U.S. Political Stress, PMI Services, A U.S. Jobs Report Shocker, and FOMC Minutes on Today’s Radar Screen

January 6, 2021

In the Georgian senate runoff elections, Warnock has apparently beaten his Republican opponent, and Ossoff holds a razor-thin 50.2%/49.8% lead over the Republican incumbent with 98% of ballots counted. If these leads hold, Democrats would take over the senate majority. The congress is scheduled to tally the state certified presidential electoral voting results this afternoon amid all sorts of rumors including possible street violence in the nation’s capital.

ADP estimated change in U.S. private-sector employment last month produced a shocking 123k drop. That would be the first decline since April and was not foreseen by analysts. Congress’s procrastination over passing a fiscal stimulus and the intensifying second wave of the Covid-19 pandemic clearly depressed the labor market more than realized.

The dollar overnight fell 0.9% against the Mexican peso, 0.5% relative to the New Zealand dollar, 0.4% versus the euro and Australian dollar, and 0.3% vis-a-vis the Swiss franc. The dollar is unchanged against the loonie and sterling and 0.2% stronger versus the yen.

Stock markets in the Pacific Rim declined 1.1% in Australia, 1.2% in Indonesia, 0.8% in South Korea, 0.5% in India, and 0.4% in Japan. Alternatively, share prices in Europe currently show daily advances of 2.8% in the U.K., 1.8% in Spain, 1.2% in Italy, 0.9% in Germany, and 0.6% in France. In futures trading, the Nasdaq is down over 1%, while the S&P and Dow are steady.

At the monthly OPEC+ production talks, Saudi Arabia blinked and accepted an output cut. West Texas Intermediate crude’s price rose just above the $50/barrel threshold for the first time in about 11 months. The price of a bitcoin move above $35k temporarily for the first time, but gold has settled back below $1,940/ounce.

Ten-year U.S. Treasury, British gilt and German bund yields have risen 6, 4, and 5 basis points.

Euroland’s December composite purchasing managers index was revised down 0.7 index points to 49.1. That’s a two-month low and suggests that real GDP likely contracted a bit last quarter. Another dip in the first quarter cannot be ruled out in light of new lockdown restrictions in the region. Euroland’s services PMI printed at 46.4 in December after 41.7 in November, with German, French and Spanish readings in the high 40s and Italy at 39.7.

China‘s composite and services purchasing manager indices last month fell to 2- and 3-month lows but, being 55.8 and 56.3, connote solid continuing rates of expansion.

Japan‘s composite PMI for December was revised up half an index point and, at 48.5, indicates the slowest rate of contraction in 11 months despite a two-month low of 47.7 in that economy’s service sector purchasing managers index.

India‘s composite and services PMI scores of 54.9 and 52.3 last month were at 3-month lows, but like those reported for China remained comfortably above the 50 threshold between improving and deteriorating business conditions.

The finalized British composite and services PMIs in December were revised lower to 50.4 and 49.4 but exceeded November’s 5-month lows. The U.K. economy got some support from an end-year jump in demand just before Britain’s Brexit transition ran out. Tougher times lie ahead.

Brazil’s composite PMI dropped to a 4-month low of 53.5 in spite of a 2-month high in the services index of 51.1.

Australia‘s composite and services PMI readings of 56.6 and 57.0 last month represent the fastest positive growth in five months, although those final scores were each a bit below their preliminary estimates.

Hong Kong‘s private purchasing managers index tumbled 6.6 index points to an 8-month low of 43.5 in December, and there was a round-up of democracy proponents today in that former British colony.

Singapore‘s private PMI rose 3.8 points in December, crossing above 50 for the first time since last January.

South Africa‘s private PMI edged down 0.1 point to a 3-month low of 50.2 in last year’s final month.

Japanese consumer confidence slipped to a 4-month low of 31.8 last month, representing a significantly pessimistic landscape.

French consumer confidence, by contrast, jumped six index points to a 3-month high of 95. Such had been at 104 last February just before the pandemic.

French consumer price inflation printed at zero percent in December, a deceleration of 0.2 percentage points and 0% for the third time in four months. Inflation had averaged 1.5% in the first two months of 2020.

German CPI inflation in December matched November’s low point of -0.3%. German inflation began last year at 1.7% in each of the first two months but averaged only 0.5% for 2020 as a whole.

Producer prices in the euro area posted a third consecutive monthly 0.4% increase in November, trimming the 12-month rate of decline to 1.9%. Non-energy producer prices were unchanged from a year earlier.

In the year through November, producer prices fell 2.6% in Belgium but rose 5.5% in Hungary.

British shop prices in November matched October year-on-year decline of 1.8%. Also in the U.K., new car sales fell 10.9% on year in December and by 29.4% on average between 2019 and 2020.

Danish business confidence improved sharply in December on Covid development news to a 19-month high.

FOMC minutes from last month’s meeting will be published later today.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without expreess permission.

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