Another Downturn in Stock Prices

March 31, 2020

Asian equities had a decent session with gains of 3.6% in India, 2.7% in Singapore, 2.2% in South Korea and 1.9% in Hong Kong, but Japan’s Nikkei closed down 0.9%. Conditions worsened in Europe, with equity market drops so far of 1.4% in France, 0.9% in Germany and 0.4% in France, and U.S. futures also point to a downturn.

10-year sovereign debt yields are down three basis points in the U.S. but rose 3 bps in Japan.

WTI oil staged a 4.0% rally overnight and is hovering near $21 per barrel after Trump spoke to Putin about stabilizing the market.

The price of gold is 1.5% lower.

The dollar rose mostly overnight, climbing 0.8% against the euro, 0.7% relative to the peso and Swiss franc, 0.6% vis-a-vis the loonie, and 0.5% versus the yen.

Being the final day of the month and quarter, a ton of data was released.

Japanese industrial production rose 0.4% on month but dropped 4.7% on year in February. Although Japan’s jobless rate held steady at 2.4% last month, year-on-year growth in jobs slowed sharply to 0.5%, and the job offers-to-job seekers ratio fell to a 37-month low. Retail sales in Japan had posted successive on-year declines of 2.1% in November, 2.6% in February and 0.4% in January but were 1.7% higher in February. Housing starts were 12.3% rewer than in the year-earlier month, whereas construction orders recorded a 0.7% uptick.

In China, the first country to experience the Covid-19 outbreak, the government-compiled composite purchasing managers index rebounded much more sharply than expected in March to a 2-month high of 53.0 from a record low in February of 28.9. Non-manufacturing leaped to 52.3 from 29.6, and manufacturing advanced to a 30-month high of 52.0 from 35.7 in February.

Euroland consumer prices rose 0.7% on month in March, but the inflation rate slowed to a 5-month low of 0.7% in March. Energy costs dropped 3.1% on month and 4.3% on year. Core inflation of 1.0% remained well below target.

The British current account deficit last quarter of GBP 5.561 billion was the smallest gap in almost nine years, yet the 2019 deficit still equaled a hefty 3.8% of GDP. British GDP flat-lined in the final quarter of 2019 but had similar calendar 2019 growth (1.4%) to that in 2018 (1.3%). British consumer confidence fell two index points to a 2-month low of -9 but easily beat market expectations of a reading close to -15.

French consumer prices were unchanged in both February and March, and were just 0.6% above their year-earlier level in March, which constitutes a 39-month low. French producer prices fell 0.6% on month and decelerated to an on-year pace of 0.2% in February. French consumer spending was hit in February by the Covid-19 pandemic and recorded a 0.1% monthly downtick after falling 1.2% in January.

German import prices fell 0.9% on month and 2.0% on year in February. German unemployment stayed at 5.0% in March, and the number of unemployed workers, which analysts were expecting would post a huge rise, instead went up just one thousand.

Italian consumer prices rose just 0.1% both on month and on year in March. The 12-month rate of increase was the smallest in 40 months. Meanwhile, Italian producer prices fell 0.4% on month and by 2.6% on year in February.

Portuguese CPI inflation fell to a 5-month low of 1.5% in March.

Spanish real GDP grew by 0.4% in each quarter of 2019 and by 2.0% in the full year. However, Spain has seen one of Europe’s worst Covid-19 attacks and is undoubtedly now in recession.

A 0.3% on-year increase in Swiss retail sales in February was a percentage point above expectations. Greek retail sales rebounded 3.3% in January and posted the largest 12-month rate of increase (8.4%) in almost three years.

Danish GDP growth in the final quarter of 2019 was revised up threefold to 0.6%.

Retail sales and industrial production in South Korea respectively fell on year by 6.0% and 3.8% in February. Those were the worst results in 5 years and 9 years, respectively. The index of South Korean manufacturing sentiment fell to a 132-month low of 56 in March from readings of 65 in February and 76 in January.

Retail sales in Hong Kong sank by a record 46.7% on year in February.

Australia’s CBA-compiled composite purchasing managers index fell 8.3 points to a record low in March of 40.7, and a 39.8 services PMI reading also represents a record low. The manufacturing PMI of 50.1 was barely in the black. But new home sales in February were a decent 6.2% greater than a year earlier.

New Zealand building permits rose 4.74% in February, more than offsetting a 2.8% drop the month before. But business confidence in New Zealand crashed this month to a reading of -63.5, which is the lowest since late 2005.

Canadian monthly GDP grew only 0.1% in January following a 0.3% rise in December but a sequence of no change in September, a 0.1% dip in October and a 0.1% rise in November. Growth was already very tepid before the Covid-19 pandemic. The Bank of Canada implemented three interest rate cuts during March, each by 50 basis points and took additional unconventional actions to inject liquidity and encourage lending. Canadian producer prices fell 0.5% on month and 0.3% on year in February.

The U.S. Case-Shiller house price index rose 0.3% on month and 3.1% on year in January. Still to come: the Chicago regional purchasing managers survey and Conference Board U.S. consumer confidence index .

As March winds down, Covid-19 indentified cases worldwide surpass 800K, and there have been more than 39K deaths.

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




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