Counting Down the Days
October 20, 2020
It’s T-minus two weeks to the U.S. presidential and congressional election. In national polls, Biden leads by just under 10 percentage points, but suspense continues because of Trump’s refusal to say he will honor the result, the electoral college distortion that necessitates a Democrat to secure a 5% or greater popular vote plurality in order to win overall, and the huge surprise in the last presidential vote. Over the ensuing four years, the dollar has risen 0.8% on balance against the Japanese yen but declined by 2.7% in trade-weighted terms and 6.5% relative to the euro. The 10-year Treasury then was yielding 108 basis points more than now at 1.86%. The world public and financial markets know that much is at stake. There is one more debate scheduled the day after tomorrow.
Yesterday happened to be the 33rd anniversary of the largest-ever percentage drop in the Dow Jones Industrial Average, and October 19th fell on a Monday in both years. The Dow Jones Industrial Average fell 411 points yesterday, equivalent to 1.4%. A 508-point collapse on October 19, 1987 equaled 22.6%. Following yesterday’s U.S. stock market decline, share prices in the Pacific Rim traded mixed, declining y 0.7% in Australia, 0.6% in Singapore, 0.5% in Indonesia and 0.4% in Japan but rising 0.6% in New Zealand, 0.5% in China and South Korea, and 0.3% in India. Likewise, markets so far today are down 0.2% in Germany and Switzerland but up 0.7% in Italy and France.
Compared to Monday closing rates, the dollar is unchanged against the yuan, loonie and sterling, up 0.7% relative to the kiwi, 0.4% versus the Australian dollar and 0.2% vis-a-vis the yen, but down 0.3% relative to the euro and Swiss franc.
Today’s is the deadline U.S. Speaker of the House Pelosi had set for getting a pre-election fiscal stimulus done. President Trump needs to agree to a Congressional compromise now, or it will need to wait until the election has passed. Ten-year sovereign debt yields are up a basis point today in Germany and Great Britain as well as the United States.
The price of West Texas Intermediate crude oil climbed 0.4% so far today, while gold has settled back 0.2%.
Minutes from this month’s Board meeting of the Reserve Bank of Australia assert that the recovery has begun but remains contingent of how the pandemic is handled, and they reveal that policymakers mulled over the range of policy tools that could be loosened further to lend support to the upturn.
The People’s Bank of China 1-year and 5-year loan prime rates as expected were left unchanged at 3.85% and 4.65%, respectively. They have been at those levels since a cut at the April monthly fixing.
Tuesday hasn’t been a big day from a data release standpoint.
German producer prices unexpectedly rose 0.4% in September, trimming their 12-month rate of decline to a six-month low of 1.0%.
Portuguese PPI deflation of 4.6% last month was also its least negative since March, but Polish PPI deflation (-1.6%) was the most negative since May.
Euroland’s seasonally adjusted current account surplus in August rose 2.9 billion euros to a 2-month high of EUR 19.9 billion. That’s still considerably smaller than the pre-pandemic monthly average of EUR 33.1 billion in the first quarter of 2020. The unadjusted surplus over the past dozen reported months equaled 2.0% of GDP.
Unemployment in Hong Kong in July-September rose to 6.4%, highest since the beginning of 2005 and up from 3.3% in the final quarter of 2019.
House price inflation in China slipped to a 53-month low of 4.6% in September.
The South African leading business index jumped by 3.7% in August, marking its biggest month-to-month increase in 10-1/2 years, but such an extreme merely reflects a rebound from extreme declines earlier in the year.
U.S. housing starts last month increased to a 2-month high by a smaller-than-forecast 1.9% and were 11.1% greater than a year earlier. Building permits rose 5.2% on month and 8.1% on year. Reported new Covid cases in the United States during the past 24 hours remained quite elevated, but deaths still haven’t accelerated in kind.
Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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