappointing. Investor sentiment in Switzerland, according to the ZEW expectations index, rebounded from a 7-year low in January to a 7-month high in February. British shop price inflation accelerated 0.3 percentage points in February, albeit to a still low 0.7%. The British Bankers Association’s estimate of mortgage applications last month rose to a 16-month high. Norwegian and Brazilian unemployment rates were lower than a year ago. Sweden’s trade balance in January was in surplus by SEK 1.2 billion compared to a SEK 3.3 billion deficit a year earlier. And Norwegian retail sales in January grew on month at the fastest pace in 8 months and on year at a 5-month high.

Canadian CPI inflation fell sharply to 1.4% in January from 2.0% in December, but core inflation held pretty stable just south of the 2.0% objective.

In the intensifying Kashmir border conflict, Pakastani forces claim to have shot down two Indian jets.

The risk of Britain leaving the EU without any Brexit deal as soon as March 29th has been reduced significantly, although such a scenario later in 2019 remains in play. Given the market’s prioritization of short-term over long-term developments, it’s not surprising the sterling has traded upward.

The leaders of North Korea and the United States will resume their talks in Hanoi today. Likewise, Fed Chairman Powell reprises his congressional testimony today, this time before the House Financial Services Committee.

Michael Cohen, President Trump’s former lawyer and fixer, testifies today before the House Oversight Committee.

Still to Come: U.S. factory orders and pending home sales.

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

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