Spooky Friday
October 21, 2022
With Halloween just ten days away, investors are hitting the weekend in a very defensive mood. Philadelphia Federal Reserve President Harker added to the hawkish drumbeat, predicting a Fed rate above 4% by December. Dollar strength against a whole spectrum of other currencies is casting a big shadow over expected corporate earnings in the coming year, as such will sap the dollar-translation value of revenues earned abroad. U.S. stock futures are down over a half percent, with social media taking the heaviest blow.
The stampede from equities into bonds sent 10-year sovereign debt yields rising overnight by 18 basis points in the U.K., 13 bps in Italy, 11 bps in Germany, France and Spain, and 8 basis points in the United States. The 10-year U.S. Treasury moved above 4.30% in futures trading.
Equities in Europe, which faces a harsh economic winter and political chaos, have absorbed a particularly large blow. So far there today share prices have dived 2.1% in Spain, 1.8% in France, 1.6% in Germany, 1.7% in Italy and 0.8% in Great Britain. Large drops in the Pacific Rim occurred in Singapore (-1.8%) and Taiwan (-1.0%), although Japan’s Nikkei and Hong Kong’s Hang Seng only lost 0.4%.
A big focus in Asia has been on the appreciating U.S. currency, which climbed overnight by 0.9% against the South Korean won, 0.9% relative to the Japanese yen, 0.5% versus the New Taiwan dollar and Thai baht, and 0.4% relative to the Indonesian rupiah. Japanese officials intervened last month in historically record amounts for a single day to defend the 145 per dollar level, but Japan’s currency has since traded down to as low as 151.6 overnight, its weakest dollar value since August 1990. Rumors continue of other central banks in Asia conducting direct intervention in foreign exchange.
Among other key relationships, the dollar is up today by 0.9% against the Swiss franc, 1.0% versus the kiwi, 0.8% vis-a-vis the Aussie dollar, and 0.4% versus the Chinese yuan, euro, and Canadian dollar. Sterling has been surprisingly steady. There’s some talk of Boris Johnson perhaps returning to lead the Conservative Party there.
The price of Bitcoin dived 1.4% overnight to a near four-week low below $19,000. Gold has fallen 0.6%, while West Texas Intermediate crude oil climbed 0.6%.
Economic data releases this Friday have featured several inflation reports, consumer confidence and British retail sales.
Japanese total CPI inflation of 3.0% last month matched August’s result, which had represented a 95-month high and a steep increase from 0.2% in September 2021. Excluding fresh food, consumer prices also climbed 3.0% year-on-year, and excluding both food and energy, there was a 1.8% 12-month rate of increase, most since March 2015.
Lebanese CPI inflation edged back up to 162.5% in September from 161.9% in August. It’s still below last January’s record high of 239% but above 144% recorded in September 2021.
CPI inflation in Hong Kong of 4.4% last month was sharply above August’s 1.9% reading and the most in 73 months.
South African CPI inflation edged down 0.1 percentage point to a 3-month low of 7.5% last month.
Malaysian consumer price inflation dipped 0.2 percentage points last month to 4.5% from August’s 16-month high.
Irish wholesale price inflation reaccelerated to 6.1% last month from 4.7% in August and 6.2% in both June and July. The WPI had dropped 1.9% between September 2020 and September 2021, by contrast.
Slovenian producer price inflation rose 0.3 percentage points to a 3-month high of 21.3% in September, not far from the record peak of 22.5% last January and well above 6.1% in September 2021.
South Korean PPI inflation of 8% in September was down from 10% in June but above the year-earlier 7.6% pace.
After a record low reading of -49 in September, British consumer confidence in October printed at a 2-month high of -47 versus -17 recorded in October 2020. The index has been south of zero since early 2016.
Belgian consumer confidence in October matched September’s record low of -27.
Danish consumer sentiment dropped 4.9 index points to a record low of -37 in October, having begun this year with a reading last January of -1.5.
Turkish consumer sentiment rose to a one-year high of 76.2 in October from 72.4 in September and a record low of 63.4 in June.
Business confidence in Hong Kong slipped two index points to a two-quarter low in 4Q 2022 of +4.
British retail sales fell 1.4% last month, three times more than forecast, resulting in a deeper year-on-year decline of 6.9%.
Although Canadian retail sales rebounded 0.7% in August from a 2.2% drop in the previous month, early evidence points to a monthly drop of about 0.5% in September.
Polish retail sales fell 1.1% in September but still exceeded its year-earlier level by 21.9%.
Swedish seasonally adjusted unemployment was 7.1% last month versus 8.8% in September 2021.
The Central Bank of Argentina’s policy interest rate was left unchanged at 75.0% in this month’s review. Officials took heart from a smaller monthly increase of consumer prices last month, and they had lifted the rate by 23 percentage points since mid-2022. That said, consumer price inflation in September of 82.9% exceeded the 51.4% pace in September 2021 and still exceeds the central bank interest rate which was at 38% at the end of 2021.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British retail sales, Central Bank of Argentina, Japanese CPI
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