Ahead of Biden Inaugural, Equities and Commodity Prices Are Up, while Dollar Is Softer

January 20, 2021

Overnight dollar losses amount to 0.6% against sterling, 0.5% relative to the Australian dollar, 0.4% vis-a-vis the yuan, 0.3% versus the loonie and kiwi, and 0.2% against the euro and peso. The Swiss franc is steady, and the yen has edged 0.1% lower against the greenback. The trade-weighted DXY dollar index is somewhat above 90.5.

Stock markets rose 1.7% in Indonesia, 1.3% in New Zealand, 0.8% in India, 0.7% in South Korea, 0.5% in China and show gains so far of 0.2-0.5% in Germany, Italy, France and Switzerland. Nasdaq futures are up about 3/4ths of a percent, while DOW and S&P futures are only marginally higher. Japan’s Nikkei closed 0.4% lower.

The prices of gold and WTI oil futures climbed 0.5% and 1.2% overnight. Ten-year U.S., U.K. and German sovereign debt yields are each up a basis point in the risk-on environment.

President Trump issued a batch of 143 pardons and commutations, many involving politicians and business executives caught up in corruption cases. President-Elect Biden’s term officially begins at noon today.

For a fourth straight month, total and core CPI inflation in Euroland was at minus 0.3% and +0.2%, respectively, in December. That’s down from 1.3% in each case at the end of 2019.

British CPI inflation doubled to a 2-month high of 0.6% in December. Core CPI accelerated by 0.3 percentage points to 1.4%. Producer output price inflation was less negative at -0.4% in the final month of 2020, and producer input inflation swung from minus 0.3% in November to +0.2% in December.

All of the 0.7 percentage point increase in German PPI inflation from -0.5% in November to +0.2% in December was attributable in the energy component, which recorded a 0.1% on-year dip in December after a 2.7% 12-month rate of decline in the prior month. Non-energy PPI inflation remained steady last month at +0.3%.

Canadian CPI inflation, which stood at 2.4% in January 2020, settled back to October’s 0.7% pace in December from November’s 9-month high of 1.0% in November. Food price inflation was at a 19-month low last month.

The Westpac index of Australian consumer confidence posted its first deterioration in five months, dropping 4.5% in January after advances of 18% in September, 11.9% in October, 2.5% in November and 4.1% in December.

The People’s Bank of China as expected left the five year loan prime rate and one year loan prime rates steady at 4.65% and 3.85%, respectively, after the January review. China fairly uniquely experienced a sustainably paced recover from the Covid shock last year. Those prime rates were cut by a total of 15 and 30 basis points in the first trimester of 2020 but not after April.

The decision by Bank Negara Malaysia officials not to cut their 1.75% overnight policy rate further at the first review of 2021 surprised analysts, who by and large anticipated a 25-basis point reduction. From 3.0% at the start of 2020, the rate had been cut last year by 25 bps each  in January and March, then by 50 bps in May and 25 bps in July. A released statement concedes that Malaysian growth slowed but stayed positive last quarter and predicts faster recovery from this year’s second quarter onward, along with subdued inflation. To be sure, much uncertainty surrounds the future evolution of the Covid epidemic.

Monetary policies are also getting reviewed today by the Bank of Canada and Bank of Brazil, and tomorrow sees a load of central bank rate announcements.

But today’s main focus will be on Joe Biden’s presidential inauguration address and the many actions that his administration takes as soon as tomorrow. President Biden enters office with a number of severe challenges, including finding a way to get people vaccinated more quickly.

Over two million people worldwide and 4 million Americans have died from Covid-19 so far, including 2,770 in the United States yesterday.

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



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