Additional Leap in U.S. Covid Cases; Euroland 3Q GDP and U.S. PPI Headline Data Menu

November 13, 2020

The dollar is slightly weaker today, with overnight losses of 0.4% against the peso, 0.3% versus sterling, 0.2% vis-a-vis the yen and Australian dollar, and 0.1% relative to the Swiss franc. The dollar is also unchanged against the yuan and euro.

Covid News continued to weigh on Asian equities, which dropped 0.9% in China, 0.7% in South Korea, and 0.5% in Japan. President Trump’s executive order banning U.S. firms from investing in Chinese companies deemed to be supportive to Beijing’s military didn’t help, either. However, European share prices are marginally up, and U.S. futures point to a somewhat larger rise.

The price of West Texas Intermediate crude oil fell 1.9%. Gold firmed 0.7%.

Ten-year German bund and British gilt yields slipped two and one basis points.

There’s been another quantum jump in the pace of new Covid cases in the United States. Not long ago, it was big news when the daily increase topped 80k, and it the last 24 hours that barrier was doubled with a leap of 161k. Global deaths from the disease continue to hover near 10k per day. Sweden joined other European governments in tightening restrictions against social gatherings.

With Arizona now declared for Biden’s electoral count column, the President-Elect has a lead of 290 to 217. President Trump maintains his silence, neither conceding the election not acknowledging the deteriorating covid numbers.

Real GDP in the euro area rebounded 12.6% in 3Q, trimming its four-quarter rate of decline to 4.4% from 14.8% in 2Q and 3.3% in 1Q. Employment in the joint current area increased by a record 0.9% on quarter but remained 2.0% below the third quarter of 2019 level.

Non-annualized third quarter-over-second quarter growth rates in Euroland’s four largest economies were estimated as follows: 18.2% in France, 16.7% in Spain, 16.1% in Italy, and 8.2% in Germany. On-year growth in these four countries were all significantly negative nonetheless: -4.2% in Germany, -4.3% in France, -4.7% in Italy and -8.7% in Spain.

Quarterly and on-year growth in other European countries last quarter were +7.7% and -2.5% in the Netherlands, +10.7% and -5.2% in Belgium, +11.1% and -5.3% in Austria, +13.3% and -5.7% in Portugal, +2.6% and -3.9% in Finland, +4.3% and -3.5% in Sweden, +6.2% and -5.8% in the Czech Republic, +7.7% and -1.6% in Poland, +11.3% and -4.7% in Hungary, +5.6% and -6.0% in Romania, and +9.4% and -4.4% in Cyprus. Because of the second Covid wave, fourth quarter growth is likely to return to the red in much of Europe.

Euroland’s seasonally adjusted trade surplus widened EUR 3 billion on month to EUR 24.0 billion in September. Monthly export growth of 4.0% outpaced a 2.7% increase in imports, but exports were still 7.9% below their pre-pandemic February level. The year-to-date unadjusted surplus was a marginal 0.4% narrower than the year-earlier level.

U.S. producer price inflation ticked up 0.1 percentage points to a 7-month high of 0.5% in October, led by an 0.8% monthly advance in the energy component. Core PPI slipped 0.1 percentage point to 1.1% last month.

There was a surprise in the Bank of Mexico‘s interest rate announcement late Thursday. Instead of a 25-basis point cut as widely anticipated, the overnight interbank interest rate was left unchanged at 4.25% over the dissent of one policymaker who favored the expected outcome. Mexico’s policy interest rate had previously been cut seven times between February and September by a total of 3 percentage points. A released statement after this week’s review suggests that easing is probably not yet done: “This pause provides the necessary room to confirm that the trajectory of inflation converges to the target.” Inflation is currently at 4.1%, 1.1 percentage points above the medium term target.

The Central Reserve Bank of Peru Board of Directors also held a policy review yesterday and decided to keep its policy rate at 0.25%, the level since a pair of one percentage point reductions in February and April. A statement projects that in view of weak domestic demand inflation is likely to hover around the target range floor next year.

Chinese central bank policymakers again injected liquidity into their money market today.

Malaysian third-quarter GDP soared 18.2% in 3Q after plunging 16.5% in 2Q. Compared to the third quarter of 2019, GDP was down 2.7%. Malaysia’s third-quarter current account surplus of MYR 26.1 billion was the widest in nine years and up from MYR 12.1 billion a year ago.

Real GDP in Hong Kong rose 2.8% last quarter but was 3.5% smaller than a year earlier. That was the fifth straight quarter with negative year-on-year growth.

The Swiss combined PPI/import price index was flat on month in October but recorded its smallest year-on-year decline (-0.7%) in seven months. Domestic producer prices fell 1.6% on year, while import prices posted a 5.6% year-on-year drop.

Spanish consumer prices rose 0.5% last month but posted their most negative year-on-year comparison (-0.8%) since May. French consumer prices in October were unchanged from September and a year earlier.

German wholesale prices rose 0.2% in October, resulting in a 1.9% drop from a year earlier. On-year WPI deflation had been -4.3% last April and May and at -1.8% in September.

The revival of Turkish industrial production and retail sales both slowed in September, but they posted ample year-on-year advances of 8.1% and 7.8%. Back in April the 12-month changes were respectively -31.3% and -20.5%.

India’s trade surplus widened to a 2-month high of $5.796 billion in September. The January-September surplus of $40.88 billion was 1.4% bigger than a year earlier.

New Zealand’s manufacturing purchasing managers index fell back to a 2-month low of 51.7. Such has exceeded the 50 level that divides expansion from contraction in each of the past five reported months.

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

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