T Minus Five Weeks and Counting

September 29, 2020

The U.S. presidential and congressional elections are just five weeks away, and the first of three debates between Donald Trump and Joe Biden takes place in Cleveland tonight. In the wake of Trump tax information disclosed in the New York Times, that figures to be a major discussion topic, as will be America’s unfavorable handling of the pandemic, the Republican rush to fill a Supreme Court vacancy before the election, and the still-stalled congressional talks over a fiscal package.

Deaths attributed to the global pandemic have now topped 1 million, 21% of which have been reported in the United States. It had seemed in August that the pace of new Covid-19 cases would be much lower around the time of the election. However, Europe has seen the start of a second wave, and the pace of new cases is rising in the United States, too.

Today also marks the start of a fresh round of Brexit talks between the EU and U.K. amid signs of greater willingness of the sides to negotiate.

Yesterday was a good day for worldwide stock markets, but that rally has petered out. Share prices closed down by 0.9% in Hong Kong, 0.8% in New Zealand, 0.6% in Indonesia, 0.5% in Singapore and just 0.1% firmer in Japan. Equities in Europe so far are down 0.4% in the U.K., Germany, and Italy.

The dollar slipped overnight by 0.8% against the Australian dollar, 0.7% versus the Mexican peso, 0.5% vis-a-vis the kiwi, 0.4% relative to the euro, and 0.2% against sterling and the Swiss franc. The U.S. currency edged up 0.2% against the yen and 0.1% versus the yuan.

Ten year German bund, British gilt and Japanese JGB yields are a basis point softer.

WTI oil is 0.8% weaker, while gold has firmed 0.5%.

Today’s economic data releases feature several economic sentiment reports, particularly the monthly economic sentiment survey of the euro area. Such recovered in September by a further 2.3 points to a 6-month high of 91.8. Sentiment in the service, retail, and construction sectors also reached 6-month highs, as did consumer confidence. The industrial sector index was at a 7-month high.

Swedish consumer confidence and business sentiment improved to 6- and 7-month highs. While business sentiment printed only 3.3 points below February’s pre-pandemic level, however, consumer confidence still trails February’s level by 10 points.

Danish business sentiment weakened in September for a second straight time to a 4-month low.

French consumer confidence has plateaued since April and with a score of 95 remains considerably weaker than 104 back in February.

Greek consumer confidence and business sentiment dropped to 2-year and 3-month respective lows in September. Finnish business sentiment dropped to a 3-month low, and consumer confidence sagged to a 4-month low. But in Austria, those indicators improved to 6- and 7-month highs.

Spanish business sentiment printed at a 6-month high but was negative for a thirteenth consecutive month at -9.1 in September.

Portuguese consumer confidence slipped to a 2-month low, whereas business confidence there had its least negative reading in a string of four straight months.

South Korean industrial production and retail sales posted year-on-year changes in August of -3.0% and +0.3%. Construction output was a substantial 9.4% weaker than in August 2019.

Portuguese retail sales dropped 1.4% on month and 4.5% on year in August. Spanish retail sales increased for a fourth straight time but was still 2.4% below the August 2019 level.

South African unemployment fell to an 11-year low in the second quarter but remained above 20% at 23.3%. Irish unemployment increased to 5.4% in September, while Hungary’s jobless rate of 4.6% in June-August compared unfavorably to 3.4% a year earlier.

British mortgage approvals jumped to 84.7K last month, the largest monthly level since 2007, and the M4 money aggregate was 12.1% greater than in August 2019.

German CPI inflation was non-positive in September for a third straight month and, at -0.2%, recorded the greatest year-on-year drop since the first month of 2015. Consumer prices also slid 0.2% compared to the prior month.

Tokyo consumer prices in September fell 0.2% on month and posted the smallest on-year increase in five months. Core CPI was 0.2% below the September 2019 level.

Italian producer prices in August rose 0.1% on month and recorded the smallest year-on-year drop (3.0%) since February.

Producer price deflation in Singapore has persisted since February, and the 9.4% on-year decrease in August was the greatest 12-month rate of decline since -14.6% in May.

The early-bird advanced estimate of the U.S. goods and services trade deficit widened 3.5% on month further in August to $82.94 billion. The trade gap has widened considerably during the pandemic.

The Case-Shiller house price index for 20 U.S. metropolitan areas posted a 3.9% on-year advance in July, 0.4 percentage points above June’s outcome.

Still Ahead: Conference Board estimate of U.S. consumer confidence.

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



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