Unsettling Geopolitical News Over the Weekend and Some Weak Data Released Today

October 7, 2019

The Brexit deadline is now 24 days away, and  British Prime Minister Johnson is still insisting on leaving the EU at monthend with or without a deal. He’s unwilling to compromise further.

U.S.-Sino trade talks resume Thursday, but it’s reported that while the U.S. wants a comprehensive agreement, China seeks a more limited scope in the coming talks.

The dollar hasn’t moved on balance against the yen or sterling. It’s up 0.4% against the Aussie dollar and 0.2% relative to the peso and kiwi but down 0.1% vis-a-vis the Swiss franc, euro and loonie.

Markets in Hong Kong and China were closed today for the Chung Yeung festival. The civic situation in Hong Kong remains unstable.

Share prices in the Pacific Rim fell 1.0% in Indonesia, 0.4% in India and 0.2% in Japan but climbed 0.8% in New Zealand, 0.7% in Australia and 0.6% in Singapore. European bourses are marginally firmer, but U.S. futures point to a lower open.

The 10-year JGB yield edged a basis point lower, while its U.S., German and Japanese counterparts are unchanged.

West Texas Intermediate crude oil advanced 1.3%, but Comex gold is 0.5% lower in price.

The Sentix measure of investor sentiment toward the euro area slumped 5.7 index points to its lowest value since April 2013 this month.

German factory orders dropped twice as much as expected in August (0.6%) and recorded a 6.7% plunge from a year earlier. Domestic demand sank 2.6% in the latest month, outweighing a 0.6% rebound in export orders, which had dived 4.2% in July.

The 1.1% 12-month rate of increase in the British Halifax house price index was 0.7 percentage points lower in September than August’s outcome and the weakest rise in 8 months.

Consumer confidence in Spain dropped 5.3 index points in September to a 5-1/2 year low.

In comparisons of August to a year earlier, industrial production dropped 6.3% in Ireland, 1.2% in the Czech Republic and 8.2% in Norway. The index of industrial sector confidence in Norway printed at minus 9.2 in the third quarter, down from -5.7 in 2Q, +7.0 in 1Q and +9.0 in the third quarter of 2018.

Austrian wholesale prices were 1.5% lower than a year earlier in September, their largest 12-month decline since June. Russian CPI inflation of 4.0% in September represents a 10-month low.

Japan’s index of leading economic indicators weakened to a 124-month low in August. The index of coincident economic indicators fell to a 3-year low, prompting officials to downgrade its trend characterization to “worsening.”

Chinese foreign exchange reserves fell $14.75 billion in September to $3.092 trillion, while Japanese reserves dropped $9.0 billion last month to $1.322 trillion.

Australia’s construction purchasing managers index in September remained below the 50 no change level for a 13th straight time, signaling a continuing deterioration of conditions, and was 2.0 index points lower than in August.

Kansas City Fed District President Esther George made some upbeat comments about the U.S. economy and indicated that growth would need to slow discernibly from now for her to be comfortable supporting an additional interest rate cut. On the FOMC, she is not a voting member this year.

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

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