Equity and Commodity Prices Up Amid Favorable Manufacturing News and Start of New Month

March 1, 2021

The dollar advanced overnight by 0.5% against the Swiss franc, 0.3% relative to the euro, and 0.2% versus the yen, sterling and in trade-weighted terms. Covid cases and deaths slowed yesterday, and Johnson & Johnson’s vaccine has been approved for distribution. Being the first day of the month, a slew of manufacturing purchasing manager surveys were reported for the month of February, and many showed more-than-anticipated improvement.

Share prices in the Pacific Rim advanced by 2.4% in Japan, 1.6% in Hong Kong and Indonesia, 1.7% in Australian, and 1.2% in China. Major European and U.S. futures indices are up so far by 1.0-1.5%.

The prices of WTI oil and gold have climbed 1.3% and 2.7%.

Ten-year sovereign debt yields show widely different overnight changes with those in the U.S. and Canada up by 3 basis points but also drops of 7 basis points in France, Italy and Spain, 6 basis points in Germany and the Netherlands, 4 bps in Great Britain, and one basis point in Japan.

Euroland’s February manufacturing purchasing managers index was revised higher than the preliminary estimate to a 3-year robust high of 57.9. Among countries using the euro, manufacturing PMIs printed at 37-month highs in Germany, Italy and France, a 36-month high in Austria, and a 29-month high in the Netherlands. More modest improvements in operating conditions occurred in Spain (a 7-month high of 52.9) and Ireland (a 2-month high of 52.0). Only Greece’s 2-month low of 49.4 scored below the neutrality threshold of “50.”

Japan’s manufacturing purchasing managers index also got revised above the preliminary estimate to a 26-month high of 51.4, and business optimism for the coming 12 months improved to the best level since mid-2017.

Several other economies posted higher PMI scores in manufacturing. Such include a 35-month high in the AIG Australian index, a 22-month high in Russia’s PMI of 51.3, a 32-month high in Poland of 53.4, a 30-month high in Switzerland of 61.3, a 23-month high in Norway of 56.1, an 11-month high in Mexico of 43.9, and 2-month highs of 51.6 in Vietnam, 55.1 in the U.K., and 51.7 in Turkey. The Philippine purchasing managers index (52.5) matched January’s 28-month high. The Czech PMI (56.5) slid to a 3-month low of 56.5 but remained respectably above the 50 threshold. Likewise, the Swedish PMI dropped to a 3-month low but remained above 60 at 61.6.

The most noteworthy disappointment among released PMIs involved China. The NBS government-compiled indices for manufacturing and non-manufacturing fell to 9- and 12-month lows of 50.6 and 51.4. Also, just about all of the surveys today contained some worrisome elements, namely intensifying supply chain disruptions and rising input price inflation.

In other data news today, several countries released GDP figures:

  • Italian GDP was 6.6% weaker than a year earlier in the fourth quarter and registered an average decline of 8.9% in 2020 following GDP growth of only 0.3% in 2019.
  • Portuguese GDP growth last quarter was revised to just half the preliminary estimate of 0.4%, resulting in a 6.1% decline from a year earlier, and average growth in 2020 of -7.6%, which was the largest rate of contraction since the Great Depression.
  • Belgian GDP growth last quarter was revised from +0.2% to minus 0.1%. GDP was 5.1% below the level in the final quarter of 2019, and the 2020 average growth rate was negative 6.3%.
  • Turkish GDP, by contrast, grew 1.8% in 2020, twice as much as in the prior year, but Covid cast a shadow on the final quarter of the year, which showed a GDP rise of 1.7%, down from a quarterly surge of 15.9% in the third quarter.

Consumer prices in Germany rose 0.7% last month following monthly increases of 0.5% in December and 0.8% in January. That sequence lifted year-on-year inflation to an 11-month high of 1.3% from -0.3% in November.

Italian consumer price inflation also accelerated in February to 0.6% overall and to 1.0% among core items.

Indonesian consumer prices only ticked up 0.1% in February, and the 12-month rate of increase settled back to a 6-month low of 1.38%.

Retail sales in Switzerland plunged 5.3% on month in January and recorded a 0.5% drop from a year earlier. Norwegian retail sales slid 0.1% on month but accelerated 0.2 percentage points to an 8.2% year-on-year advance. Irish retail sales were again whip-sawed, dropping 2.18% in January (and by 14.1% on year) after a 14.3% monthly rise in December but a 12.3% plunge in November. A 10.9% year-on-year drop in Portuguese retail sales in January was the greatest 12-month decline in 8 months. In Vietnam, retail sales were 8.2% higher than a year earlier, but industrial production posted a 7.2% drop.

The impact of the global pandemic on government budgets could be seen in Italy, where the deficit-to-GDP ratio soared from a 12-month low 1.6% in 2019 to a 25-year high of 9.5% in 2020.

Canada’s current account deficit printed at C$ 7.26 billion last quarter, bringing the total shortfall in 2020 to C$42.673 billion following a deficit in 2019 of C$ 47.385 billion.

By removing the minimum wage segment of the U.S. pandemic relief package working its way through congress, Democrats were able to secure passage of a $1.9 trillion plan over the weekend, and prospects are much improved that this highly popular legislation will become law later this month.

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




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