Many Data Releases while Investors Monitor Coronavirus and Await FOMC Decision

January 29, 2020

China remains closed ostensibly for holiday but in reality due to the spreading coronavirus epidemic with the number of confirmed cases so far surpassing 6,000. Taiwan markets also were shut.

The dollar firmed overnight by 0.3% against the kiwi, 0.2% relative to the euro, Swiss franc, loonie and Aussie dollar, and 0.1% vis-a-vis the peso and sterling. Then yen strengthened 0.1% against the dollar.

Ten-year sovereign debt yields fell anew (6 basis points in Italy, 4 bps in France and the U.S., 3 bps in Germany and 2 bps in Great Britain. Investors are in a guarded frame of mind.

Hong Kong’s stock exchange reopened with a 2.8% thud, but share prices rose 0.8% in South Korea, 0.7% in Japan and India, and 0.5% in Australia. U.S. and European stocks are up somewhat as well.

The FOMC is not expected to change interest rates. The decision will be announced at 14:00 EST and followed 30 minutes later by Chairman Powell’s press conference.

Australian CPI inflation unexpectedly accelerated marginally last quarter. The total index rose 0.7% versus 3Q and by a 1-year high of 1.8% compared to a year earlier. However core inflation held steady and was even further below the 2% threshold than total inflation.

Italian consumer confidence rose a whole index point to a 4-month high in January, and the latest measure of German consumer confidence improved to an 8-month peak. French consumer confidence rebounded from December’s 6-month low to a 2-month high, and South Korean consumer sentiment leaped 3.7 index points to a 19-month high this month.

Japanese consumer confidence printed at an 8-month high of 39.1  in January, 3.7 index points above last September’s 99-month low, but like the aforementioned improvements in household confidence, this observation fails to embody the coronavirus health scare. The disease has spread from China to a number of other countries in spite of government efforts China to lock down areas where the epidemic originated.

German import prices rose 0.2% on month and fell 0.7% on year  in December, which was the smallest 12-month rate of decline since May 2019. Excluding petroleum products, import prices were 1.9% below year-earlier levels.

British shop prices in January recorded a 0.3% dip from a year earlier, their smallest drop in 6 months. The U.K. Nationwide house price  index was 1.9% higher than a year earlier in January, its greatest on-year advance in 19 months.

Money growth in the euro area ended 2019 on a weak note. M3 posted a December-over-December increase of just 5.0% after November’s 5.6% result. All broad components of M3 contributed to the slowdown.

The Swiss ZEW expectations index, a gauge of investor sentiment, printed at 8.3 in January, down from 12.5 in December. Previously, this data series had results below zero.

Spanish retail sales posted a 0.7% monthly drop in December, the largest decline since October 2017. Compared to a year earlier, the 1.7% increase was the smallest since April.

Italian overall business sentiment slid to a 2-month low this month, but manufacturing went up half an index point.

Austria’s manufacturing purchasing managers index in January recovered to a 9-month high of 49.2 in January from 46.0 in December and an 83-month low of 45.1 last September. Readings below 50 still connote deteriorating conditions, but the pace of contraction was only slight this month.

A summary of this month’s Bank of Japan Board review of monetary policy reveals a deepening rift on the policy committee between members advocating for additional monetary stimulus and others fearful of irreversible harm from prolonged ultra-low interest costs and massive asset buying. The word “Japanification” has entered the global economic vocabulary to define unsuccessful policy efforts to eradicate decades of meager economic growth and a propensity toward price deflation. That stigma is embarrassing Japanese officials.

The preliminary estimate of the U.S. trade deficit in December of $68.3 billion after $68.2 billion in November was slightly smaller than anticipated.

U.S. pending home sales surprisingly fell 4.9% last month, resulting in a smaller-than-presumed 4.6% increase from a year earlier.

Chilean central bankers are also reviewing monetary policy today.

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


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