Equities Down and Dollar Weak but Little Changed Overnight

December 8, 2020

Senate Majority Leader McConnell has not yet lent his support to the bipartisan U.S. fiscal stimulus plan. Opinion polls suggest the all-important senate races in Georgia are both close, and unprecedented funds are being poured into both contests.

The EU summit begins in two days, with fiscal stimulus and trade relations with the U.K. high on the agenda. Vaccine dissemination has begun in the U.K.. There were over 600k new Covid cases and over 10k deaths worldwide in the last 24 hours. America’s share of those figures amounted to 216k cases and 1918 deaths. Covid restraints were tightened in California.

Stock markets dropped 1.7% in South Korea, 0.8% in Hong Kong and 0.3% in Japan. Equities have slipped 0.9% in Switzerland, 0.8% in Italy, and 0.78% in France and Spain. The DOW is down only marginally and holding above 30k.

Ten-year sovereign debt yields have settled back 2 basis points in German and a basis point each in the U.S., U.K., and Japan. WTI oil fell 0.7% overnight, while gold firmed 0.4%.

The dollar is unchanged from yesterday against the yen, yuan, loonie, and kiwi. The greenback slipped 0.2% relative to the Swissy and 0.1% vis-a-vis the euro but strengthened 0.2% against sterling, which continues to be plagued by the uncertain outcome of trade talks with the EU. The trade weighted dollar remains weak at 90.83 on the DXY index, a fifth straight sub-91 reading and also 7% below its mid-2020 level.

Japanese quarter-on-quarter growth this past summer was revised up a tad to 5.3% (20.4% at an annualized rate). Personal consumption and net exports were the main engines of growth. The positive growth followed contractions in each quarter of this year’s first half and left GDP in 3Q still 4.6% below its year-earlier level. The GDP price deflator rose 0.2% on quarter and decelerated to a 1.2% on-year increase.

Other Japanese data releases today revealed a 0.8% on-year drop in labor cash earnings (-0.2% when adjusted for inflation); rises of household spending in October of 0.2% versus September and 1.9% versus a year earlier; a 6.3% year-on-year advance in bank lending in November; a JPY 2.145 trillion current account surplus in October (17% wider than a year earlier and equal after seasonal adjustment to almost 2 trillion yen); and a 3-month low in the monthly Economy Watchers index.

Euroland real GDP growth last quarter was revised down 0.1 percentage point to 12.5%. This followed back-to-back contractions of 3.7% in 1Q and 11.7% in 2Q and left GDP 4.3% below its year-earlier level. A regression to negative growth in the current fourth quarter seems quite plausible in light of renewed restrictions against social gathering. Growth in euro area employment last quarter was revised upward by 0.1 percentage point to 1.0%. There nonetheless were 2.3% fewer jobs than a year earlier.

U.S. labor productivity last quarter was revised down 0.3 percentage points to 4.6% and also exceeded productivity in the third quarter of 2019 by 4.0%. Unit labor costs fell 6.6% on quarter but climbed 4.0% on year.

The ZEW Institute’s December indices of investor sentiment toward Germany and Euroland rose to 2- and 3-month highs of 55.0 and 54.5. Germany’s perceived current situation slipped to a 4-month low, while its euro area counterpart printed at a 9-month high. There is a dichotomy between dismay at the region’s second Covid wave and encouragement that vaccines are on the way.

Same store sales in the U.K. were 7.7% greater in November than a year earlier, marking the 8th on-year increase in a row.

Consumer confidence in Indonesia leaped to an 8-month high of 92 in October from 79 in September.

Likewise, business confidence and business conditions in Australia went up 9 and 7 index points respectively in November.

South African real GDP expanded 66.1% at an annualized rate last quarter, the most in over 27 years, but still posted a year-on-year contraction of 6%.

Brazilian CPI inflation accelerated to an 11-month high of 4.3% in November.

Taiwanese CPI inflation of 0.1% in November nudged above 0% for the first time in 10 months.

Dutch CPI inflation dropped 0.4 percentage points to a 3-month low of 0.8% in November.

The NIFB U.S. small business sentiment index dropped 2.5% in November to a 3-month low following the inconclusive U.S. election that defeated Donald Trump’s bid for a second term but resulted in Republican gains in the Congress and leaves the fate of badly need pandemic relief in doubt.

The Central Bank of Chile‘s key interest rate of 0.50% since two March cuts totaling 125 basis points was left unchanged after this month’s policy review as expected. No increase is anticipated for some time, and non-interest rate tools of stimulus continue.

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


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