Xi/Biden, Central Banking Signals, and a Big Line-Up of U.S. Data Releases Today

November 16, 2021

The virtual summit between the Presidents of China and the United States exceeded three hours. The talks were reportedly civil but didn’t yield newsworthy compromises on the key contentious issues.

The Fed and Bank of England seem closer to an interest rate lift-off than the European Central Bank or Bank of Japan. Minutes published from the latest Reserve Bank of Australia policy review put that central bank in the latter category. As things stand, 2024 is the baseline scenario for when an initial hike of the Official Cash Rate is most likely to occur. Core inflation is expected to only climb back to 2.5% by end-2023. The behavior to wages will have a major influence on future policy.

Today’s U.S. data menu features import prices, retail sales, industrial production, capacity utilization, the NAHB housing market index and Treasury-compiled capital flows.

The weighted DXY dollar index firmed 0.1% overnight and at one point touched a new 52-week high of 95.62. The U.S. currency scored another outsized advance against the beleaguered Turkish lira, gaining 1.5% on net. The dollar is trading 0.3% higher versus the Swiss franc and kiwi. The greenback also shows gains of 0.2% relative to the loonie and 0.1% vis-a-vis the yen, yuan, and Australian dollar but is unchanged against the euro and 0.2% softer versus sterling.

The price of a bitcoin dived as low as $58,680 overnight but is currently back above $60k. Gold and oil each cost 0.5% more than their Monday closing levels.

Ten-year U.S. Treasury, German bund, and British gilt yields are each two basis points lower, while their Japanese counterpart has edged a basis point higher.

In equity trading overnight, there were losses of 0.7% in Australia, 0.4% in New Zealand and 0.3% in China, but markets in India, Hong Kong, Indonesia and Taiwan are in the black.  So too are the German Dax, Paris Cac and British Ftse.

While waiting for the slew of U.S. data releases, investors learned that Euroland GDP grew 2.2% last quarter, which is an unrevised estimate from the flash figure announced 2-1/2 weeks ago. Reflecting the GDP jump that occurred in the summer quarter of 2020, on-year growth slowed from 14.2% in 2Q 2021 to 3.7% last quarter (also an unrevised estimate). Employment growth in the euro area accelerated by more than anticipated to 0.9% on quarter and 2.0% on year during 3Q 2021.

Third quarter-over-second quarter GDP growth in Euroland’s big four economies ranged from 1.8% in Germany and 2.0% in Spain to 2.6% in Italy and 3.0% in France. Even higher 3.3% growth was seen in Austria, while similar paces of 1.8% and 1.9% occurred in Belgium and the Netherlands. Finnish GDP went up only 0.9%, while GDP in Portugal climbed by 2.9% on top of 4.4% during the second quarter.

Among Eastern European economies, third quarter GDP advanced 2.1% in Poland and 1.4% in the Czech Republic but just 0.7% in Hungary and 0.3% in Romania.

The latest batch of British labor market statistics revealed an eighth straight monthly drop in jobless insurance claims but the smallest decline of that sequence. September’s 4.3% jobless rate was lower than forecast, down from 5.2% last December, but still above 4.0% prior to the pandemic. Employment shot up by a greater-than-expected 247k in September, and on-year wage growth in 3Q of 5.8% overall and 4.9% for regular pay only constituted 5-month lows.

Norwegian consumer confidence improved to a nine-quarter high in the final quarter of 2021.

Czech producer prices leaped 1.9% last month, more than double what analysts were projecting. On-year PPI inflation, which had begun 2021 at zero percent in January, has now climbed to 11.6%.

Japan’s tertiary index, a measure of service sector activity, fell 0.8% in the third quarter despite a 0.5% rise in September. Compared to the same quarter a year earlier, the tertiary index was just 0.3% higher, down from a 7.5% advance in 2Q.

Unemployment in Hong Kong of 4.3% in August-October was down from 7.2% in December-February and the lowest since before the pandemic’s onset.

Chinese foreign direct investment in January-October was 17.9% greater than a year earlier. Such had increased only 6.2% in 2020.

U.S. Covid vital indicators continue to show a double-digit two-week rate of increase but a diminishing death rate.

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


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