A Drop in Sterling and China Records a Record Trade Surplus

December 7, 2020

The dollar is unchanged from the Friday closing levels against the euro, yen and Swiss franc and shows insignificant net changes against the loonie, kiwi, Australian dollar and yuan. But a big 1.0% appreciation has occurred against sterling amid news that the EU and U.K. trade negotiators remain far apart with time running out for a post-Brexit trade arrangement.

China’s $75.42 billion trade surplus in November was 29% wider than October’s surplus and the largest monthly surplus in records going back to the start of 1981. Imports were 21.1% greater than a year earlier, and import growth of 4.5% fell short of analyst expectations. China also reported a $50 billion month-on-month leap in international reserves to a 51-month high of $3.178 trillion at end-November. U.S. President Trump announced new trade sanctions against China, which were more a focus to Beijing’s crackdown on Hong Kong than the failed U.S. effort to curb the Chinese trade surplus.

Stock market performances in Asia were widely mixed, with declines of 1.2% in Hong Kong and 0.8% in both China and Japan but advances of 2.1% in Indonesia, 0.9% in Taiwan, 0.8% in India, and 0.5% in South Korea. The British Ftse was buoyed by sterling’s decline, but Continental European share prices are mostly lower.

So are 10-year sovereign debt yields, which have dropped 5 basis points in the U.K. and 3 bps in both Germany and the United States. Likewise, the prices of WTI oil and gold have eased 0.9% and 0.2%.

U.S. congressional negotiators reportedly made further progress in reaching an agreed fiscal stimulus of a tad over $900 billion. Trump campaigning in the Georgian senate races made headlines by continuing to insist that he will ultimately win the presidential contest. But any proof of his allegations remains missing, and President-Elect continues to move forward on selecting his cabinet.

New global Covid cases surpassed 1.8 million cases, and deaths totaled nearly 30 thousand. In the U.S., there were more than 625k new cases and over 6k deaths from the disease, but in both the United States and Europe, Sunday was the best day of the period. Lockdowns seem to be helping.

A 3.2% monthly increase in German industrial production in October was the most in 4 months, beat analyst expectations by a factor of two, and cut the on-year decline to a ten-month low of 3.0%.

Swedish industrial production rose 1.2% in October, resulting in the first on-year increase (0.2%) since March. In contrast, Danish industrial output dropped 5.8% on month and 10.9% from October 2019 — both being the weakest comparisons since July. And Norwegian industrial production fell 3.5%, resulting in zero change from a year earlier, ending a streak of positive results going back to October 2019. Chech retail sales in October fell 1.9% on month and 0.9% on year.

The Sentix measure of investor sentiment toward the euro area economy jumped more than expected to a 10-month high of -2.7 in December from a reading of -10 in November. Optimism that vaccines are soon coming to counter Covid eclipsed the fact that the region is experiencing a second wave of the pandemic.

Japan’s index of leading economic indicators climbed to a 16-month high in October, and the index of coincident economic indicators reached an 8-month high. Japanese reserves broke a streak of monthly declines, rising $243 million to $1.385 trillion in November.

Britain’s Halifax house price index increased 1.2% in November, resulting in a 53-month high of 7.6% in the year-on-year comparison that had been as low as 2.5% at midyear.

Chilean CPI inflation decelerated 0.3 percentage points to 2.7% last month. Austrian wholesale prices fell 3.8% in the year to November, their smallest 12-month rate of drop in ten months.

Sweden’s current account surplus of SEK 67.4 billion in 3Q was some 8% bigger than the second-quarter surplus but 13% narrower than in the third quarter of 2019.

Australia’s AIG-compiled services purchasing managers index climbed 1.5 points to a 1-year highof 52.9 in November.

Private sector business investment in Mexico fell 16% on year in September, almost as much as the 20.1% on-year decline in January-September.

Still to come: U.S. consumer credit and Conference Board-compiled employment trends index.

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


Tags: , ,


Comments are closed.