Markets Pausing for Next Big Theme

September 9, 2020

Equities recorded further considerable losses in Pacific Rim trading overnight but have stabilized in Europe. Share prices closed down 1.9% in China, 2.2% in Australia, 1.3% in Indonesia, 1.1% in South Korea and 1.4% in New Zealand. But the Swiss and German markets have rebounded 0.6%, and those in the U.K. and France are up 0.5% and 0.3%.

The trade-weighted dollar touched a 1-month high. Ahead of tomorrow’s policy meeting at the European Central Bank when forecasts will be updated, the dollar gained very modest ground overnight against the euro and has swung from a 16-month low at the start of September to a 4-week high.

Ten-year sovereign debt yields are unchanged from Tuesday closes in the United States, Germany, and Great Britain. The 10-year Japanese JGB yield has settled back to 0.02%.

West Texas Intermediate crude oil recovered 1.1% overnight, while the price of gold retreated another 0.7%.

Coronavirus news has been mixed. One of the highly touted vaccines had to halt trials, and there have been another quarter million new cases identified worldwide in the past 24 hours. But the pace of new cases and deaths continues to slow in the United States, amounting to about 28k and less than 500 in the past 24 hours.

No huge data surprises have been reported. Chinese CPI inflation dropped 0.3 percentage points to a 3-month low of 2.4% in August, and a 2.0% year-on-year decline in producer prices was the smallest in five months.

A 23.8% on-year decrease in Japanese machine tool orders during the year to August was its smallest 12-month drop in 11 months. Like bank lending, Japanese money growth is responding to the Bank of Japan’s stimulative stance. M2 money growth rose in year-on-year terms from 2.4% in 2019 to 3.0% in the first quarter, 5.3% in 2Q, 7.9% in July and 8.6% in August.

Dutch factory output in July posted the smallest on-year decline (5.8%) since March.

Consumer confidence in Thailand improved to a 6-month high in August, and the Westpac consumer sentiment index for Australia jumped 18.0% in September, reversing steep back-to-back deterioration in prior two months of July and August.

The ANZ business confidence gauge for New Zealand strengthened in September to a 7-month high, and Australian home loans recorded a 10.7% monthly advance in July.

Greek industrial production, which had posted a 16.1% on-year drop back in April, recorded a third straight month-on-month rise in July and was just 0.2% less than its year-earlier level.

But labor market data are lagging behind the recovery of other indicators. Ireland’s jobless rate of 5.2% in August marks a 14-month high, and the Swiss seasonally adjusted 3.4% jobless rate last month was the highest its been in 2020.

Portugal’s trade deficit of EUR 716 million in July was the smallest in four years but mainly because imports had tumbled 21.2% over the past year.

Mexican consumer prices rose 0.4% on month, and the 12-month rate of increase (4.05%) represents a 15-month high, while CPI inflation in Hungary swelled 0.1 percentage point to a 5-month high of 3.9%.

The Bank of Canada will unveil its latest policy rate decision shortly but is not expected to change the record low 0.25% level. Canadian housing starts data, and the U.S. Labor Department’s monthly JOLTs survey are due today as well.

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


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