Another Wave of Coronavirus-Related Risk Aversion to End Month of January

January 31, 2020

Near to noontime in New York, the DOW, S&P 500 and Canadian TSE indices shows losses of 1.2%, 1.1%, and 0.9% in North American trading. Earlier, stocks fell 1.9% in Indonesia, 1.4% in South Korea, 0.9% in Malaysia, and 0.5% in Hong Kong and India. China’s market continues to stay shut. In Europe, the British Ftse, German Dax and Paris Cac are down by 1.2%, 1.1% and 0.9%.

Ten-year sovereign debt yields declined by 6 basis points in the United States, 4 bps in Germany and 3 bps  in Great Britain. Among commodity prices, WTI oil fell another 1.3%, and gold has edged 0.2% higher.

The dollar declined against key developed economy currencies like sterling (0.8%), the yen (0.5%), Swiss franc (0.6%) and euro (0.4%) but has also strengthened broadly relative to commodity-sensitive monies like the peso (0.7%), kiwi (0.4%) and Australian dollar (0.3%). The Chinese yuan remains weaker than 7.0 per dollar.

The U. Michigan/Reuters U.S. consumer sentiment index has been revised up to a 5-month high of 99.8, but the Chicago regional purchasing managers index fell 5.3 index points to a 49-month low of 42.9 in January.

U.S. personal income rose a touch less in December (0.2%) than analysts were anticipating, but the 0.3% increase of personal spending topped forecasts. The PCE price deflator rose 0.3% on month and accelerated 0.2 percentage points to a 1.6% on-year pace. Core inflation of 1.6% as well matched expectations.

The Trump trial in the senate appears to be wrapping up soon and expected to produce a partisan acquittal. The Iowa caucus will be held next Tuesday. The State of the Union address is tentatively scheduled for the following day, February 4.

Real GDP in the euro area went up only 0.1% last quarter, according to the preliminary estimate, and resulted in the slowest year-on-year advance (1.0%) since the final quarter of 2013. GDP rose 1.2% in 2019.

Consumer prices in the euro area fell 1.0% on month in January due to seasonal factors. On-year inflation of 1.4% was 0.1 percentage point higher than in December and  matched the January 2019 12-month rate of  increase. Energy prices increased 0.7% on month and 1.8% on year (versus a 3.2% drop as recently as November). Non-energy CPI inflation printed at 1.4% for a third straight month, and core inflation slowed 0.2 percentage points to 1.1%.

French GDP contracted last quarter (0.1%) for the first time since the spring of 2016, trimming its on-year increase to an 11-quarter low of 0.8% versus 1.4% in the third quarter. French GDP grew 1.2% in 2019, same pace as the whole euro area.

French producer price inflation accelerated to a 7-month high of 0.4% in December, and CPI inflation of 1.5% in January matched December’s 12-month high. French consumer spending slid 0.3% on month in December.

Italian GDP fell by 0.3% last quarter (the weakest outcome in 27 quarters) and was unchanged from the final quarter of 2018. GDP growth of 0.2% on average last year was down from 0.8% in 2018.

German retail sales plunged 3.3% in December, the biggest monthly drop since May 2007. Sales, which had expanded 5.7% between July 2018 and a year later, recorded on-year growth of 0.8% in December and 2.7% for 2019 as a whole.

Swiss retail sales fell 0.4% in December and was a mere 0.1% higher than a year earlier.

Spanish GDP increased 0.5% last quarter, but the on-year growth rate slowed 0.1 percentage point for a second straight quarter and, at 1.8%, was below 2.1% in the final quarter of 2018. Spain’s current account surplus in January-November of EUR 21.7 billion was a tad wider than EUR 21.4 billion a year earlier.

British consumer confidence strengthened to a 16-month high in January with the reduction of uncertainties surrounding the Brexit transition.

China’s composite purchasing managers index compiled by NBS fell to a 3-month low of 53.0 in January due to stagnant manufacturing activity.

Several Japanese economic indicators were reported today.

  • Industrial production (up 1.3%) rose twice as fast in December as expected. Output was 3.0% lower than a year earlier. Production fell 4.0% on quarter in 4Q and by 2.9% in 2019 as a whole.
  • Retail sales rose 0.2% on month but dropped 2.6% on year in December.
  • The jobless rate of 2.2% last month matched November’s 3-month low.
  • Housing starts were below their year-earlier level in each month of the second half of 2019. December’s level was down 7.9%. Construction orders, on the  other hand, were 2.14% greater than in December 2018, their biggest such advance since July.
  • Motor vehicle sales were 9.3% lower than a year earlier in November.

A 3.5% monthly increase South Korean industrial production was the largest rise of 2019. Output was 4.2% greater than in December 2018, and retail sales posted a 4.6% on-year advance last month. Both 12-month increase were the most in 14 years.

Canadian GDP growth stayed limp in November, edging up 0.1% on month and 1.5% on year. The monthly increase matched the largest rise since June. Canadian PPI inflation ticked up 0.1% in December and 0.3% on year.

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

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