Dollar and Sovereign Debt Yields Up, but Equities Mostly Down

March 5, 2019

Overnight gains in the dollar amount to 0.6% versus sterling, 0.5% relative to the kiwi, 0.4% vis-a-vis the loonie, and 0.3% against the euro, Swiss Franc and Australian dollar.

Ten-year sovereign debt yields climbed two basis points in Germany and the United States and a basis point in Japan.

Stock markets fell 0.7% in Indonesia, 0.5% in South Korea and Singapore, 0.4% in Japan and Taiwan and 0.3% in Australia. Share prices rose 0.9% in China, 1.1% in India, and 0.4% in Hong Kong but have so far slid today by 0.6% in Spain, 0.5% in Switzerland, and 0.4% in Germany and France.

WTI oil edged up 0.2%, while gold is unchanged on balance.

Central banks in Australia and Malaysia held benchmark interest rates unchanged.

  • The Reserve Bank of Australia‘s official cash rate has been at a record low of 1.5% since a 25-basis point cut in August 2016. Australia’s economy, which managed to keep growing through the Great Recession, has lately been slowing noticeably, prompting RBA officials to downgrade projected fiscal 2018-19 growth by nearly a percentage point. But their baseline forecast sees somewhat faster growth next year rather than a recession. Nonetheless, the bias of the next interest rate change, which isn’t seen happening soon, was recently changed to neutral from upward.
  • More than a year has not elapsed since the Central Bank of Malaysia’s first interest rate hike in 3-1/2 years was implemented in January 2018. That hike of 25 basis points to 3.25% reversed a similar-sized cut in July 2016, and there have been no follow-up increases. A released statement after today’s policy review foresees stable inflation and consumption-led growth but also identifies ” downside risks from unresolved trade tensions, heightened uncertainties in the global and domestic environment, and prolonged weakness in the commodity-related sectors could further weigh on growth.” Officials are proceeding cautiously and currently favor the existing degree of monetary accommodation.

As analysts expected, retail sales volume in the euro area rebounded from December’s 1.4% plunge with a 1.3% increase in January, which resulted in a 12-month 2.2% rate of increase, most in 3 months.

Italy’s recession, its third in 10 years, was confirmed by revised fourth-quarter GDP data that showed a 0.1% downtick from 3Q and also a 0.1% working day-adjusted slide from the final quarter of 2017.

Swiss on-year CPI inflation in February matched January’s 11-month low of 0.6%. Core CPI of 0.4% was even lower.

South Korean CPI inflation eased to a 30-month low of 0.5% in February and was associated with a 1.3% pace in the underlying core inflation rate. South Korea also reported a 3-quarter high GDP growth rate last quarter of 1.0% from 3Q, resulting in a 5-quarter higher year-on-year advance of 3.1% but a six-year calendar year growth rate of 2.7% versus 3.1% in 2017.

CPI inflation in the Philippines slipped to a one-year low in February of 3.8%.

South African GDP rose 1.4% at a seasonally adjusted annual rate last quarter. That was slower than growth in 3Q and resulted in year-on-year growth of 1.1% in 4Q and 0.8% in full-2018.

Australia’s current account deficit narrowed to a 7-quarter low of A$ 7.203 billion last quarter.

Spanish consumer sentiment printed at a 6-month high of 96.1 in February, up from a recent low of 90.9 in December by still well below the mid-2018 level of 107 last June.

British same-store sales recorded a 0.1% on-year dip in February, which was the fourth on-year decline in the last six months.

Euroland’s service sector and composite purchasing manager indices in February each improved to 3-month highs of 52.8 and 51.9, respectively. Nonetheless, the data suggest the economic growth in the first quarter will be no faster than in the final quarter of 2018. A big dichotomy has emerged between somewhat resilient service-sector activity and recessionary manufacturing, which has been hit by concerns over Brexit, trade strains, slower global demand, strained geopolitical relations with the U.S. and Russia, and tighter financial conditions.

China’s services and composite purchasing manager surveys fell in February to 4-month lows of 41.1 and 50.7.

Japan posted a 3-month service-sector PMI of 52.3 but a 5-month low in its composite PMI of 50.7.

Britain’s services PMI beat forecasts and rose to a 4-month high of 51.3 in February, lifting the composite PMI to a 2-month highof 51.5.

The CBA-compiled Australian service-sector and composite PMI readings slipped below the no-change threshold of 50 to 48.7 and 49.7, which were the lowest scores in this nearly 3-year-old data series. The AIG Australian services PMI edged up 0.2 to a 2-month high but remained very depressed with a score of 44.5.

Russia’s services and composite purchasing manager indices improved to 3-month highs of 55.3 and 54.1.

India’s service-sector PMI rose 0.3 points from January’s 3-month low to a 2-month higho f 52.5, but India’s composite PMI stayed at 53.6 for a third consecutive month.

Private sector PMI surveys for Hong Kong (48.4), Singapore (49.8), and Lebanon (46.9) in February were above January levels but also indicative of continuing contractions since they stayed below the 50 level. South Africa’s private PMI compiled by Standard Bank edged above the 50 level for the first time in eight months, albeit to merely 50.2.

Non-oil purchasing manager indices for Egypt (48.2) and the United Arab Emirates (53.4) hit respective 17- and 28-month lows in February, but Saudi Arabia’s index climbed to a 14-month high of 56.6.

Reflecting the distorting impact of the Lunar New Year holiday, Hong Kong retail sales in January was 6.9% greater than a year earlier.

Mexican consumer confidence improved significantly and unexpectedly in February.

Still ahead: U.S. non-manufacturing PMI, new home sales, monthly federal budget, and small business sentiment.

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

Tags: , , ,


Comments are closed.