Share Prices and Sovereign Debt Yields Rebound… Brexit Situation Remains Muddled

March 26, 2019

In futures trading, the 10-year treasury yield rose five basis points to 2.44%. The 10-year German bund and Japanese JGB yield firmed two bps, while their British counterpart is 3 basis points firmer.

Share prices rebounded 2.2% in Japan, 1.1% in India, 0.9% in Indonesia, 0.8% in Taiwanand 0.6% in Singapore. European equity markets are up 0.6% in Switzerland, 0.7% in France, 0.5% in Italy, 0.3% in Spain and 0.2% in both Germany and Britain.

West Texas Intermediate crude oil advanced 1.4%, while gold is 0.7% softer.

A narrowly mixed dollar shows losses of 0.3% versus sterling, 0.2% relative to the Aussie dollar and 0.1% against the loonie but upticks of 0.4% versus the yen and kiwi and of 0.1% vis-a-vis the Swiss franc and Chinese yuan. EUR/USD is unchanged from Monday’s close.

There was a British parliamentary vote backed by proponents of a soft Brexit in favor of the House of Commons taking over control of the agenda governing amendment votes from Prime Minister May’s cabinet. This has persuaded some hardliners, who had voted previously against the prime minister’s  plan to now accept such. Outcome of all this remains highly unclear.

Revised GDP data were reported in France and the Netherlands.

  • French real GDP climbed 0.3% between 3Q18 and 4Q18, causing the on-year growth rate to slow to a 9-quarter low of 1.0% from 1.4% in 3Q and 2.8% in the final quarter of 2017. Calendar year economic growth slowed to 1.6% in 2018 from 2.3% in 2017.
  • Dutch GDP went up 0.5% on quarter and 2.2% on year last quarter. Calendar year average growth slowed 0.2 percentage points to 2.7% in 2018.

German consumer confidence slowed to a 4-month low and matched its weakest level in the past 12 reported months.

French overall business sentiment ticked a point higher to a 4-month low in March in spite of a 28-month low in the manufacturing sector. Construction confidence improved, while sentiment held steady in retail and services.

Swedish producer price inflation accelerated to a 3-month high of 6.3% in February. Danish retail sales rose 0.2% in February following back-to-back monthly declines in December and January. Sales were 1.2% greater than in February 2018. Finnish unemployment fell to 7.4% in February from 8.6% a year earlier.

Japanese corporate service prices posted their largest month-on-month increase in four months during February (0.3%), but the 12-month rate of increase only returned to its end-2018 pace of 1.1%.

A summary of deliberations at the Bank of Japan’s March 14-15th Board meeting revealed considerable continuing disagreement between those members wanting more stimulus and a majority fearful that negative interest rates are damaging commercial bank profits.

Hungary’s central bank is holding a policy review.

New Zealand’s trade balance in February was in surplus by only NZD 12 million, down from NZD 188 million a year earlier. The twelve-month rate of trade deficit through February was NZD 6.62 billion, some twice as much as NZD 3.06 billion during the prior statement year through February 2018.

Hong Kong ran a trade deficit of HKD 59.3 billion in January-February, 20% smaller than a year earlier as imports contracted more rapidly than exports.

Boston Fed President Eric Rosengren blamed low U.S. bond yields on overseas trends and defended the FOMC decision to put interest rate increases on pause.

U.S. monthly data arriving today include housing starts, building permits, durable goods ordeers, the Case Shiller and FHFA house price indices, and the Richmond Fed manufacturing index.

President Trump has gone on a verbal offensive since declaring his own exoneration from accusations of collusion with Russia’s interference in the 2016 U.S. election. He plans action against his accusers and seeks to have Obamacare declared unconstitutional.

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

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