Dollar Firms Modestly; Equity Markets are Mixed

January 8, 2020

The dollar recorded overnight gains of 0.3% against the euro, 0.2% versus the yen and sterling, and 0.1% vis-a-vis the loonie. The dollar remains unchanged relative to the yuan, Swiss franc and kiwi.

  • ADP estimates that U.S. private-sector employment increased last month by a robust 202k, beating November’s result and exceeding analyst expectations. There was a 13.5% jump in U.S. mortgage applications last week.
  • Iran fired about a dozen missiles at U.S. air bases in Iraq but no deaths have been reported. Coincidentally or not, a Ukrainian plane departing Iran’s capital of Tehran crashed shortly after take-off, killing all 176 (mostly Iranians and Canadians) on board. No cause has been announced.

Stock markets in Asia fell 1.2% in China, 1.6% in Japan, 1.1% in South Korea, 0.9% in Indonesia and 0.8% in Hong Kong, In European markets, share prices have risen so far by 0.5% in Italy, 0.3% in Germany, 0.2% in France and 0 .1% in Spain. U.S. futures trading suggests a rise at the open.

The ten-year German bund yield rose five basis points, while sovereign debt yields in the U.S., U.K., and Japan of similar maturity remain unchanged.

WTI crude oil fell 1.2%, whereas the price of gold is trading 0.2% firmer.

Several interesting European economic data have been released today. German factory orders for November produced a big disappointment. Instead of rising slightly, such fell 1.3% on month and by an even larger 6.5% on year than the 12-month slide through October. A 3.1% decline in export orders outweighed a rebound in domestic demand.

French consumer confidence fell three index points to a 5-month low in December of 102. Separately, France experienced its first monthly current account surplus (EUR 483 million) in November since the final month of 2018.

British labor productivity growth last summer was revised up 0.1 percentage point to 0.4%, pushing the on-year comparison into the black but by a mere 0.1%. Unit labor costs in the third quarter rose 0.5% versus 2Q and 3.6% relative to a year earlier. The Halifax index of British house prices rose 1.7% in December and 4.0% from a year earlier.

Euroland’s economic sentiment index climbed 0.3 index points to a 3-month high of 101.5 in December. Subcomponents for services, construction and retail showed their best results in 7, 5, and  at least 12 months, respectively. Industrial sector sentiment slipped to a 2-month low, and consumer confidence weakened to a 1-year low.

Swedish retail sales fell 0.4% on month and rose just 1.3% on year. In both comparisons, November’s performance was the weakest since May. Irish retail sales dropped 3.3% in November, their first slide since July and resulting in a halving of the 12-month rate of rise.

Spanish industrial sentiment improved from readings of -8.8 in October and -3.2 in November to a 4-month high of -1.9 in December.

Industrial production in Norway slipped much less sharply in November from a year earlier (just 0.8% after 12-month declines of more than 5% in the five prior months).

Two Eastern European central banks left policy interest rates unchanged at their first reviews of 2020. The National Bank of Poland’s reference rate has been at 1.50% since a pair of 50-basis point cuts in the first quarter of 2015 and 225 basis points of reduction engineered between November 2012 and July 2013. The National Bank of Romania‘s policy rate has been 2.5% and flanked by a 1.5% deposit rate and a 3.5% overnight lending rate since hikes of 25 basis points in January, February and May of 2018. Earlier seven 25-bp cuts were made between August 2014 and May 2015.

Japanese consumer confidence registered a sub-40 reading for an eighth straight month in December. At 39.1, such was 0.4 points higher than in November and at a 7-month high.

Following a 7.9% drop in October, building permits in Australia rebounded 11.8% in November, which was far more than forecast but still resulting in a 3.8% year-on-year decline.

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



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