A Little Bit of Everything This Wednesday

November 13, 2019

Investors have much to watch today including two separate congressional events of great interest. Public hearings on a possible impeachment of President Trump begin at 10:00 EST in the House Intelligence Committee, and one hour later Fed Chairman Powell testifies on the economic outlook before the Joint Economic Committee.

There’s already been one central bank surprise, this from the Reserve Bank of New Zealand. Officials there had been expected to extend their easing. New Zealand’s Official Cash Rate previously this year had been reduced by 25 basis points in May and 50 basis points to a mere 1.0% in August, but policymakers decided not to change their stance again just yet even while in a statement conceding that both domestic and external growth since their last policy change had continued to slow. The statement asserts that policy already is stimulative and maintains that recent economic developments do not warrant an additional rate cut, pointing out that robust prices for New Zealand’s export commodities and some depreciation of the New Zealand dollar have provided mitigating growth support. That said, the statement predicts a prolonged period of low interest rates, observes some slippage in medium-term inflation expectations, and promises to ease further if that’s deemed necessary. Prior to mid-2015, the OCR had been at 3.50%.

Hong Kong saw intense overnight unrest again. The Hang Seng equity index dropped 1.8% in a day that saw a wide cross-section of stock markets experiencing difficulty. Share prices dropped 0.9% in Japan, Singapore and South Korea, 0.8% in Australia and 0.6% in India and Indonesia. In Europe, political uncertainty after Spain’s inconclusive election weighed on the Ibex, which so far is down 1.7%. Italy’s market has lost 1.3%, and the German Dax is down 0.7%. Stocks are lower in France and the U.K. by 0.3%, and a drop is indicated in U.S. futures.

Ten-year sovereign debt yields dropped five basis points in the U.S. and U.K., 4 bps in Germany, 3 bps in the Netherlands and France and 2 basis points in Japan. Bucking that trend, however, the equivalent New Zealand yield shot up 11 basis points after the Reserve Bank of New Zealand failed to cut its interest rate benchmark again.

Risk aversion was also reflected in commodities, where the price of gold went up 0.9%, but that of WTI oil slipped 0.5%.

The New Zealand dollar advanced 0.9% against its U.S. counterpart. The greenback otherwise firmed 0.5% relative to the Mexican peso, 0.2% versus the yuan, Aussie dollar and loonie, and 0.1% vis-a-vis the yen and sterling. The euro is flat, and the Swiss franc is 0.3% stronger.

On this first day of public impeachment hearings in Washington, President Trump will be holding talks at the White House with fellow political strongman Recep Tayyip Erdogan.

Industrial production in the euro area during September was not quite as depressed as forecast, edging up 0.1% on month. In spite of that increase, production still fell 0.9% on quarter in 3Q after a 0.6% slide in 2Q and was 1.7% lower in September than a year earlier.

Several economies reported price data today, led by the United States where consumer prices went up by a greater-than-forecast 0.4% on month in October, which lifted the 12-month increase to a 3-month high of 1.8%. A 2.7% monthly jump in the energy component was the main inflationary impulse. Core CPI excluding food and energy rose 0.2% on month and by a 3-month low of 2.3% on year.

German consumer price inflation was confirmed at a 35-month low of 1.1% in October and associated with core consumer price inflation of 1.5%.

British consumer prices dipped by a greater-than-forecast 0.2% in October, resulting in a 35-month low in its year-on-year comparison which slid 0.2 percentage points to 1.5%. British retail price inflation dropped 0.3 percentage points to 2.1%. Producer output price inflation fell 0.4 percentage points in October to 1.3%, while producer input prices posted a 5.1% decline from October 2018. The on-year producer input price change had been +0.9% as recently as July. Finally, house price inflation in the U.K. according to the government’s index stayed level at 1.3% in September.

Japanese domestic PPI inflation was less negative in October at -0.4% following a 1.1% on-year drop recorded in October. Export and import prices were 6.3% and 10.5% lower than October 2018 levels.

Year-on-year Australian wage inflation last quarter was 2.2%, down from 2.3% in 2Q and at a 5-quarter low.

Swedish CPI inflation ticked 0.1 percentage point higher to a 3-month high of 1.6% last month.

Although Portuguese CPI inflation also reached a 3-month high in October, such was merely at zero percent. And Romanian CPI inflation slipped marginally to a 9-month low of 3.4% in the month.

Food prices fell 0.3% in New Zealand last month, but their 12-month 2.5% rate of increase represents a 2-year high.

Consumer confidence in Australia recouped this month most of October’s sharp decline to its weakest level since July 2015.

A 12-month 0.2% increase in South African retail sales in September was the smallest on-year advance in nine months. Brazilian retail sales rose 0.4% in October and were 3.4% greater than a year earlier.

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

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