Brexit Deal Reached, Congressman Cummings Dead, and Beige Book Reflects Slowdown

October 17, 2019

Several big stories hit the wires this morning.

First, Congressman Elijah Cummings of Maryland, Chair of the House Oversight and Reform Committee and a leading figure in the investigation of President Trump, has died at age 68. He’d had several health problems, but exact details of cause of death were not provided.

Second, British Prime Minister Johnson secured a deal with the EU on leaving the European Union on October 31, but it is opposed by the Northern Ireland Unionist Party which makes its approval by British Parliament questionable. Britain’s Conservative government needs the support of the Unionists to secure a majority and stay in power.

Third, the Fed’s Beige Book of U.S. regional economic conditions out late yesterday portrays a deterioration since the summer. Growth now is only slight to modest. Manufacturing and agriculture have become more problematic according to business leaders, largely due to trade uncertainties. Inflation is modest, although personal consumption remained resilient. All in all, the report would seem to strengthen the case for another interest rate cut at the FOMC meeting late this month.

Fourth, Deputy Governor Debelle of the Reserve Bank of Australia said that the housing market’s difficulties are continuing and likely to become a bigger drag on the economy. However, that warning was overshadowed by robust Australian labor market statistics released today, and the Aussie dollar climbed 1.0% overnight against its U.S. counterpart.

The U.S. dollar also slipped 0.6% today against the kiwi, 0.5% versus the Swiss franc, 0.4% relative to the euro, 0.3% vis-a-vis the loonie and yuan, and 0.2% against the peso and sterling. The yen is steady.

In stock market action, share prices were mixed in the Pacific Rim, advancing 1.2% in India , 0.2% in Taiwan, and 0.7% in Hong Kong but slipping 0.8% in Australia, 0.3% in Singapore, 0.2% in Indonesia and South Korea, and 0.1% in Japan and China. European markets show gains of 0.3% so far in Germany, Italy, and Spain.

Ten-year sovereign debt yields rose three basis points in the United States and bumped up a basis point in Germany, the U.K., and Japan.

The price of West Texas Intermediate oil fell 0.7%. Gold is little changed.

U.S. Treasury-compiled capital movement data released at the end of Wednesday trading showed a robust $70.5 billion aggregate net inflow in August concentrated in short-term instruments. There was a $41.1 billion net long-term outflow.

Australia’s jobless rate fell 0.1 percentage point to 5.2% in September, and employment rose 14.7k on top of a combined 79k increase in the prior two months. In a separate Australian release, the NAB business confidence index fell to minus 2 last quarter from +5 in the second quarter, and its companion business conditions index printed a point higher at +2 but 11 points lower than its year-earlier reading.

Construction output in the euro area fell 0.5% in August, marking its fifth drop in six months. Construction was just 1.2% higher than a year earlier, down from a 5.9% on-year advance last March.

British retail sales volume was flat in September but still 3.1% higher than its year-earlier level.

The Swiss trade surplus widened to a 3-month high of CHF 2.881 billion in September. The January-September surplus was 30% bigger than that in the first three quarters of 2018.

Italy’s trade surplus of EUR 2.585 billion in August was 3.8% wider than a year earlier despite a 3.4% drop in exports.The seasonally adjusted surplus, EUR 3.67 billion, narrowed 14.5% from July due to flat exports and a 1.8% increase of imports.

Chinese foreign direct investment recorded on-year growth of just 3.7% on average in August-September, down from 7.2% in the first half of 2019.

Icelandic CPI inflation slowed 0.2 percentage points to a 6-month low of 3.0% in September.

Portuguese producer prices fell 0.3% on month in September to post their fourth straight year-on-year decline. The 12-month drop of 1.8% followed declines of 1.1% in August, 0.4% in July and 0.2% in June.

The Philly Fed manufacturing index dropped to a 3-month low of 5.6 in October from 12.0 in September, 16.8 in August, and 21.8 in July. U.S. new jobless insurance claims last week were 4k greater than in the prior week but, at 214k, still historically low. The Fed Beige Book highlighted continuing shortages of skilled workers.

In September, U.S. housing starts dropped back 9.4% to a 2-month low, and building permits declined 2.7% also to a 2-month low. Housing starts were only 1.6% above their year-earlier level.

Canada’s monthly survey of manufacturers for August showed increases from July of 0.8% in sales, 6.1% in orders, and 0.5% in inventories, but but sales and orders were still below year-earlier levels.

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


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