U.K. in Greater Danger of a No Deal Brexit

April 2, 2019

The British House of Commons still cannot find sufficient agreement on the terms of withdrawing from the EU. Faced with binary scenarios of withdrawal without a deal or a lengthy delay in leaving, the first option is looking more and more likely.

The 10-year British gilt yield dropped five basis points in response overnight, but the FT share price index is up about 1%.

The dollar on balance is unchanged overnight against the yen, euro, Swiss franc and sterling.

Share prices in the Pacific Rim closed unchanged in Japan but up 1.7% in Hong Kong, 1.0% in New Zealand, 0.5% in India and Taiwan, 0.9% in Singapore, 0.4% in Australia and 0.2% in China. In Europe, the German Dax and Paris Cac are 0.6% and 0.5% firmer.

WTI oil has risen 0.4% to $61.86 per barrel, while gold is marginally down at $1292.80 per ounce.

The Board of the Reserve Bank of Australia in the face of lower-than-desired inflation and growth did not cut the 1.5% official cash rate. It’s been at that level since a pair of 25-basis point cuts in May and August of 2016. There were also four earlier cuts of that size between May 2013 and May 2015. In a released statement, officials deemed the 1.5% OCR to be still appropriate and projected a gradual upturn of core inflation in coming years.

Australian building permits shot up 19.1% in February, their biggest month-on-month jump in 65 months, but the year-on-year change was a decline of 12.5%.

The Board of the National Bank of Romania also left its benchmark interest rate unchanged today following a scheduled review. Such has been at 2.5% since 25-basis point cuts were made in February and May of last year. Officials did observe, however, that inflation is above target and “following a higher path than in the latest medium-term forecast published in the February 2019 Inflation Report.” Romanian producer price data released today showed a 1.1% monthly rise in February and a 0.9 percentage point acceleration in year-on-year PPI inflation to a 3-month high of 4.8%.

Bank of Canada Governor Poloz gave a speech that disappointed some people looking for a hint that the central bank might soon cut its rate, a view he failed to endorse. Canadian monetary officials still presume that the recent slower pace of growth will prove temporary.

U.S. durable goods orders fell more sharply than expected in February, dropping 1.6% on month overall and by 0.1% for core non-defense items excluding aircraft.

Despite better-than-expected manufacturing PMIs last month in China, Japan, and the U.K., the JP Morgan-compiled global purchasing managers index remained unchanged and not far above the 50 line that separates improving from deteriorating conditions.

India’s manufacturing PMI fell 1.4 points to a 6-month low of 52.6 in March.

Australia’s AIG-compiled manufacturing PMI dropped 3.0 points to a 3-month low of 51.0.

The British construction PMI printed below the 50 threshold for a second straight time in March, but at 49.7 was 0.2 index points better than the reading in February.

Swiss CPI inflation picked up from an 11-month low of 0.6% in February to 0.7% in March, and core inflation also rose 0.1 percentage point to 0.5%.

CPI inflation in Thailand accelerated to a 5-month high of 1.2% in March.

In South Korea, by contrast, CPI inflation slid to a 29-month low of 0.4% in March from 0.5% in February and 2.0% as recently as November.

Japan’s monetary base, the variable over which the BOJ exerts direct control, continued to show decelerating on-year growth in March, posting a 12-month increase of 3.3%, down from 4.6% in January-February, 5.6% in the final quarter of 2018, 7.3% in full-2018, and 17% in 2017.

Producer prices in the euro area edged up 0.1% in February and recorded an increase of 3.0% from a year earlier. Excluding energy, PPI inflation remained at 1.2%.

Irish unemployment dropped to a 133-month low in March of 5.4%.

According to revised data, Czech GDP advanced 0.8% on quarter in 4Q18 and was 4.8% greater than in the final quarter of 2017.

The New York regional PMI survey results, known as the NAPM report, will be released in a little while.

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



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