Investors More Inclined to Taking a Risk

January 19, 2021

Stock markets closed on Tuesday up 2.7% in Hong Kong, 2.6% in China, 1.7% in India, 1.4% in Japan and appear headed for a rise of almost 1.0% on the U.S. open. European markets held back, with upticks so far of just 0.2% in Germany and 0.1% in the U.K. and France.

Refuge currencies like the dollar and yen settled back. The U.S. currency fell overnight by 0.5% against the peso, 0.4% relative to the euro and Aussie dollar, 0.3% on a traded-weighted basis and versus the Swiss franc, 0.2% vis-a-vis the kiwi, yuan, and sterling and 0.1% relative to the Canadian dollar.

In futures following yesterday’s MLK holiday, the 10-year Treasury yield climbed three basis points, and its German and British counterparts are each a basis point firmer.

The prices of WTI oil and gold appreciated by 0.3% and 0.4% overnight.

There is great anticipation in the air on this day before the inauguration of Joe Biden as America’s 46th president. Janet Yellen, whom Biden nominated to be Treasury Secretary, will be grilled by the senators in her first day of confirmation hearings. Outgoing Donald Trump is expected to pardon 50-100 criminals before leaving office. Will the list include family members, January 6th rioters, Rudy Giuliani or even himself? Stay tuned.

The Central Bank of Sri Lanka’s key 4.5% interest rate was left unchanged at the first policy review of 2021. Such was reduced five times last year by a total of 250 basis points. The most recent cut was by 100 basis points last July. Monetary Board members would like to see market rates continue drifting lower in response to last year’s easing according to a released statement after today’s meeting. The Covid pandemic depressed Sri Lankan GDP by around 4% in 2020, and inflation is low.

Results of the ZEW Institute’s monthly survey from January of investors regarding the German and Euroland economies shows improvements in their expectations to four-month highs. But current conditions were perceived weak: a 4-month low of minus 78.9 in the euro area and only a 0.1 rebound in Germany’s reading to -66.4 following December’s four-month low.

Euroland’s seasonally adjusted current account surplus narrowed in November to a 3-month low of EUR 24.6 billion. The EUR 237 billion unadjusted surplus over the past twelve reported months was 12.7% smaller than in the previous twelve-month period and equivalent to 2.1% of GDP.

Construction output in Euroland rose 1.4% in November but was still 1.3% less than than the total in November 2019. Output fell in both the first and second quarters of 2020 and recorded a plunge of 15.3% between 2Q 2019 and 2Q 2020.

German consumer price inflation in December matched November’s 70-month low of minus o.3%. Despite a 1.7% month-on-month rise in energy, that component fell 6% on year, offsetting a 0.4% collective rise in all other items in the CPI. CPI inflation averaged 0.5% last year, down from 1.4% in 2019. A large cut in value added tax last July was a significant factor.

The combined Swiss PPI/import price index increased 0.5% on month but fell 2.3% on year in December.  The year-on-year change has been in the red for 24 straight months, but last month’s reading was the least negative since February.

Between end-2019 and end-2020, producer prices fell 4.0% in Portugal and were unchanged in the Czech Republic.

New car registrations in December were respectively 10.9% and 3.3% fewer in December than a year earlier in Great Britain and Euroland, respectively.

British labor productivity leaped 5.6% on quarter in 3Q 2020, and also posted the largest on-year increase (4.0%) since the final quarter of 2005.

Irish consumer confidence ended 2020 at a 9-month high, having recovered from a 34.7 index point plunge last April to within 2.7 points of last March’s level.

Unemployment in Hong Kong averaging 6.6% last quarter was at a 16-year high.

New home sales in Australia catapulted 91.8% in December, culminating a 32.5% average advance in 2020.

The National Association of Home Builders monthly U.S. housing index is due later this morning, and Treasury-compiled capital flow data will be published at the end of today.

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

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