Covid and U.S. Politics in the Forefront

January 12, 2021

The dollar ticked up 0.1% against the yen overnight and held steady on balance versus the euro, but has slipped moderately against other key currencies such as sterling (0.5%), the Mexican peso (0.7%), the Canadian and Australian dollars (0.3%), the Chinese yuan (also 0.3%), the kiwi (0.2%) and the Swiss franc (0.1%).

U.S. equity futures point to a modest gain at the open. Stock markets in the Pacific Rim closed up 2.2% in China, 1.3% in Hong Kong, and 0.5% in India but down 0.7% in South Korea, 1.0% in New Zealand and 0.3% in Australia. Japan’s Nikkei and the German Dax are little changed, but the British Ftse has fallen 0.7%.

Bigger moves have been seen in 10-year sovereign debt yields, up 4 basis points in Spain and Britain, six bps in Italy, 3 bps in France and two bps in the United States and Germany.

Among commodity prices, WTI oil and gold show robust gains overnight of 1.5% and 0.6%. The price of a bitcoin has retreated to $34,500.

The U.S. presidential inauguration is a week from tomorrow, but police are on high alert against far-right attacks against state capitols. Democrats and some Republicans are pressing VP Pence and the White House cabinet to invoke the 25th amendment to remove President Trump, a gambit that appears unlikely to work. In that case Articles of Impeachment are likely to be approved on Wednesday. One of President Trump’s main financial supporters, Sheldon Adelson, has died.

Many countries and parts of the United States are in social lockdowns against Covid, which keeps churning. The global death count will soon surpass 2 million. Just over 2k U.S. deaths were reported yesterday, and the pandemic total there is hovering near 380k. Vaccine distribution in the United States is still proving problematic and confusing.

Japan’s seaonally adjusted current account widened to JPY 2.339 trillion in November from JPY 1.983 trillion in October and a monthly average of JPY 1.34 trillion in the third quarter. Merchandise exports and  imports grew positively on month but still posted on-year declines of 3.4% and 13.6%, respectively.

Amid an intensifying Covid outbreak, Japan’s economy watchers index fell sharply to a 6-month low of 35.5 in December from a reading of 43.6 in October.

New bank lending in China declined about 12% to a 2-month low in December of 1.26 trillion yuan, and on-year growth in M2 money decelerated 0.6 percentage points to a 5-month low of 10.1%.

Retail sales in Indonesia and Malaysia recorded year-on-year declines in November of 16.3% and 2.3%.

Indian industrial production was 1.9% lower in November than a year earlier, its first on-year decline in three months. Meanwhile, retail price inflation in that economy slowed two percentage points to 4.9% last month, which is the lowest in 15 months.

Brazilian CPI inflation of 4.5% in December represents a 20-month high, by contrast, and is 2.4 times above last May’s level.

Factory output in South Africa dropped 1.3% on month and 3.5% on year in November.

Turing to Europe,

  • Norwegian GDP reversed a 4.7% second-quarter plunge with a 4.6% rebound in 3Q 2020, leaving such only 0.2% below its year-earlier level.
  • Irish industrial production soared 53% on month and 41.7% on year in November reflecting Brexit distortions.
  • Italian retail sales tumbled 6.9% on month in November and posted its largest on-year drop (8.1%) since June.
  • Dutch CPI inflation in December of 1.0% lay midway between the prior two months and resulted in average inflation of 1.3% for 2020 as a whole after 2.6% in 2019.
  • Serbian CPI inflation of 1.3% last month was its lowest since May.
  • Romanian GDP, which had plunged 12.2% in 2Q 2020, rebounded 5.8% in 3Q according to revised figures that show a 0.3 percentage point inward adjustment in the year-on-year slide to 5.7%.
  • British same-store sales were 4.8% higher than a year earlier in December, their smallest 12-month advance in four months.

U.S. small business sentiment dropped 5.8 index points in December to a 7-month low of 95.6.

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

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