Awaiting Powell Confirmation Hearing and a Disturbing Covid Data Point

January 11, 2022

There’s been no significant developments on the economic data front today. Investors are looking ahead to tomorrow’s data menu featuring U.S. consumer prices, Chinese CPI and PPI, Euroland industrial production and the Japanese current account and economy watchers index.

The market’s immediate focus now is on Fed Chairman Powell’s confirmation hearings today before the Senate Banking Committee, which start at 10:00 EST (15:00 GMT). President Biden has chosen Powell  to have a second four-year term, but the appointment requires senate confirmation. Today’s testimony provides an opportunity for lawmakers to flesh out further detail on the central bank’s monetary policy plans. On Thursday, Governor Brainard, who’s been nominated Vice-Chair, will face the same committee for her confirmation.

In the meantime, we are learning of a new daily record high in newly discovered U.S. Covid-19 cases. To be sure, health officials have lately been discouraging the public from putting great importance on cases given the readily available home testing kits and the lessening severity of the Omicron infections. Nonetheless, yesterday’s case count of 1.417 million smashed through the previous high of 1.003 million on January 3, and lifted the 7-day average to 737k, 203% above the level two weeks earlier. Moreover, deaths, which had been pretty steady, are now trending clearly higher, too, and at a 7-day average of 1,653 exceed the level two weeks earlier by 76%. All this points to more strain on America’s hospitals.

In market action overnight,

  • The dollar has been narrowly confined, showing no net change against the euro, sterling, Swiss franc, Australian dollar or Chinese yuan, slipping 0.3% against the loonie and 0.1% on a weighted basis, and rising 0.2% against the Japanese yen and Turkish lira.
  • U.S. equity futures point to a slightly higher opening. It’s not uncommon for Tuesday market action to be contrarian, that is opposite to Monday’s direction. In the Pacific Rim, share prices had been mostly lower including losses of 0.9% in Japan, 0.8% in Australia, 0.7% in China, and 0.6% in Indonesia, but both the German Dax and Paris Cac are up over 1.0%.
  • Ten-year U.S. Treasury and German bund yields are steady. Their British and Japanese counterparts have fallen two basis points and risen one basis point, respectively.
  • Prices for WTI oil and gold show gains overnight of 0.6% and 0.4%.

Dutch consumer prices rose 0.7% last month, ending 2021 with the highest 12-month rate of increase (5.7%) in the last 472 months, that is since the summer of 1982. Core inflation dipped 0.1 percentage point below November’s 27-month high.

Small business sentiment in the United States improved 0.5% last month to a 3-month high.

Spanish industrial production jumped 4.5% in November, their largest monthly rise in 16 months, and that resulting in a 4.8% year-on-year advance, most since 10.7% last June.

Mexican industrial production dipped 0.1% in November, resulting in a 12-month 1.6% rise, which was just two-thirds as much as forecast.

Factory output in South Africa rebounded from a big drop in October with a 3.7% advance in November and was only 0.7% less than output in November 2020.

The quarterly drop in British labor productivity during 3Q 2021 has been revised from -1.2% to -1.4%. That is the weakest quarter since the last one of 2020. Same-store sales in the U.K. were only 0.6% greater in December than a year earlier. That’s down from a 1.8% on-year rise recorded in November.

Retail sales in November were 6.7% and 10.8% greater than a year earlier in Malaysia and Indonesia. In each instance, those 12-month gains represented 6-month highs.

Australian retail sales recorded the largest monthly increase in 18 months during November, lifting the level of sales back to a 1-year high. Australia’s trade surplus that month was its smallest in eight months.

Japan’s indices of leading and coincident economic indicators printed at 4-month highs in November, according to preliminary figures, but officials characterized to trend in the coincident index as “weakening.”

Turkey’s current account deficit of $2.68 billion in November was close to expectations and 24% narrower than a year earlier. It was the first deficit since July. South Korea’s current account surplus of $7.16 billion in November was 22% narrower than the November 2020 surplus.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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