Coronavirus Infections Kicking into Higher Gear

October 21, 2020

The trend in new cases of Covid-19 are intensifying and becoming more dispersed in both Europe, where many governments have been compelled to reimpose restraints on social activity, and the United States where the 24-hour increase again topped 60k.

Optimism has swelled that a U.S. fiscal stimulus may get passed before the election. Talks continued after the Pelosi deadline passed, and she made some upbeat remarks about their progress. House Democrats and President Trump want a deal, but the wild card is Senate Republicans’ continuing reluctance. Red states have not been as inconvenienced as much as blue states by the pandemic.

Trade talks between the EU and British government do not appear any closer to a deal in spite of some optimism expressed by Barnier, the EU negotiator.

As earlier this week, markets have taken their cue from things said rather than released data. In other developments, a member of the Bank of England monetary policy committee asserted that chances of additional stimulus have increased, and a Bank of Japan Board member echoed that policy may have to be conditionally loosened if the pandemic counters recovery trends. The Reserve Bank of India is believed to have intervened to counter buying pressure on the rupee.

The dollar fell to a 2-1/4 year low against the Chinese yuan and one-month lows against the yen, euro, and its trade-weighted index. Compared to Tuesday closing levels, the dollar shows declines of 0.9% against sterling, 0.7% relative to the kiwi, 0.6% vis-a-vis the yen, 0.4% versus the yuan and Australian dollar, 0.3% against the yuan, 0.2% versus the euro and 0.1% relative to the Canadian currency.

Equity markets in the Pacific Rim closed up 0.8% in Hong Kong, 0.4% in India, and 0.3% in Japan, but stock market performance turned negative in Europe share prices so far today have lost 1.2% in Italy and the U.K., 1.1% in France, 1.0% in Spain and Switzerland, and 0.9% in Germany. U.S. stock futures are down, too.

Ten-year sovereign debt yields have risen by 4 basis points in the U.K., 3 bps in the U.S., and a basis point in Germany.

British consumer price inflation rebounded from August’s 56-month low of 0.2% to a 2-month high of 0.5% in September and was accompanied by a rise in core CPI to 1.3% and retail price inflation to 1.1%. Those levels also represented two-month highs. Producer output price inflation printed at minus 0.9% for a fourth straight month, while producer input inflation was less negative than in August at -3.7%.

The British fiscal debt to GDP ratio swelled to a 60-year high of 103.5% in September.

The preliminary estimate of Australian retail sales volume for September is a monthly drop of 1.5% after -4.0% in August.

South Korean PPI inflation was negative in September for a seventh consecutive month but by the smallest amount (0.4%) in that whole streak.

Malaysian consumer prices were unchanged in September compared to August and also matched the prior month’s year-on-year decline of 1.4%.

A 1.8% August rise in Polish retail sales during August got reversed in September.

Belgian consumer confidence in October printed at a two-month low of -17. That’s not so far from the pandemic trough of -26 in April and again matched in August.

The Westpac-compiled Australian index of leading economic indicators is showing “consistent improvement,” rising 0.22% in September and in each of the last five reported months.

Namibia’s central bank policy interest rates was held steady at 3.75% at the latest review. A sequence of five cuts earlier this year totaled 275 basis points, the last 25 bps of which was done in August. Namibian monetary policy aims to preserve a 1:1 link with the rand and thus dovetails closely with what officials at the South African Reserve Bank are doing.

Mexico’s jobless rate dipped 0.1 percentage point to 5.1% in September but was still 1.3 percentage points higher than a year earlier.

Canadian data reported today showed a 0.4 percentage point acceleration of CPI inflation to a 3-month high of 0.5% in September accompanied by a higher core CPI inflation rate of 1.0%; a 0.4% rise of retail sales in August that was only a third as much as forecast; and a 32-month high in new house price inflation of 3.2% in September.

Turkish monetary policy officials are reviewing their stance today. Their key interest rate was hiked by 200 basis points last month to counter lira weakness that has lifted inflation. Strain on the currency has been amplified by regional military conflicts.

The Federal Reserve Beige Book that chronicles regional economic conditions in the United States and serves as a useful input for the FOMC will be released this afternoon.

The last U.S. presidential debate is scheduled tomorrow. Also, the Senate Judiciary Committee will vote tomorrow to confirm the nomination of Amy Coney Barrett to the Supreme Court.

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

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