Partial Unwind of Monday’s Sharp Market Moves

January 28, 2020

Markets in China, Hong Kong and Taiwan remained closed on Tuesday.

Stock exchanges in the Pacific Rim extended Monday’s losses with declines of 3.1% in South Korea, 1.8% in Singapore, 1.4% in Australia, and 1.1% in New Zealand. However, in European trading, Italian equities  have jumped 1.6%, and there’s been a recovery so far of 0.4-0.6% in the U.K., Germany, France, and Switzerland.

Ten-year sovereign debt yields rose two basis points in Germany and the U.K., and the 10-year U.S. Treasury yield is a basis point firmer.

The dollar strengthened another 0.5% against sterling, 0.4% versus the kiwi, 0.3% relative to the Swiss franc, and 0.1% vis-a-vis the yen, loonie, and euro overnight. Gold settled back 0.1%, and WTI oil edged up 0.1%.

The Central Bank of Hungary as expected left the benchmark interest rate at 0.90% where such has been since a 15-basis point reduction in May 2016. Likewise, the overnight deposit rate will remain at -0.05%; such had been  lowered in September 2017 to -0.15% but then returned to -0.05% a year and a half later. CPI inflation in Hungary rose to 4.0% last month, highest in around seven years.

Several Swedish economic indicators were reported today. PPI inflation edged up 0.1 percentage point to a 4-month  high of 1.3% in December. Sweden’s trade balance ended 2019 with surpluses of SEK 7.2 billion in November and SEK 0.3 billion in December. All but two months of the year saw a surplus, and the full-2019 surplus of SEK 20.1 billion contrasts sharply with a deficit in 2018 of SEK 40.7 billion. Thirdly, retail sales went up 0.5% on month and 3.4% on year in December.

The British distributive trades index printed at zero for a second straight month in January, having been negative earlier, but the latest reading fell a tad below analyst expectations.

On-year growth in Irish retail sales swelled to a 13-month high of 5.8% in December from 1.9% in November.

Japanese corporate service price inflation was 2.1% for a third straight month in December. Prior to a 2-percentage point national sales tax effective October 1, such had been 0.5% in September. The month on month change in the CSP was zero percent in December.

Mexico experienced a record trade surplus in December of $3.068 billion. Helped by higher oil export prices, the trade balance swung from a $13.618 billion deficit in 2018 to a surplus of $5.82 billion last year.

U.S. durable goods orders rebounded 2.4% last month, its biggest monthly advance since August 2018, but still recorded a 1.5% calendar 2019 decline. Orders for non-defense durable goods and excluding aircraft too dropped 0.9% on month.

The on-year rise in the U.S. Case-Shiller house price index of 2.6% in November was 0.4 percentage points higher than October’s reading and also beat analyst expectations.

The Richmond Fed manufacturing index improved 25 index points to +20 in January, and the Conference Board’s monthly U.S. consumer confidence index improved for a third straight time to a 5-month high in January of 131.6 from 128.2 in December and 126.1 in October.

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

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