Covid Concerns, U.S. Political Tensions, Disinflation, and Weak Demand
November 10, 2020
Yesterday’s vaccine news spurred a stock market rally, but pandemic prospects remain poor until vaccines and therapeutic treatments are widely available. The public is being warned of a grim winter just ahead. New global Covid cases topped half a million yesterday, including a fresh record U.S. number exceeding 130k. U.S. hospitalizations are hovering near 60k.
Joe Biden won on a message of unity, but Republicans are having little of it and are almost unanimous in backing President-Reject Trump’s barrage of lawsuits to destabilize the presidential transition process.
Aside from a 0.6% drop against sterling, there was little net movement overnight in major dollar relationships.
Stock markets in the Pacific Rim jumped 3.7% in Singapore, 2.0% in Indonesia, 1.6% in India, 0.8% in New Zealand and 0.7% in Australia but only 0.3% in Japan. The Chinese and Taiwanese equity exchanges fell 0.4%. In Europe, the British Ftse climbed 1.2%, but the German Dax firmed only 0.1% further. In futures trading, the S&P and Nasdaq show losses, but the DJIA has extended Monday’s rise.
Ten-year sovereign debt yields rose two basis points in Germany, Great Britain and the United States and by three basis points in Japan. Commodity prices have strengthened, with gold advancing 1.3% and WTI oil up 0.7%.
Price data released today were mostly weaker than expected.
- An unexpected 0.3% monthly drop in Chinese consumer prices in October depressed the 12-month advance by 1.2 percentage points to an 11-year low of 0.5%. The on-year change in producer prices was negative for a ninth time in a row, sliding 2.1%.
- Greek consumer prices fell 1.8% between October 2019 and last month.
- Danish CPI inflation of just 0.4% in October constituted a 4-month low.
- Hungarian CPI inflation slowed 0.4 percentage points to a 4-month low of 3.0%.
- Czech CPI inflation decelerated 0.3 percentage points to a 5-month low of 2.9%.
- Norwegian PPI inflation has been negative for the past year and a half, including a year-on-year drop of 6.0% in October. CPI inflation of 1.7% was as expected.
Financial market sentiment toward the German economy suffered a larger-than-forecast setback in November when the ZEW Institute expectations index tumbled 17.1 points to a 7-month low of 39.0. Such had crested at 77.4 two months earlier. The appraisal of Germany’s current situation slid 4.8 index points to a 2-month low of -64.3. Euroland’s expectation index likewise dropped sharply to a 7-month low.
Italian industrial production sank 5.6% in September, close to triple the anticipated decline, and was 5.1% weaker than in September 2019.
Despite a monthly increase, French industrial production in September remained 5.1% below its pre-pandemic level and 6.9% weaker than a year earlier.
Finnish industrial production fell 2.1% in September, its biggest monthly drop in five months, and was also 6.0% lower than a year earlier.
Saudi Arabian real GDP, down 4.2% from the third quarter of 2019, recorded a fifth consecutive on-year decline last quarter.
GDP in the Philippines posted a third straight year-on-year decline, this time of 11.5% in 3Q after drops of 16.5% in the second quarter and 0.7% in the initial quarter of 2020.
Cleveland Fed President Mester identified a continuing need for the central bank’s emergency lending measures, even as Senate Majority leader McConnell argued for a smaller rather than forceful fiscal stimulus in light of the promising news on the Covid vaccine development front.
There were also some upbeat data reports today.
British labor statistics unexpectedly revealed another monthly decline in jobless claims as well as a sizable acceleration of wage inflation. However, the 4.8% jobless rate last quarter was the highest since the autumn of 2016. In a separate report from the British Retail Consortium, same store sales exceeded their year-earlier level by 5.2% in October.
Swedish household consumption increased 0.6% in September.
Turkish unemployment dipped 0.2 percentage points in August to 13.2%, which was also 0.8 percentage points lower than in August 2019.
Japanese exports recorded a smaller 4.2% on-year drop in September after plunging 15.5% on year in August. The seasonally adjusted current account surplus was ample at JPY 1.346 trillion in the latest months. Also, Japan’s economy watchers index jumped 5.2 index points to a 79-month high of 54.5 in October.
South African factory output in September rose 3.2% on month, resulting in the smallest year-on-year drop since February.
The Australian business confidence index jumped 9 index points to a 17-month high of +5 in October, and business conditions edged up an index point to a 9-month high of +1.
U.S. small business sentiment last month matched September’s reading of 104, not far below last February’s 104.5 reading and up from 90.9 in April.
The U.S. will release the monthly JOLTs index of job openings, hires and separations later this morning, and the IBD/TIPP optimism index is also on today’s menu.
Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Chinese CPI and PPI, German ZEW expectations index, Japanese current account