A Mostly Inconsequential Friday

November 12, 2021

The dollar marked time overnight. It’s weighted DXY value did not climb further after reaching highs on Thursday not seen since July 2020. The dollar is also unchanged from Thursday closing levels against the euro, yen, loonie, and kiwi, up 0.3% versus the Turkish lira and 0.2% against the Swiss franc but down 0.2% vis-a-vis sterling and 0.1% versus the Australian dollar and Chinese yuan.

Share prices rose 1.1% in Japan, 1.5% in South Korea and over 1% in India. But U.S. stock futures show only modest gains, and equity markets are down a bit in Italy, Spain and the United Kingdom.

The ten-year U.S. Treasury yield rose two basis points, and Japan’s 10-year JGB yield increased a basis point. But comparable British gilt and German bund yields dipped a basis point.

The price of West Texas Intermediate oil fell 1.9% and is hovering around $80 the figure. Gold prices settled back 0.7%.

The Swiss combined PPI/import price index recorded its largest 12-month increase in October (5.1%) since the late 1980s after accelerating from -0.2% in March to an increase of 4.5% in September.

German wholesale price inflation jumped two percentage points in October to a 571-month  high of 15.2%. Such began 2021 at zero percent in January. Wholesale prices for oil products were 54.7% higher than a year ago.

Indian consumer price inflation rebounded from September’s 5-month low of 4.35% to a 2-month high in October 4.48%, further underscoring the global nature of this year’s inflationary wave, which in light of many producer price reports over the past week clearly has plenty of continuing upside potential.

Today’s most notable released indicator of economic activity was a 0.2% month-on-month dip of industrial production in the euro area during September. Such followed a 1.7% drop in August and was the third monthly slide in five months. Output posted a 0.2% quarterly downtick in 3Q after just a 0.1% uptick in 2Q, and September’s 5.2% 12-month rate of advance was down from on-year gains of 20.6% last May and 39.9% in April.

Real GDP in Malaysia sank 3.6% on quarter in 3Q. That was the third quarterly drop in four quarters and was set against a break-out upsurge of 17.3% in 3Q 2020. Consequently, year-on-year GDP growth swung from +16.1% in the second quarter to -4.5% last quarter.

Real GDP in Hong Kong recovered just 0.1% in the third quarter following a 0.9% drop in 2Q. The year-on-year rate of growth was 5.4%, down from 7.6% in 2Q and 8.0% in the first quarter.

On-year Polish GDP growth slowed from a record high of 11.2% in the second quarter to 5.1% in 3Q.

On-year growth in Indian industrial production also imploded, printing at just 3.1% in September after a streak of six straight robust 12-month advances ranging between 11.5% in July and 133.5% in April.

Finland experienced its largest current account surplus (EUR 1.146 billion) so far this year during September.

New Zealand manufacturing purchasing managers index rose 2.9 points to a 3-month high of 54.3 in October.

Central banks in Mexico and Peru each announced policy interest rate hikes late yesterday. Officials at the Bank of Mexico by a vote of four to one authorized a fourth straight 25-basis point hike of the overnight interbank rate to 5.0%. Before the magnitude of global inflationary pressure was understood, the rate last February had been sliced by 25 basis points to 4.0% to culminate 325 basis points of post-pandemic easing. The Governing Board’s goal now is “to facilitate the orderly and sustained convergence of headline inflation to the 3% target within the time frame in which monetary policy operates as well as an adequate adjustment of the economy and financial markets.” Mexican CPI inflation currently is at 6.24% overall and 5.19% for core underlying items.

At the Central Reserve Bank of Peru, the Board of Directors felt compelled to react to a 0.6 percentage point further acceleration of CPI inflation to 5.8% in October, its highest level since the start of 2009. Officials attribute the rise mostly to external factors but also mentioned the Peruvian Sol’s recent depreciation. Their hope and expectations is that in-target inflation is restored sometime in the latter part of 2022. Today’s hike of the reference interest rate to 2.0% was 50 basis points in size and followed similar increases in September and October and an initial 25-basis point tightening in August. Early in the pandemic, the rate was slashed from 2.25% to 0.25% in two equal full percentage point cuts in March and April of 2020. One more 25-basis point hike, and that entire easing will have been reversed, but to quell such thinking, today’s released statement of explanation asserts, “Monetary policy is still expansionary and the current decision does not necessarily imply a cycle of successive increases in the reference rate.”

The U.S. Labor Dept. JOLTS index and the U. Michigan preliminary measure of consumer confidence in November will be reported later this morning.

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



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