Safe Haven Assets in Lessening Demand

September 10, 2019

Some of the recent uncertainties for investors seem somewhat less anxiety-provoking. British Prime Minister Boris Johnson seems to now be intent on working out a Brexit deal with the EU instead of a no-deal exit. Reports have surfaced that the Merkel government in Germany is considering a relaxation of its rigid insistence on balancing the budget. This would enable some fiscal stimulus for an economy teetering on the brink of recession. There’s even some hope that President Trump will declare progress on the trade talks and pull back from his tariff war.

The Swiss franc and dollar price of gold each slipped 0.6% overnight. These traditional safe havens has been in strong demand until recently.

10-year sovereign debt yields advanced 3 basis points in Japan and a basis point each in Germany and Great Britain.

Stock markets fell overnight by 0.7% in New Zealand, 0.5% in Australia, and 0.4% in Taiwan but rose 0.6% in South Korea and 0.4% in Japan. Aside from a 0.6% drop in Switzerland, share prices in Europe have remained pretty steady.

The dollar is unchanged against sterling, down 0.2% versus the yuan and 0.1% vis-a-vis the peso but up 0.1% relative to the euro, yen and Aussie, New Zealand and Canadian dollars.

On the data front, there have been a number of weak price reports today, especially the Chinese PPI, which posted the largest year-on-year decline in August (0.8%) in the last three years. Consumer price inflation in China remained at July’s 17-month high of 2.8%, in contrast.

CPI inflation in Hungary slid to a 6-month low of 3.1% in August from 3.3% in July and 3.9% in April-May.

Swedish CPI inflation dropped 0.3 percentage points to 1.4% last month versus 2.3% last October.

On-year Greek CPI inflation was negative in August for the second time in 3 months. A 12-month drop of 0.2% in August and 0.3% slid in June sandwiched and unchanged July outcome.

Danish CPI inflation last month matched July’s 32-month low of 0.4%.

Norwegian CPI inflation declined 0.3 percentage points to a 19-month low of 1.6% in August.

Norwegian producer prices were 9.4% lower in August than a year earlier.

There were also some weak indicators of economic activity reported earlier today.

Italian industrial production in July posted declines of 0.7% both from June and July 2018.

French industrial production rose 0.3% on month in July but recorded a 12-month slide of 0.2% after a dip of 0.1% in June.

South African manufacturing production rose in July for the first time since April but still recorded a year-on-year decline of 1.1%.

The National Australia Bank’s latest monthly measures of of business conditions and and business confidence fell by two and three index points to a reading of only +1 in each case. The +2 sum of those two indicators is the lowest total so far this year.

Small business sentiment in the United States fell 1.6 points to a score of 103.1 according to the monthly NFIB indicator. That’s the lowest level since 101.8 last March.

Japanese machine tool orders recorded a third straight year-on-year decline of more than 30.0% in August, this time of 37.1%. Japanese M2 money growth remained subdued at 2.4% on year in August after 2.3% in July and 2.5% in the second quarter.

Jobless insurance claims in Great Britain rose 28.2k last month after a 19.8k increase in July, but average hourly earnings accelerated.

The Philippines’ trade deficit of $3.393 billion in July was 15.5% narrower than a year earlier but because of a 4.2% slide in imports rather than robust export growth.

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

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