The Debate, Central Bank News, and More Data to Digest
October 8, 2020
Any reaction to the single U.S. vice presidential debate last night has already been squashed by just-breaking news regarding the second presidential debate scheduled for October 15th in Miami. The debate commission decided that debate should be held virtually rather than in person inasmuch as President Trump and many of his advisers have Covid, and Trump quickly countered that he will not participate in anything but a face-to-face debate. As for last night’s event, the discussion was at least intelligible. Pence habitually ran over his time limit, consistently avoided answering questions, and managed often to flip the conversation into an examination of the Biden-Harris record as public servants rather than a referendum on the Trump years. But most likely, few voter watchers changed their minds.
Announcements yesterday by the National Bank of Poland and Central Reserve Bank of Peru left policy interest rates unchanged at record lows of +0.1% and 0.25%, respectively. Poland’s reference rate in three moves this spring had been slashed by 140 basis points, and Peru’s rate underwent back-to-back 100 basis point cuts in March and April. A statement from the NBP observed that the recovery’s pace had slowed in August and asserted that stimulative credit policy is needed to diminish the chance of inflation falling below target in the medium term. Peruvian monetary officials expect sub-target inflation for the rest of 2020 and defended the need for a prolonged application of accommodative monetary policy.
FOMC minutes express concern that a lack of continuing fiscal aid could hurt the U.S. recovery. This danger has been reinforced by similar rhetorical sentiments express ed by Fed officials such as Minneapolis Fed President Kashkari and Chicago Fed President Evans.
Bank of Japan Governor Kuroda gave a speech that in upbeat fashion observed Japan’s continuing recovery and stable financial market conditions.
The National Bank of Serbia’s policy interest rate was retained at a record low 1.25% as had been expected after today’s review. The rate had been cut 50 basis points in March and 25 bps each in April and June.
The Central Bank of Botswana’s key interest rate was sliced 50 basis points to 3.75% today.
Minutes from the European Central Bank’s policy review meeting last month speak of weak demand, excess capacity, and soft wage and price inflation, and they reaffirm a willingness to use all tools to lift inflation towards its medium term target.
In spite of a very strong session in U.S. stock market trading on Wednesday, the dollar overnight moved hardly at all. On balance, the U.S. currency is unchanged against the yen and sterling and up just 0.1% relative to the euro and Swiss franc.
Equity values rose overnight in Europe and Asia including gains of 1.0% in Japan and 0.5% so far in the U.K.. U.S. futures are higher, too.
With the big hurricane Delta on a course toward Louisiana, the price of West Texas Intermediate crude oil climbed 1.8% overnight. Gold firmed 0.3% and is hovering very near to $1900 per ounce. Ten-year sovereign debt yields are down two basis points in the United States and Germany and by a basis point in Great Britain.
Monthly German and Japanese current account figures were reported. The German surplus of EUR 16.5 billion in August was slightly above year-earlier surplus of EUR 15.9 billion, but the year-to-date EUR 139.2 billion surplus continues to run below the year earlier pace of EUR 153 billion. Germany’s seasonally adjusted merchandise trade surplus narrowed to EUR 15.7 billion from EUR 18.0 billion in July. The trade surplus had imploded from a EUR 17.4 billion per month pace in the first quarter to just EUR 8.4 billion per month in 2Q but has recouped most of that slide.
Regarding Japan, the current account surplus widened in August to a 6-month unadjusted high of 2.103 trillion yen and was close to its year-earlier level of JPY 2.135 trillion. The seasonally adjusted surplus jumped from JPY 964 billion in July to 1.648 trillion yen in August, with exports posting an 8.8% monthly jump but imports slipping by 0.7%.
Japan’s economy watchers index, a gauge of retail worker perceptions economic activity, jumped 5.4 points to a 2-year high of 49.3 in September.
Indonesian retail sales rose 1.3% on month in August, shaving their year-on-year decline to a 5-month low of 9.2%. Consumer confidence in Thailand settled back from a 6-month high of 51.0 in August to a 2-month low of 50.2 in September. Czech retail sales in August were unchanged from their year-earlier level. Brazilian retail sales, which had tumbled to 17.1% below their year earlier level in April, had by August recovered to 6.1% above that month’s year earlier level.
The number of new U.S. weekly jobless insurance claims last week fell less than forecast to 840k, further depicting a flattening pattern, but a one million decline in continuing claims during the week of September 26th was significantly larger than street forecasts.
Price data released this Thursday showed 1) Taiwan‘s smallest on-year drop in wholesale prices (8.12%) in half a year, 2) a 0.6% on-year decline in Taiwanese consumer prices (their most deflationary point in three months), 3) little change in Mexican CPI inflation, which held at 4.0% in September, 4) a 3-month high of 1.1% in Dutch CPI inflation last month, 5) a 1.2% on-year drop in Irish consumer prices (their most deflation in a decade), and 6) drops of a half percentage point and 0.7 percentage points in Hungarian total and core CPI inflation to 3.4% and 4.0%, respectively, during September.
The British Royal Institute of Chartered Surveyors’ housing price balance index rose to an 18-1/4 year high of 61% in September from 44% in August.
Canadian housing starts fell back 20% on month in September after spiking in August.
Much of the Pence-Harris debate last night centered on the Trump administration’s handling of the Covid-19 pandemic. Pence claimed America’s record had been top-notch and diverted blame to Beijing’s secrecy in misleading the world about the illness. Harris missed a big opportunity in not pointing out that even though the U.S. accounts for just 4% of the world population, it has 21.3% of global cases and 20.4% of reported deaths. Whatever deception China did, all governments around the world were equally handicapped in responding to the disease. If the Trump Administration’s handling of the matter were really the best, America would not be leading the world in number of cases and number of resulting deaths — not with just 4% of the population. Meanwhile, the pace of newly reported Covid cases is rising in a majority of U.S. states, and the total new U.S. cases exceeded 50k in the past 24 hours, which is a higher daily increment than had been experienced lately.
Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: German current account, Harris-Pence debate, Japanese current account, U.S. jobless insurance claims