A Somewhat Better Market Tone as Northern Hemisphere Observes Winter Solstice
December 21, 2022
Data reported this Wednesday took a turn for the better, and investors were cheered also by recent earnings and other corporate news like Elon Musk’s announcement that he will step down as Twitter’s CEO.
The U.S. current account deficit narrowed to $217.1 billion last quarter from $238.7 billion in 2Q and $282.5 billion in 1Q. The third quarter deficit-to-GDP ration of 3.4% of GDP was down from 4.2% of GDP in the first half of 2022 and 3.6% of GDP in 2021.
The Conference Board’s monthly measure of U.S. consumer confidence unexpectedly improved this month, printing at a 7-month high of 108.3 after 101.4 in November but still below its year-ago reading of 115.2.
The CBI monthly index of British distributive trades had been projected to weaken further in December but instead rebounded sharply to a reading of +11 from -19 in November, suggesting better holiday sales than presumed.
Swedish business sentiment and consumer confidence were each higher in December than November but still below October readings.
German consumer confidence rallied further from an historically depressed state to a score of -37.8 from -40.1 in the previous month and a record low of -41.9 two months earlier. Confidence was at -6.9 a year ago, however.
One probably shouldn’t make to much of the above improvements. As 2022 winds down, the global economic and political landscape remains fraught with uncertainty and risk. But equities and sovereign debt instruments are nonetheless up. Today’s solstice foreshadows lengthening light, and that alone is something to welcome.
The DOW, SPX, and Nasdaq have each risen more than 1.0% so far today. So too have stock markets in Germany, France, Italy, Spain, Great Britain, Canada and Australia. Sovereign debt values are mostly showing green, and the dollar, which has drawn investor interest in these perilous times, is narrowly mixed.
The price of West Texas Intermediate oil advanced 2% so far today, while those of Bitcoin and gold are little changed.
Among other economic reports out today included U.S. monthly existing home sales, which tumbled 7.7% on month and 35.4% on year, which outside of May 2020 was the largest year-on-year drop in a dozen years.
Australia’s Westpac-MI index of leading economic indicators fell for a sixth straight month.
Britain experienced a record November government fiscal deficit of GBP 22.0 billion.
Canadian CPI inflation slid to a 7-month low of 6.8% in November due mainly to a 3.6% monthly drop in gasoline, but two of the Bank of Canada’s three preferred measures of core consumer price pressure moved higher, and the other held steady. Food jumped 1.2% on month and 10.3% on year.
Although policymakers at the Czech National Bank left their two-week repo interest rate unchanged again at 7.0%, which such has been since a hike of 125 basis points last June, two of the seven committee members favored a half-percentage point increase, and the tone of the released statement was hawkish:
The Bank Board states that long-term price stability is also contingent on moderate wage bargaining demands and responsible fiscal policy. The Bank Board will wait for further data and will assess them. It will decide at the next meeting whether rates will remain unchanged or increase. From this point of view, the market’s expectation that we will not increase rates in the first half of next year may not materialise. The Bank Board stands ready to raise rates, especially if the risk of demand-pull inflation increases.
The CNB repo rate had been only 0.25% at the start of 2021, was raised to 3.75% in by the end of last year and to the current 7.0% by mid-2022. That’s still way below recent consumer price inflation, which reached a 29-year peak of 18.0% in September, dipped to 15.1% in October but then rebounded to 16.2% last month.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Canadian CPI, Czech National Bank, U.S. current account deficit
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