Month-End, Powell’s Speech, and a Whole Lot of Released Data to Digest

November 30, 2022

Investors are awaiting Fed Chairman Powell’s luncheon speech today at the Brookings Institution, scheduled to start at 13:30 EST (18:30 GMT).

The last business day of each month typically offers a very heavy menu of released data. November saw the biggest monthly drop  in the dollar in over a decade, as long-term interest rates fell unexpectedly. Equities had a decent month, while the prices of commodities and Bitcoin softened.

In overnight market action, the dollar rose 0.6% against the yen, but fell 1.0% against the Australian and New Zealand dollars and showed little net change against other major currencies. The weighted dollar index is almost 4% weaker than at the end of October. Equity markets in the Pacific Rim closed this Wednesday with daily gains of 2.2% in Hong Kong, 1.3% in New Zealand, 1.2% in Taiwan, 0.7% in India, 1.6% in South Korea but a dip  of 0.2% in Japan. The British FTSE so far shows a gain of 0.8%, and the Paris CAC has firmed 0.5%. Major U.S. stock indices are narrowly mixed. Ten-year sovereign debt yields, while lower for the whole  month, are  up today by eight basis  points in the  U.K., four bps in the U.S.,  and 2 bps in Germany. WTI oil and Bitcoin  prices have jumped today by 3.0% and 2.5%.

Third-quarter U.S. GDP growth was revised higher to 2.9% quarterly but expressed at an annualized rate and 1.9% when compared with the  level one year earlier. Net exports accounted for all of the quarter’s growth. Drags  on growth from inventories and residential investment offset  positive growth in personal consumption, government spending, and non-residential business expenditures. The total and core PCE price deflators were 6.3% and 4.9% above their year-earlier levels. Corporate profits dipped 0.2% on quarter.

Other released U.S. economic indicators showed a 30-month low in the Chicago regional purchasing managers index; a record 36.7% year-on-year plunge  in pending home sales; an 18-basis point weekly drop in the 30-year fixed mortgage rate on top of the prior week’s 23-basis point slide; a 0.8% weekly decline in mortgage applications; fewer job openings and  new hires in October than September; a 5-month high merchandise trade deficit in October of $99.0 billion; and a near-halving of the ADP estimate of private employment growth to 127k in November from 239k in October.

Euroland consumer price inflation unexpectedly retreated this month to 10.0% from 10.6% in October but was still twice as much as the 4.9% pace in the year ending November 2021. Harmonized CPI inflation among members of the euro zone advanced between November 2021 and November 2022 to 11.3% from 6.0% in Germany, 7.1% from 3.4% in France, 12.5% from 3.9% in Italy, 11.2% from 5.9% in the Netherlands, 9.0% from 4.0% in Greece, and 10.3% from 2.6% in Portugal. Core inflation in the whole Euroland economy remained steady at 5.0% in November but had been 2.6% a year earlier.

A 0.2% quarterly rise in French GDP  last quarter was associated with a sharp year-on-year growth decline to 1.0% from 4.2% in the second quarter and 5.1% in the  final quarter of 2021. Italian real GDP advanced 0.5% in 3Q 2022 but still recorded the smallest on-year increase (2.6%) in six quarters. On-year Polish GDP growth of 3.6% was also the least in six quarters, but Icelandic on-year growth of 7.3% was up from 6.6% in 2Q despite a 0.5% quarterly decline. Portuguese on-year growth of 4.9% was  down from 7.4% in the previous quarter.

French producer prices dipped 0.1% in October, resulting in an 8-month on-year smallest increase of 24.7%. Belgian producer price inflation likewise slowed to 28.1% from 36.5%, but Greek PPI inflation reaccelerated to 35.4% in October from 29.4% in September.

The Swiss ZEW expectations index, a gauge of investor sentiment, printed at a deeply negative and 5-month low -57.3 this month. The Swiss leading business cycle  index dropped to a 29-month low as well.

Japanese industrial production contracted 2.6% on month in October after September’s 1.7% drop, prompting officials to downgrade their trend characterization to “picking up slowly but signs of decline in part.” Industrial  production was 3.7% greater than in October 2022, down from a 4.2% on-year increase on average in the summer quarter. Meanwhile, Japanese housing starts were 1.8% fewer than in October 2021, and construction  orders posted a 7.9% on-year advance, sharply less than their 36.6% increase in September.

The NBS Chinese government-authorized manufacturing and non-manufacturing purchasing manager survey indices each fell more deeply below the 50 neutrality  level to 7-month lows of 48.0 and 46.7, respectively.

South Korean  industrial production fell 3.5% on month in October (most in 29 months) and 1.1% on year (first 12-month decline in 13 months).

Malaysian PPI inflation of 4.0% in October was at a 20-month low and down from 13.2% in October 2021.

In Sri Lanka, consumer prices in November were 61.0% above a year earlier versus but down from a record high 69.8% in September.

In central banking news, the Bank of Thailand’s policy rate was raised today by 25 basis points to 1.25%. This is the third such hike since August, fully reversing a trio of 25-bps cuts between February and May of 2020. In taking today’s step, bank officials revised their 2023 inflation forecast up 0.4 percentage points to 4.05.

The Central Bank of Namibia’s policy interest rate was also increased today via a 50-basis point move to 6.75%. There had been five earlier increases this year, totaling 250 basis points. At 6.75%, the new rate level still lies a bit below the 7.1% on-year current rate of CPI inflation. Between August 2020 and February 2022, the rate had been at a pandemic low of 3.75%.

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

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