Politics in the Forefront

September 27, 2021

As expected, political power will be changing hands in Germany. In yesterday’s national parliamentary election, the Social Democrats (SPD) captured the most seats (206 at last count) in a close and widely fractious vote. The SPD percentage of total votes cast was 25.7%, and the Christian Democrat/Social Democrat central-right group (24.1) share was its smallest since the second world war ended. The combined shares of three other parties — the Greens, Free Democrats, and Far-Right AfD of 36.6% was more than 10 percentage points greater than the SDP’s share, and the political far Left party’s share of 4.9% lies just south of the 5% threshold for a party to be seated in parliament. Should the final count nudge its share to that level, its would receive around 40 seats. What all this means is that SDP leader Olaf Scholz will start the cumbersome effort of forging a workable coalition, presumably with both the Free Democrats and Greens. This is always a difficult process of compromise, and the extremely dispersed voting pattern reflects some of the inherent instability during the interwar Weimer Republic era when minority factions were able to exert disproportionate influence over the government. Previous Social Democrats serving as Chancellor of Germany were Willy Brandt in 1969-74, Helmut Schmidt in 1974-82 and Gerhard Schroeder in 1998-2005.

A U.S. House of Representatives vote on an infrastructure bill is planned tentatively for this Thursday. It’s very touch and go whether such will be achieved. The outcome will cast long shadows over the effectiveness of the Baden administration.

In market action this Monday, the dollar has edged 0.1% higher in weighted terms, with gains of 0.3% versus the Swiss franc, 0.2% relative to the euro, and 0.1% vis-a-vis the yen countering a 0.2% overnight dip against sterling. The Canadian dollar is unchanged. The Turkish lira initially slipped to a record low of 8.8945 per dollar but currently shows a net overnight rise of 0.3%.

Equity markets in the Pacific Rim fell 0.8% in China and 0.4% in Indonesia but rose 1.3% in Singapore, 0.6% in Australia, and 0.3% in South Korea. European share price gains range from 0.3% in the U.K. to 0.9% in Germany. U.S. stock futures show a modest advance.

Ten-year sovereign debt yields have risen four basis points in the U.K., three basis points in the U.S., and a basis point in Germany.

The price of WTI oil jumped 1.2%. Britain’s gas shortages at the pumps persist. The price of gold fell 1.1%.

Economic data releases this Monday have been few and not consequential from a market-moving standpoint.

Japanese corporate service prices dipped 0.1% in August, depressing their 12-month rate of increase to 1.0% from 1.1% in July and 1.2% in June.

Spanish producer prices soared 1.9% on month and accelerated to a 445-month high on-year pace of 18.0%. Between December 2019 and December 2020, by contrast, Spain’s PPI had fallen 1.4%.

Danish retail sales fell 0.5% on month in August, resulting in their smallest 12-month rate of increase (4.0%) since February.

Consumer confidence in the Philippines printed at a six-quarter high of -19.3 in the third quarter, up from -54.5 in the same quarter a year earlier.

Finnish consumer confidence improved in September to a 45-month high.

Taiwanese retail sales posted a third straight year-on-year drop in April, but the 4.3% decrease was much smaller than those in the prior two months. On-year growth in Taiwanese industrial production of 13.7% was the smallest gain in six months.

The stock of Euroland M3 money was 7.9% greater in August than a year earlier. On-year growth in loans and credit to the private sector was modest at 2.9% and 3.1%, respectively.

U.S. data releases later this morning will include durable goods orders and the Dallas Fed manufacturing index.

From one source, the count of U.S. Covid deaths may have crossed above the 700,000 level this weekend, including over 2000 on Sunday. Globally, more than 4-3/4th million people have died so far from the illness.

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

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