Financial Markets Comparatively Steady after Signing of Phase I U.S.-China Trade Deal

January 16, 2020

The dollar rose 0.1% overnight against the yen but slipped by 0.3% versus sterling and the Australian dollar, 0.2% relative to the Chinese Renminbi and Swiss franc, and 0.1% versus the euro and loonie.

Share prices in the Pacific Rim advanced 0.7% in Australia, New Zealand and Singapore, 0.8% in South Korea, 0.1% in Japan, and 0.4% in Hong Kong but fell by 0.5% in China and 0.2% in Taiwan. Stock prices in Europe so far today are down 0.5% in the U.K. and 0.1% in Germany, France, and Switzerland.

Ten-year German bund and British gilt yields slipped two basis points, but the 10-year sovereign debt yields of Japan and the United States are unchanged on net.

WTI oil is off 0.4%, and the price of gold has firmed 0.2%.

The text of the Phase I trade pact between China and the United States is long on words but scant on new revelations. As already known, Beijing officials promised to purchase $200 billion of U.S. exports over the next two years, and current tariff levels were mostly not reduced.

The Central Bank of the Republic of Turkey’s one-week repo rate was cut by 75 basis points to 11.25%. Analysts had been projecting a likely 50-bp cut. Today’s moves follow consecutive cuts of 425 basis points last July, 325 bps at September’s meeting, 250 bps in October and 200 bps last month. Even though the repo rate level now lies below on-year inflation, a released statement claims that current monetary policy is aligned with projected further disinflation. The economy is recovering in spite of tempered external demand. Inflation expectations continue to recede.

Japanese domestic producer price inflation accelerated to a 10-month high of 0.9% in December. Year-on-year declines of 6.8% in import prices and 4.1% in export prices were the smallest drops since June.

Japanese private domestic orders for core machinery shot up by a much greater-than-forecast 18.0% in November after sinking 3.5% in 3Q and 6.0% in October. However, public-sector orders and foreign orders for machinery dropped 8.7% and 11.5%. Export orders, moreover, were 39.4% lower than their November 2018 level.

A 6.6% increase in Chinese house prices between December 2018 and last month was the smallest on-year rise in 17 months and down from 7.1% in November and last year’s high of 10.7% seen in May.

New loans in China totaled CNY 1.14 trillion last month, which was somewhat less than anticipated and well below November’s CNY 1.89 trillion level. M2 money growth accelerated a half percentage point to 8.7% on year.

German CPI inflation in December was confirmed at a 5-month high of 1.5%. Inflation is all of 2019 averaged 1.4%, down from 1.8% in 2018. There was a deceleration in the energy price component from 4.6% in 2018 to 1.4% in 2019.

Irish CPI inflation rose 0.2 percentage points to an 8-month high last month of 1.3%.

Czech PPI inflation advanced to a 4-month high of 2.1% in December from 0.9% the month before.

House prices in Euroland rose 1.4% in the third quarter of 2019, down from a 1.7% quarterly increase in 2Q, and were 4.1% higher than a year before.

Car sales in the European Union posted a much greater 21.7% on-year increase in December after rises of 4.9% in November and 8.7% in October.

The British house price balance index compiled by the Royal Institute of Chartered Surveyors printed at a 6-month high of -2% in December after -11% in November.

Several U.S. economic indicators were reported a while ago:

  • Retail sales rose by an as expected 0.3% in December and 0.5% in 4Q19. Year-on-year increases were 5.8% in December and 4.1% in the fourth quarter.
  • Import prices rose 0.3% on month in December as well. Their on-year advance accelerated to a 13-month high of 0.5% compared to a year-on-year drop of 0.9% a year earlier. Imported fuel inflation swung to 19.3% in December 2019 from -13.1% in December 2018. All other import prices posted a collective on-year decline of 1.4% versus a rise of 0.6% in the year to December 2018.
  • New jobless insurance claims fell by 10k last week to 204k and averaged 216.25k over the past four weeks, lowest in four months.
  • The Philly Fed manufacturing index shot up to an 8-month high of 17.0 in January from a 6-month low of 2.4 in December.

Policymakers at the South African Reserve Bank voted unanimously to cut the central bank’s repo rate by a further 25 basis points to 6.25%. This follows an initial 25-bp cut last July that reversed a 25-bp hike in November 2018. In a released statement, bank officials announced downward revisions to the growth path, which overall is weak, and indicated that both inflation and price expectations are subsiding. The rand has strengthened some 2.6% versus the dollar since the prior policy review.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: , , , ,


Comments are closed.