Active Day for Markets In Spite of Holidays

November 11, 2019

Equity markets are open despite today’s observance of Veterans Day in the United States, Remembrance Day in Canada and Armistice Day in France, which observes the 101st anniversary of the end of World War I. Investors are reacting to some meaningful data and other developments.

Street protests in Hong Kong turned more violent, sending the Hang Seng index 2.6% lower.

U.S. President Trump threw some cold water on last week’s excitement that, according Chinese officials, two-sided tariff reductions would be reduced in steps if China and the U.S. pen a deal. Trump claimed that trade talks were in fact progressing more slowly than he had hoped and added that reporting on the implications of a deal for tariffs had been incorrect. He said he would only agree to a deal that is “great” for the United States. In response, equities in China fell almost 2%, and U.S. share prices opened lower. The yuan flipped back to the weak side of the psychological 7.000 per dollar. In other Asia stock markets, sharre prices declined 1.3% in Taiwan, 0.6% in South Korea and 0.7% in Singapore.

In the U.K., the Brexit Party of Nigel Farage will not contest parliamentary seats held by Conservatives in next months election. The release of preliminary 3Q national income accounts today confirmed that real GDP, which had contracted 0.2% in the second quarter, returned to positive growth of 0.3% in the summer period, thus averting a recession for now. The dollar is trading 0.7% lower against sterling. The British Ftse is down 1.0%, and the 10-year gilt yield remains flat.

Spain’s fourth parliamentary election in four years and second in sixth months failed to give the Socialist government the increased support it sought. The Party’s seat total fell slightly further below the majority threshold while remaining greater than any other party’s total. However, the far right, anti-immigration party more than doubled its seat total. It will be hard to cobble together a ruling coalition.

Other U.K. data releases were not so upbeat. Monthly GDP ticked today 0.1% for a second straight month in August. In September, construction output declined 0.2% on month and rose just 0.5% on year, while industrial production dropped 0.3% on month and 1.4% on year. The goods and services trade deficit in September of GBP 3.36 billion last month embodied a GBP 12.54 billion goods-only shortfall and was the largest deficit since May.

In Europe, stock markets have slipped modestly in Germany, Spain, Italy and Switzerland.

President Trump’s comments on the trade talks sent WTI oil’s price down 1.5%. Gold is little changed.

Chinese consumer prices recorded a second straight month-on-month 0.9% increase in October, which lifted the 12-month increase to a 93-month high of 3.8%. That compares with 1.5% last February. Producer price inflation, on the other hand, became more negative (-1.6% compared to -1.2% in September and +0.6% last May) than any time in the last 39 months.

Also from China, new yuan bank lending of CNY 661 billion in October was 5.1% less than a year earlier and down from a CNY 1.69 trillion total in September. The M2 money stock was 8.4% greater than a year earlier, the same result as in the prior month. Finally, China’s current account surplus of $59.9 billion in the third quarter was well above the surplus of $23.3 billion a year earlier and the widest amount in seven quarters.

Japan’s current account surplus in September of JPY 1.613 trillion was JPY 2.3 trillion less than a year earlier, as the on-year 6.7% drop in exports eclipsed a 2.0% slide in imports. The seasonally adjusted JPY 1.485 trillion current account surplus was 13.7% smaller than August’s surplus. Between the two months, exports fell 1.3%, whereas imports went up 0.6%.

Private Japanese core domestic machinery orders, a leading indicator of business investment, had been projected to rise about 1% in September but instead contracted 2.9%, causing such to drop 3.5% between the second and third quarters. Government and export orders for machinery respectively dropped 45.2% and 12.6% between August and September.

Japanese current economy watchers index fell 10 index points to 46.7 in October, a 99-month low. The economy watchers outlook index, in contrast, recovered more than expected to a 2-month high of 43.7 — still well below the neutral 50 level.

German wholesale prices dipped 0.1% in October, their fifth straight monthly decrease and depressing the 12-month rate of decline to 2.3%, most in 40 months.

Italian industrial production dropped 0.4% in September, reversing August slide and resulting in a decline of 2.1% from a year earlier.

In the twelve months through October, Czech consumer prices rose 2.7%,  same as in September but down from 3.0% last March. Denmark’s on-year inflation rate ticked higher ot a 4-month high in October of 0.6%.

Ireland’s construction purchasing managers index fell 2.1 index points to a 76-month low of 46.2 in October. Back in February, the PMI printed at a robust 60.5.

Mexican industrial output was unchanged from a month earlier in September and down 1.8% compared to a year earlier.

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

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