More Smoke than Fire

December 20, 2019

A lot of economic data was released on the final day of the final meaningful week of 2019, but the market is settling into yearend mode and showed a muted reaction.

The dollar firmed overnight by 0.3% against the euro and Swiss franc but slipped 0.3% relative to sterling. There were dollar upticks of 0.2% against the loonie and 0.1% versus the peso and  kiwi but a downtick of 0.2% relative to the Australian dollar and no net changed vis-a-vis the yen or yuan.

Share prices slid 0.5% in Taiwan, 0.4% in China, 0.3% in Hong Kong and 0.2% in Japan and Australia, but stocks in Europe are up 0.6% in France and Germany and about 0.4% in the United States.

Prices for gold and oil eased marginally. Ten-year German bund and British gilt yields are unchanged, while their U.S. and Japanese counterparts edged a basis point higher.

The Bank of Mexico’s overnight interbank rate was lowered 25 basis points to 7.25%, bringing its drop since August to a full percentage point.

The Chinese one-year loan rate had undergone three marginal reductions since August, most recently a move of 5 basis points last month, but Peoples Bank of China officials decided to leave such unchanged at 4.15% after this month’s meeting. Chinese monetary policy has not been loosened this year by as much as many analysts were anticipating.

Japanese total and core CPI inflation accelerated slightly to 0.5% in November, a 4-month high. Japanese department store sales in November were 6.0% lower than a year earlier. This decline follows a huge 17.5% on-year decline in October when the national sales tax got raised to 10% from 8%.

The final revision of U.S. real GDP during the third quarter left estimated growth unchanged at 2.1%. On-year growth was also 2.1%. The total and core personal consumption  price deflators were 1.4% and 1.7% higher than in 3Q18.

A 0.5% rise in U.S. personal income last month was the most since August and accompanied by a 4-month best increase of personal spending (+0.4%). The PCE price deflator in November rose 0.2% on month and accelerated in year-on-year terms to a 4-month high  of 1.5% inflation. Core PCE inflation, however, slowed 0.1 percentage point to a 4-month low of 1.6%. Finally, the U. Michigan/Reuters consumer sentiment gauge for December was revised upward by 0.1 point to a 9-month high of 99.3. Such had bottomed last August at 89.8.

British third-quarter GDP growth got revised higher to 0.4% on quarter and 1.1% on year, but the annual comparison was still the lowest in 29 quarters. The British current account deficit in the third quarter of GBP 15.86 billion was down from GBP 19.61 billion a year earlier and equal to 2.8% of GDP. U.K. outstanding fiscal debt at end-November equaled 94.1% of GDP.

Euroland’s seasonally adjusted EUR 32.4 billion current account surplus in October was up from EUR 28.2 billion in September and its widest point in nine months. Nonetheless, the unadjusted surplus over the past 12 reported months EUR 49 billion narrower than a year earlier and represents 2.7% of GDP, down from 3.2% of GDP.

Italian producer prices dipped 0.2% in November, but the on-year decline of 2.5% was 0.4 percentage points less than the 12-month decline in October. Italian business sentiment in November ticked marginally upward.

German consumer confidence slipped in October and matched November’s 3-year low.

British consumer confidence unexpectedly rose three index points to a joint 8-month high in December.

Italian consumer confidence rebounded 2.2 index points to a 2-month high of 110.8 in December.

Dutch consumer confidence held steady at a joint 7-month low in December.

Turkish consumer sentiment slid from a 7-month high of 59.9 in November to a 2-month low of 58.8 in December.

Danish consumer confidence improved from a reading in November of 1.4 to a 3-month high  in December of 2.5.

Brazilian consumer sentiment rose 2.7 index points to a 10-month high in December. Brazil also reported the smallest current account deficit ($2.16 billion) in November since last May.

Hong Kong’s current account surplus shot up more than twofold from 2Q to HKD 74.45 billion in 3Q, which was the largest surplus since 2008.

Switzerland recorded a CHF 18.1 billion current account surplus in the third quarter following surpluses of CHF 19.2 billion in 2Q and CHF 19.5 billion in 1Q.

In November, Danish retail sales rose 0.3% on month but recorded their first year-on-year decline in five months. Canadian retail sales fell 1.2% in October and posted their first on-year drop (0.6%) since 2013. Mexican retail sales slumped 2.3% in October, and a 0.4% year-on-year rise was the smallest increase since the prior December. In contrast, Polish retail sales in November recorded a more robust 5.9% year-on-year advance in November.

Swedish producer price inflation picked up 0.3 percentage points to a 3-month high in November of 1.2%. Icelandic producer prices in November were 3.3% lower than a year before to mark their first 12-month drop since September 2017. Irish producer prices also declined on year in November, but the drop was a smaller 2.9% in size. French producer prices jumped 1.1% on month in November and thus trimmed the year-on-year rate of decline to 0.8%. South Korea‘s PPI dipped 0.1% both on month and on year in November.

Consumer price inflation in Hong Kong eased to a 6-month low in November of 3.0%.

The French index of leading economic indicators fell 0.2% in October, reversing September’s improvement.

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


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