Investors Influenced Keenly by What Putin Says
March 11, 2022
Friday fighting in Ukraine was as intense as ever, but Russian President Putin reportedly told Belarusian President Lukashenko that diplomatic talks between Russia and Ukraine had produced some “positive” developments. Despite Putin’s propensity for lying, that comment was today’s main market mover.
Share prices in Europe are ups 3.3% in Germany, 2.3% in Italy and France, 2.2% in Spain and 1.5% in the U.K. thus far, while U.S. futures point to a 1-1.5% advance when the market opens. Earlier in the Pac Rim, equities had dropped 2.1% in Japan, 1.6% in Hong Kong, 1.0% in Taiwan, 0.9% in Australia and New Zealand, and 0.7% in South Korea.
In other financial market developments, the dollar is up 0.6% against the yen after hitting more than a 5-year high of JPY 117.06 earlier in the session. The dollar also rose 0.5% against the Aussie dollar but has declined by 0.3% versus the Mexican peso and Turkish lira and 0.1% relative to the loonie and euro. Sterling is unchanged. Among 10-year sovereign debt yields, there have been increases of 3, 2, and 1 basis points in Germany, the U.S., and Great Britain but a dip of 1 basis point in Japan. The price of gold fell 1.6%, but that of WTI oil rose 1.1%. The price of a Bitcoin rose 0.6% and is just south of $40,000.
The Central Bank of Russia continues to implement currency controls during office hours to hold the ruble steady around 116-117 per dollar, but after-hours trading sees the ruble swoon. Yesterday’s ruble low was 140/dollar compared to a 52-week high of 69.2 per dollar.
Brexit and soaring energy costs caused the British goods and services trade deficit to catapult to GBP 16.16 billion in January. That record gap compares to deficits of GBP 2.34 billion in December and GBP 3.4 billion in January 2021. The merchandise trade deficit (goods only) more than doubled to GBP 26.499 billion.
Other British data released this Friday were strong. Monthly GDP grew 0.8% in January, four times faster than expected. Construction output rose 1.1% on month and 9.9% from January 2021. Industrial production in January also recorded larger-than-projected increases of 0.7% on month and 2.3% on year.
The quarterly survey of business conditions conducted by Japan’s Ministry of Finance reflects a considerable deterioration during the first quarter of this year due to faster producer input cost inflation. The diffusion index for all large companies swung from +9.6 in the final quarter of 2021 to -7.5 this quarter. Both manufacturing and non-manufacturing saw a swing from the black into the red.
On a brighter note, Japanese real personal spending posted the largest year-on-year increase (6.9%) in January since June 2021.
New bank lending in China slowed more sharply than expected in February to CNY 1.23 trillion from a record high in January of CNY 3.98 trillion and was smaller than CNY 1.36 trillion in February 2021 as well. Likewise, on-year growth in the stock of M2 money fell more sharply than forecast to 9.2% compared to 9.8% in January and 10.1% in February 2021.
Chinese motor vehicle sales recorded their largest year-on-year increase (18.7%) during February in 17 months.
German consumer prices rose 0.9% on month in February after January’s 0.4% increase, resulting in a 0.2 percentage point increase of its 12-month rise to 5.1%. In year-on-year terms, energy, food and service sector prices went up 22.5%, 5.3% and 2.8%. The recent 354-month 5.3% peak in German inflation in December will undoubtedly be surpassed in March due to recent global energy price developments.
Spanish CPI inflation accelerated 1.5 percentage points to a 35-plus year high of 7.6% in February.
The 12-month increase of 6.8% in New Zealand food prices last month was up from 4.5% in December and 1.2% in February 2021. New Zealand’s manufacturing purchasing managers index recovered 1.3 points to a 2-month high of 53.6 in February.
Serbian CPI inflation of 8.8% last month was up from 1.2% in February 2021 and the most such has been in 164 months.
Brazilian consumer prices rose 1.0% in February after a 0.5% increase in January. Their 10.5% year-on-year increase was 10.0% of more for a sixth straight month.
Indian industrial production flat-lined in January and was only 1.3% greater than a year earlier. Over the previous twelve months between February 2020 and February 2021, industrial production had dropped 1.6%.
Turkey experienced its largest current account deficit (-$7.112 billion) in 49 months. Turkish retail sales fell 1.5% on month in January and posted the smallest year-on-year rise (7.9%) in 11 months. Turkish industrial production also fell in January. The slide of 2.4% resulted in a the smallest on-year rise (7.6%) in 18 months.
Mexican industrial production climbed 1.0% on month and 4.3% on year in January, marking their largest 12-month advance in five months.
Canadian unemployment dropped a whole percentage point to 5.5%, while employment shot up 336.6k in February. Not only was that increase a bit more than double what analysts had been anticipating, but given the fact that there are 7.7 times more U.S. than Canadian workers, Canada’s increase was akin to a 2.6 million monthly increase in U.S. non-farm payroll workers. Canada also reported an 1.1 percentage point acceleration in average hourly wage growth to 3.3% year-on-year. And last, capacity utilization in Canada rose to 82.9% last quarter, the most since the spring of 2019 and up from 81.4% in 3Q 2021 and a pandemic low of 71.9% in the summer of 2020.
The Central Bank of Peru’s policy interest rate has been increased by a further half percentage point to 4.0%, which nonetheless is still just over 2 percentage points below the latest Peruvian rate of inflation.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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