Commodity Prices, Equities, and Dollar Strengthen

February 1, 2021

Today’s speculative move of the day involves silver, which briefly edged above $30  per ounce and currently shows a net daily gain of slightly more than 10%.  The prices of gold and oil are each up 0.8%.

Share prices in the Pacific Rim surged 5% in India, 3.5% in Indonesia, 2.7% in Hong Kong and South Korea, 1.8% in Taiwan, and 1.6% in Japan. Equity market gains so far in the U.K., Germany, Italy, Switzerland and France range between 1.3% and 1.5%. U.S. stock futures are up almost 1%.

The dollar strengthened overnight by 0.5% against the Swiss franc, 0.6% versus the Chinese yuan, 0.4% relative to close to a 2-month high versus the euro, 0.2% vis-a-vis the Japanese yen and Australian dollar, and 0.1% against the kiwi and loonie.

Ten-year U.S. Treasury, German bund, and Japanese JGB yields each edged a basis point higher.

A huge winter storm is battering the U.S. Northeast that could by tomorrow make it into the top ten snow accumulations to hit NYC.

Being the first business day of February, data released today features many manufacturing purchasing manager surveys taken last month. There are regional differences. Several Asia economies showed faster growth, while Western European economies tended to slow amid social lockdowns. A common thread was increasing supply chain delays with an accompanying intensification of input price inflation.

China‘s NBS manufacturing and non-manufacturing PMIs compiled by the government fell to 5- and 10-month lows in January of 51.3 and 52.4. The Caixin manufacturing PMI for China dropped to a 7-month low of 51.5.

Japan‘s manufacturing PMI had risen to the 50 neutral threshold in December for the first time since August 2019 but retreated to a 2-month low of 49.8 in January.

Elsewhere in the Pacific Rim, manufacturing PMIs readings last month in South Korea of 53.2, Taiwan of 60.2, Indonesia of 52.2, the Philippines of 52.5, and India of 57.7 represent the fastest growth in 119, 129, 78, and 3 months. Australia’s AIG-compiled manufacturing PMI was the highest score since October. But Vietnam and Malaysia posted 2-month lows of 51.3 and 48.9, and Thailand’s PMI slipped below 50 to a 6-month low of 49.0.

Euroland’s manufacturing PMI declined 0.4 index points to a 2-month low of 54.8 and included a return to sub-50 territory in Spain’s reading, which printed at a 7-month low. Germany’s PMI was at a 4-month low but still displayed robust resilience at 57.1. And France’s PMI of 51.6 was above 50 for a second straight month.

Among other European factory sector PMI surveys reported today, Great Britain’s index fell 3.4 points to a 3-month low of 54.1. The U.K. economy is facing two big drags: Covid and adjustment to Brexit. The Swiss PMI climbed 1.4 points to a 28-month high of 59.4, while those of Sweden and Norway slipped to 2- and 4-month lows of 62.4 and 51.8. Denmark’s PMI rose from an 8-month low of 41.9 in December to a 2-month high of 46.9, a level that still signals a noticeable rate of contraction.

Eastern European PMIs were up. The Czech reading matched December’s 32-month high of 57.0. Hungary’s index climbed to a 20-month high of 54.9, and Poland’s printed at a 6-month high of 51.9. The Russian PMI rose 0.8 points to 50.9, its first reading above the 50 neutrality level since August. Turkey’s PMI jumped 3.6 points to a 6-month high of 54.4.

The Absa-compiled South African manufacturing purchasing managers index rose 0.6 points to 50.9 in January.

Brazil‘s manufacturing PMI fell back 5.0 index points to 57.0 in January. That still reflects fairly robust activity but represents a 7-month low.

German retail sales in December weakened almost four times faster than forecast, posting a 9.6% plunge, which was even greater than the monthly declines last March and April. That resulted in a smaller 1.5% year-on-year increase after +5.0% in November and +8.6% in the year to October. For 2020 as a whole, sales advanced 3.9% in spite of December’s swoon.

Euroland’s jobless rate stagnated at 8.3% in December. That was just 0.9 percentage points above the December 2019 level, indicating a smaller impact from Covid than the United States has experienced.

Swiss retail sales, in sharp contrast to Germany’s experience, rose 2.6% on month and 4.7% on year in December. That was the eighth straight month with a year-on-year increase in sales.

Indonesian CPI inflation fell 0.1 percentage point to a 3-month low of 1.55% in January.

Australian home loans leaped 8.7% on month and 38.9% on year in December.

British mortgage approvals in December of 103,000 were a tad less than forecast, but M4 money posted robust 13.4% on-year growth.

In a sequence of nine straight South Korean trade surpluses, January’s of $3.96 billion was at a 5-month low. India posted a $57.5 billion trade deficit in April-December, including a shortfall in December alone of $15.44 billion.

Officials at the Central Bank of Colombia by a 5-2 vote agreed to keep their policy interest rate at 1.75%. Seven cuts totaling 225 basis points were implemented last year between March and September. Inflation is currently running at only about half the 3% target.

Still to come: the U.S. and Canadian manufacturing PMI results. Mexico is closed for Constitution Day.

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


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