Dollar Marking Time and Some Profit-Taking in Stocks

October 27, 2021

Wednesday has seen the release of more price data and several measures of economic confidence. Attention is poised to turn to central bank monetary policies. Up first today will be the Bank of Canada followed later in the week by statements from monetary authorities in Euroland, Japan, and Brazil.

Stocks in several places touched record highs on Tuesday amid better-than-anticipated third-quarter corporate earnings reports, but today has seen some profit-taking. Share prices fell 1.6% in Hong Kong, 1.0% in China, 0.8% in Indonesia and South Korea, and 0.6% in New Zealand. European stock markets are down 0.5% in Italy, 0.3% in Germany and France and 0.2% in Spain. Japan’s Nikkei closed unchanged, and the British Ftse so far is flat, too.

Ten-year sovereign debt yields fell overnight by six basis points in the U.K. (the Autumn budget is being presented later today), four basis points in Germany and two bps in the United States.

The weighted DXY dollar index has dipped 0.1%, led by a 0.4% drop against the yen but mitigated by advances of 0.3% versus sterling and 0.2% relative to the loonie. The dollar has also fallen 0.1% against the euro but is unchanged from Tuesday’s close against the Swissie, Mexican peso, and Australian dollar.

Australian consumer price inflation receded to 3.0% in the third quarter from a twelve-plus-year high of 3.8% in 2Q. Core inflation, however, accelerated to 2.1%.

German import price inflation climbed by a further 1.2 percentage points to a 480-month high of 17.7% in September, led by a 107% on-year advance in the energy component.

French producer prices rose 1.7% on month in September, lifting their 12-month rate of increase to a record high of 11.6%.

Icelandic CPI inflation rose to a 6-month high in October of 4.5%.

German consumer confidence unexpectedly climbed to a 19-month high in November of +0.9. The GFK-compiled measure was above zero for a second straight month and was as weak as -15.6 back in February.

French consumer confidence unexpectedly weakened two index points to a two-month low reading of 99 in October. That compares to a 15-month high of 103 in June and a low of 89 last November.

Consumer confidence in South Korea improved for a second straight month to a 4-month high in October.

In Finland, consumer sentiment dropped 3.3 index points to a 5-month low of 2.7, matching last May’s result.

Business confidence in the New Zealand economy during October was revised to a weaker reading of -13.4 this month from an initial estimate of -8.6 and readings of -7.2 in September and -14.2 in August.

Turkish business confidence fell 1% to a 2-month low in October but was 9.5% above last May’s level despite the latest geopolitical strains stirred up by President Erdogan. The Turkish lira recovered 0.6% overnight against the U.S. dollar but remains historically depressed at 9.49 per USD.

Investor sentiment in Switzerland had see-sawed from a reading of 42.8 in July to -7.8 in August and +25.7 in September and settled back this month to 15.6.

Just In: A preliminary estimate of the U.S. merchandise trade deficit shows a 9.2% month-on-month widening to $96.25 billion, a record high and more than $1.1 trillion if that pace were sustained for a whole year. Separately, U.S. durable goods orders in September fell by a smaller-than-forecast 0.4% following a 1.3% upward spike in August. Durables were 14.4% above their year-earlier level.

Other data around the world of note reported today showed

  • A 16.3% year-on-year rise in Chinese corporate earnings, up from 10.1% in August. Earnings for the full year of 2020 had risen 4.1%, and the increase this year during the first nine months is 44.7%.
  • The number of unemployed French workers dropped 55k last month and by 353k from a year earlier.
  • Austria’s manufacturing purchasing managers index fell 2.2 index points in October to an 8-month low of 60.6.
  • Sweden’s trade surplus in the first nine months of 2021 of SEK 30.3 billion was 31% less than a year earlier.
  • Mexico’s September trade deficit of $2.398 billion was smaller than the deficits in the previous two months but still compared adversely with a surplus of $4.4 billion in September 2020.
  • Turkey wracked up a trade deficit in January of $32.35 billion versus a gap of $37.88 a year earlier.
  • New Zealand’s NZD 2.17 billion trade deficit in September was more than twice the deficit a year earlier.
  • Danish retail sales growth between September 2020 and last month of 3.1% was the smallest on-year rise a sequence of seven consecutive advances.
  • Industrial production in Thailand was 1.3% lower in September than a year earlier. That’s the worst 12-month comparison in seven months.

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

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