Stocks Up, Dollar Marginally Lower, and Trump Out of the Hospital

October 6, 2020

Share prices overnight rose 1.5% in India, 1.2% in Taiwan, 0.8% in Indonesia, and 0.5% in Japan. Markets have also climbed 0.7% in New Zealand and 0.3% in Australia. In Europe so far, equities have risen 1.0% in Spain, 0.8% in Italy , 0.5% in France, 0.3% in Germany but just 0.1% in Great Britain.

The price of West Texas Intermediate crude oil has advanced 1.6%. Gold and 10-year sovereign debt yields are little changed.

The dollar has fallen 0.2% against the Swiss franc and Mexican peso and by 0.1% relative to the yen and euro, but it is up 0.2% vis-a-vis sterling.

After a comparatively short three-night stay in the hospital, U.S. President Trump returned to the White House and, generalizing from his own experience, downplayed the threat from the coronavirus while praising the expertise and competence of his medical care. It remains to be seen if he continues to get better.

The Reserve Bank of Australia again left its Official Cash Rate at a record low of 0.25%. The only two 25-basis point reduction so far this year were both made in March, but the rate been cut previously by 75 basis points last year. Moreover, street analysts aren’t ruling out the possibility of another cut. A released statement concludes

The Board is committed to do what it can to support jobs, incomes and businesses in Australia. Its actions, including last month’s decision to expand the Term Funding Facility, are keeping funding costs low and assisting with the supply of credit. The Board views addressing the high rate of unemployment as an important national priority. It will maintain highly accommodative policy settings as long as is required and will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band. The Board continues to consider how additional monetary easing could support jobs as the economy opens up further.

Australia’s government meanwhile presented its federal budget today, which packs A$100 billion of fiscal stimulus and will raise its debt to nearly A$ 1 trillion.

Released Australian data today include a 22-month low in the trade surplus of A$ 2.64 billion in August and an 18-month high in the construction purchasing managers index of 45.2.

Euroland’s construction purchasing managers index slipped back to a 4-month low of 47.5 in September, marking the seventh consecutive sub-50 monthly outcome. The deterioration in September was led by Germany, whose construction PMI fell 2.5 points to 45.5.

On a brighter note, German factory orders posted a fourth straight increase in August, this time of 4.6%. Even so, the level of orders was 3.6% lower than February’s pre-pandemic high in February and 2.2% below the level in August 2019.

Swedish industrial production jumped 7.8% in August, trimming the year-on-year rate of decline to only 0.2%.

Iceland’s trade deficit narrowed to a 4-month low in September. While imports were 5.8% smaller than a year earlier, exports posted a 22.2% advance.

The British construction purchasing managers index rose 2.2 index points to a 2-month high of 56.8 in September.

India’s service-sector and overall composite purchasing manager indices printed in September at 7-month highs of 49.8 and 54.6, respectively. The improvement reflected less stringent social gathering restrictions.

South Korean CPI inflation accelerated to a 6-month high of 1.0% in September, while Filipino CPI inflation that month settled back to a 4-month low of 2.3%.

Indonesian consumer confidence index retreated to a 4-month low of 83.4 in September, which was only slightly better than May’s low of 77.8 and well behind to end-2019 level of 126.4.

Ironically in the last U.S. balance of trade report before next month’s election, the goods and services trade deficit widened by $3.7 billion to $67.1 billion in August, which is the second largest imbalance ever next to the record set fourteen years earlier. Reducing the trade deficit has been one of President Trump’s top and most consistent economic policy priorities.

The Canadian trade deficit narrowed slightly on month to C$ 2.45 billion in August but was 71.5% bigger than the August 2019 deficit.

The U.S. Labor Department indices of job hires and separations, known as the monthly JOLTS data, will be reported later this morning.

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


Tags: , , ,


Comments are closed.