Stocks Hit by Geopolitical Factors
October 8, 2019
Share prices in Germany, France, Italy, and Spain are down over 1.0%, and a lower U.S. open is implied by futures. Brexit talks between the U.K. and EU are seemingly paralyzed, and the U.S. blacklisting of Chinese tech firms over treatment of Uighur Muslims underscores trade tensions between the the two countries. Share prices in the Pacific Rim did better, rising 1.2% in South Korea, 1.0% in Japan, 0.8% in Taiwan, 0.7% in Indonesia, and 0.5% in Australia. India was closed for the Hindu festival of Desara.
10-year U.S. Treasury, British gilt and German bund yields fell today by 4, 3, and 1 basis points, whereas the 10-year Japanese JGB yield is 2 bps firmer.
Among commodity prices, WTI oil sank 1.3%, but gold is 0.4% higher.
The dollar rose 0.6% against sterling, which was hit by Brexit concerns and news that British productivity fell 0.2% on quarter and 0.5% on year, which is the worst in five years. British same-store sales were 1.7% smaller in September than a year earlier, their largest 12-month drop since May.
Against other currencies, the dollar has weakened 0.6% against the euro, 0.4% relative to the yen, 0.5% versus the kiwi, 0.3% against the Swiss franc and 0.2% versus the Aussie dollar.
China reopened after a week-long holiday. China’s service sector purchasing managers index fell 0.8 index points to a 7-month low of 51.3.
Several Japanese economic indicators were released today.
- A 2.3% on-year dip in bankruptcies reported for August a month ago was sandwiched between year-on-year upsurges of 14.27% in July and 13.04% in September.
- Although the current economy watchers index improved to a 7-month high of 46.7 in September, the more forward-looking outlook economy watchers index slumped further to a very depressed reading of 36.9 from 39.7 in August and 44.3 in July.
- Labor cash earnings posted on-year declines in April of 0.2% in nominal terms and 0.6% on an inflation-adjusted basis.
- The rise in household spending of 2.4% on month and 1.0% on year was marginally less than forecast.
- The current account surplus widened in August to JPY 1.720 billion seasonally adjusted from JPY 1.547 billion in July and to JPY 2.158 billion not adjusted from JPY 1.824 billion in August 2018.
German industrial production recovered 0.3% on month in August from declines in three of the prior four months but remained 4.0% lower than a year earlier.
France’s current account deficit leaped to EUR 2.50 billion in August from 290 million euros the month before.
Italian retail sales fell 0.6% in August, same as their monthly slide in July, and that cut the 12-month increase to a 3-month low of 0.7%.
Spanish industrial production was 1.7% greater in August than a year earlier, the biggest such advance in four months.
Dutch and Austrian CPI inflation slowed respectively in September to a 2-month low of 2.6% and an eight-month low of 2.8% in Hungary.
Fed Chairman Powell in a speech defended the virtue of a monetary policy independent of political influence. Minneapolis Fed District President Kashkari urged more interest rate cuts but said he didn’t know yet how many cuts would be appropriate.
The Bank of Israel left its policy interest rate unchanged at 0.25%, citing a strengthened shekel, slower global growth, benign inflation, well-anchored inflation expectations, and easier monetary policies of other central banks.
Business confidence in Australia according to the monthly NAB index dropped to a 5-month low in September.
Disappointing U.S. data were also released:
- Small business sentiment in the United States according to the monthly NFIB index worsened to a 6-month low of 101.8 last month.
- Producer prices fell 0.3% on month in September, cutting their 12-month rate of increase by 0.4 percentage points to 1.4%. Neither that nor a drop in underlying core PPI inflation had been anticipated.
- The IBD/TIPP optimism index slumped 4.3 points to a 7-month low in September of 50.8. The index had printed at 58.6 as recently as May.
Canadian housing starts and building permits were fewer in September than August.
Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British productivity, German industrial production, Japanese current account, U.S. PPI