Equity Rebound Extended and Dollar Up Somewhat Too
October 18, 2022
With China’s 20th National Congress still ongoing, officials there elected to delay today’s scheduled release of GDP, industrial production, retail sales, unemployment and fixed asset investment. Investors await U.S. industrial production and the National Association of Homebuilders’ housing index, but otherwise it’s been another light day from a data release standpoint.
Appetite for risk was strengthened by surprisingly resilient corporate earnings reports and by the British U-turn on fiscal policy plans. Equities in the Pacific Rim closed up 1.7% in Australia, 1.8% in Hong Kong, 1.4% in Japan and South Korea, 1.2% in Taiwan, and 1.0% in India. Share prices have risen 0ver 1.0% in Germany and Italy and 0.9% in the U.K. and Spain so far, while key U.S. indices are up 1.5-2.0% in futures.
In central banking news, a spokesman from the Bank of England disclaimed an FT report that the start of planned gilt sales is going to be delayed beyond October 31st. Michele Bullock of the Reserve Bank of Australia said the reduced size of this month’s Official Cash Rate hike merely reflects a tactical modification to smaller but more frequent tightenings of the interest rate. A number of European Central Bank officials expressed a preference for reversing the previous process of quantitative stimulus as a complement to raising the bank’s interest rates.
Ten-year sovereign debt yields rose today by 7 basis points in Italy, 6 bps in the U.K., and 4 bps in France and Germany but slipped two basis points in the 10-year U.S. Treasury.
Prices for gold, WTI oil and Bitcoin dipped 0.4%, 0.2% and 0.1% overnight.
The dollar has appreciated 0.6% against sterling, 0.1% relative to the yen and euro and 0.2% against the Swiss franc. That outweighs a 0.7% drop against the kiwi, and the weighted DXY dollar index shows a net gain of 0.3%.
The New Zealand dollar’s overnight rise was triggered by quarterly consumer price data reported in that economy. The CPI jumped 2.2% on quarter in 3Q 2022, and it’s on-year 7.2% advance was just marginally below the second quarter’s 128-quarter high of 7.3%. In a monetary tightening landscape, indications of persisting inflation point to further sizable central bank interest rate hikes, and that empowers demand for associated currencies.
The German ZEW survey of investor sentiment in October produced another round of depressed results. The expectations indices for Germany (-59.2) and the whole euro area (-59.7) were almost as weak as September’s 14-year lows, and those depicting current conditions (respectively -72.2 and -70.9) dropped in the latest month.
New car registrations in the European Union, a measure of sales, posted a 9.6% on-year advance in September following a 4.9% increase in August. That trimmed the year-to-date decline from 14.0% in the first half of 2022 to 9.9% over the first three quarters of the year.
Italy experienced a record monthly trade deficit in August of EUR 9.57 billion, and Spain‘s deficit of EUR 7.94 billion was its largest since the 2008 financial crisis.
Moldovian producer price inflation ticked up 0.2 percentage points to a 268-month peak of 30.4% last month.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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