An Active Friday in the Market Caused by Breaking Geopolitical News

October 11, 2019

An Iranian oil tanker in the Red Sea was the object of rocket attacks and is spilling oil. The missiles are believed to have been fired by Saudi Arabia. WTI crude oil rose 1.6% in response.

British Prime Minister Johnson and Irish PM Varadkar after bilateral talks said they could see a pathway to a possible Brexit deal, but the ball is now in the EU’s court. The dollar fell 1.6% against sterling, and the 10-year British gilt yield is up 6 basis points on this unexpected note of guarded optimism.

Trade talks between China and the United States resumed yesterday. No major breakthrough has been announced, but investors appear hopeful about the fact that talks are happening. The dollar slipped slipped 0.3% against the yuan amid reports that an exchange rate accord might be part of a package of agreements.

Stock markets in Asia rose Friday by 2.3% in Hong Kong, 1.4% in Indonesia, 1.2% in Japan, 0.9% in China and Australia, 0.8% in South Korea and 0.7% in India.

Share prices so far in European trading show gains of 1.7% in Germany, 0.9% in the U.K. and France, 0.8% in Italy, and 0.7% in Spain.

The ten-year Japanese JGB yield rose 3 basis points, and its U.S. and German counterparts are a basis point firmer.

The dollar overnight declined by 0.6% against the Australian dollar, 0.5% versus the euro, 0.3% relative to the kiwi, and 0.2% vis-a-vis the loonie, but it strengthened 0.4% against the yen and 0.1% versus the Swiss franc. The yen and franc generally do well in times of risk aversion.

On the central bank watching front, Cleveland Fed District President Mester, a non-voting member of the FOMC, expressed support for holding interest rates steady for now. ECB Vice President de Guindos said the ECB hasn’t run out of room to cut interest rates but conceded that ill-effects from doing so are becoming more noticeable. More importantly, reports have surfaced that the decision at the ECB Governing Council’s September meeting to resume bond-buying next month was more controversial than realized initially. Led by outgoing ECB President Draghi, the Council agreed to more quantitative stimulus over the objections of several staffing technocrats at the ECB and at central banks in Germany, France, the Netherlands and some smaller members of the euro area.

The Central Bank of Sri Lanka, which had engineered 50-basis point interest rate cuts earlier this year in May and August, left its key deposit and lending rates unchanged at 7.0% and 8.0% after the latest policy review. An accommodative stance is needed to keep inflation within the 4-6% target and to support economic growth which currently is slower than its potential trend. Officials noted, took that monetary policies at other central banks have been loosened.

The reverence central bank interest rate in Peru was retained at 2.5% at the latest policy meeting. Previously, such had been cut seven times since May 2017, most recently this past August. A statement released by the Central Reserve Bank of Peru mentions global risks to economic growth such as trade tensions and observes subdued in-target inflation and steady inflation expectations.

German CPI inflation was confirmed to have decelerated in September to 1.2% overall and 1.4% when excluding energy. Consumer prices were unchanged from August levels after recording a 0.2% month-on-month dip in August.

Spanish CPI inflation of 0.1% in September represents a 3-year low. There has not been a month-on-month rise in consumer prices there since May.

Japanese on-year growth in M2 money was 2.4% in both September and the third quarter as a whole, which is down from 2.9% in 2018 and 4.4% in 2017.

Romanian CPI inflation eased 0.4 percentage points to 3.5% in September.

The Dutch trade surplus of EUR 3.88 billion was at a 4-month low but 5% bigger than the surplus in August 2018.

Turkey’s current account posted a third consecutive monthly surplus in August. At $2.604 billion, such was the highest since October 2018.

Retail sales in Singapore fell on month for the third time in four months, and the year-on-year decline of 4.1% was the third largest drop so far this year.

The manufacturing purchasing managers index in New Zealand of 48.4 in September printed below the 50 line of separation between improving and deteriorating conditions for a third straight time. Such had been comfortably above 50 at 53 as recently as April.

Still to Come: Canadian labor market statistics, U.S. import and export price data, the U. Michigan index of U.S. consumer confidence and Germany’s index of leading economic indicators will be reported shortly later today.

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

Tags: , , , ,


Comments are closed.