Markets Stymied by Covid

January 25, 2021

The more contagious variant strains of Covid-19, tightening lockdowns in several countries, and Republican senator misgivings about undertaking another large fiscal stimulus have world investors unsure about what lies next for the world economy. The confusion can be seen in mixed financial market results.

Stock markets rose today by 2.4% in Hong Kong, 2.2% in South Korea, 0.7% in Japan, and 0.5% in China but currently show losses of between 1.1% and 2.0% in the U.K., Germany, France, Italy and Spain. Nasdaq futures are 1.0% higher, while DOW futures had been up but now show a drop of around 0.5%.

Aside from a 0.6% advance against the Mexican peso, Monday changes in the dollar are narrowly mixed. The trade-weighted DXY dollar index held above the psychological 90 threshold and is currently hovering close to the top of today’s 90.08 to 90.39 range.

Ten-year German bund and British gilt yields are 3 basis points lower, and the 10-year U.S. Treasury yield slipped settled back basis points. WTI oil slipped 0.2%, while the price of gold moved 0.4% firmer.

The eight-person bipartisan group of U.S. senators that spearheaded last month’s lame-duck $900 billion fiscal stimulus has grown to a group of 16 senators that held a conference call with President Biden yesterday. However, most Republican senators appear disinclined to accept a stimulus that’s as forceful as the president is pushing. This creates uncertainty over the timing of a deal and its eventual size and composition.

Covid milestones that are being approached are 100 million global cases and 430 thousand U.S. deaths. The U.S. continues to account for a fifth of all global Covid deaths compared to less than 1.5% of those during the 1918 Spanish flu.

Today’s major economic data release has been theĀ  monthly German business climate index prepared by the IFO Economic Institute in Munich. Such fell 1.1 index points to a 6-month low of 90.1, with business expectations falling to a 7-month low and perceived current conditions dropping to a 4-month low. Readings for the manufacturing, services, trade, and construction sectors all worsened, leading IFO officials to say that the latest wave of the coronavirus “has brought Germany’s recovery to a halt for now.” Germany had been Europe’s main engine in the rebound that followed last spring’s wave of the pandemic.

The Chicago Fed National Activity index printed at 0.52 in December, and November’s reading was revised up a bit. But both readings were below 1.01 seen in October. The CFNAI has been above zero since May.

Czech consumer and business confidence weakened in January to 3- and 2-month lows.

Belgium’s business confidence index rose 0.9 points in January to -7.5, its least negative reading in a string dating back to last March.

Polish and Austrian industrial production in December were 11.2% and 0.1% above their year-earlier levels. Between December 2019 and last month, industrial production and retail sales in Taiwan advanced 9.9% and 1.4%.

The Central Bank of Kazahstan left its policy interest rate unchanged at 9.0%, which was the expected result of the first policy review of 2021. The rate has been at 9.0% since being cut 50 basis pints last July but was very briefly as high as 15% early in 2020.

Mexico’s economic activity index went up 0.9% in November, cutting the 12-month decline to 3.9%.

Singapore consumer prices were unchanged in December from their year-earlier level. Core inflation was still in the red, however, at minus 0.3%.

Finnish producer prices recorded their smallest on-year decline last month, -2.9%, in 10 months.

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



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