Further Recovery in Risk Appetite Ahead of Holiday
December 23, 2021
Most major markets, but not Japan’s, will be closed partially or fully tomorrow for Christmas Eve. As a result, some data were released earlier than normal today.
Covid developments today were constructive on the whole. Although new cases continue to crest on the Omicron wave, the latest variant doesn’t appear to be as lethal as Delta, and investors have been heartened by the coming roll-out of Covid pills that will be used for especially vulnerable patients in the early stages of infection.
U.S. equities have extended the Tuesday-Wednesday rally by a further advance of slightly more than 0.5%. Share prices closed up in Asia by 0.8% in Japan, 0.7% in Taiwan, and 0.6% in China. The German Dax and Paris Cac are thus far up 0.9% and 0.8%, while the British Ftse has settled for a lesser 0.3% rise.
Long-term interest rates are adjusting to elevated inflation. Ten-year sovereign debt yields today are up four basis points in the U.S., Canada, Germany and U.K. and even more in Italy, Spain, and Portugal.
Among commodities, the price of WTI oil has extended yesterday’s rise 0.3% further, but gold is steady.
Overnight dollar movements have been narrowly mixed with gains of 0.5% versus sterling, 0.2% relative to the yen and 0.1% vis-a-vis the euro and Swissie but losses against commodity-sensitive currencies like the Canadian, Australian and New Zealand dollars and developing economy currencies like the Mexican peso. Government regulatory changes continued to promote an artificial rebound in the Turkish lira, which rose about 8% further versus the dollar overnight.
There have been several U.S. indicators reported today.
- Orders of durable goods advanced 2.5% in November and by 15.7% year-on-year. That gain beat expectations despite a 0.1% downtick in non-defense capital goods excluding aircraft.
- 205k new claims for unemployment benefits were filed last week, matching the prior week’s total. Two weeks earlier had seen the fewest new claims since September 1969.
- 744k new home sales in November were the most in seven month, 12.4% greater than October’s total, but 14% less than in November 2020.
- The U. Michgan/Reuters monthly index of consumer sentiment was revised up 0.2 points to a still very depressed 70.6 for December. November’s reading of 67.4 had been a 10-year low. Such follows yesterday’s report of a 5-month high in the Conference Board’s index of U.S. consumer confidence.
- Personal consumption expenditures increased 0.6% in November as expected but were only flat when adjusted for inflation. A rise of o.4% in personal income matched analyst expectations. Inflation measured by the PCE price deflator climbed 0.6 percentage points to a 39-year high of 5.7%. Underlying inflation increased 0.5 percentage points to 4.7%.
Price data from other countries revealed a whopping 3.0% monthly leap in German import prices, the second increase of at least that much in a row which resulted in the largest year-on-year increase (24.7%) in 565 months. The energy component was 159.5% above the year-earlier level. In Belgium, a 5.7% CPI inflation rate in December was the most in 157 months, and Finnish PPI inflation of 21.1% in November was the most since at least 1996. In Singapore, a rise of CPI inflation to 3.8% in November beat forecasts and was the most in 105 months.
Bank of Japan Governor Kuroda gave a speech that included the attention-grabbing assertion that Japan’s economy on balance could benefit from a weaker yen. Japan has a long history of promoting a soft yen at times of weaker-than-desired overall economic growth.
British consumer confidence slipped an index point to a 3-month low of -15 in December. And U.K. car output in November was 28.7% lower than a year earlier.
Irish consumer sentiment dropped 8.2 index points to a 10-month low this month.
Italian consumer confidence ticked 0.2 points higher to a 2-month high of 117.7 but was accompanied by news of a 2-month low in manufacturing business sentiment.
Belgian business confidence recorded an above-zero reading for a ninth straight month in December but, at only 3.6, the lowest in that streak.
Canadian monthly real GDP grew by a strong 0.8% on month in October, thanks to a 1.5% advance in industrial production. GDP and IP were 3.8% and 5.9% greater than in October 202o. Average weekly earnings rose 2.7% over the same 12-month span.
Spanish real GDP growth in 3Q 2021 has been revised upward to a 2.6% quarterly advance from 2.0% reported previously. After posting a record 17.7% on-year climb in 2Q, GDP in 3Q was just 3.4% above its year-earlier level.
Danish quarterly GDP growth in 3Q also has been revised upward to 1.1% from 0.9%. On-year growth slowed to 3.6%.
The 12-month increases through November of Taiwanese industrial production and retail sales were 12.2% (a 3-month high) and 6.3% (a 2-month low).
Japan’s leading and coincident economic indices for December were revised a little lower but still represent 3- and 2-month highs.
Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: BOJ Governor Kuroda, Canada October GDP, Omicron, U.S. durable goods orders, U.S. personal consumption expenditures
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