2023 Opens on a Cautiously Hopeful Market Note
January 3, 2023
Share prices closed up 1.8% in Hong Kong, 0.9% in China, and 0.6% in Taiwan and Indonesia. Japan stayed closed for holiday. Stock markets have traded up at least 1.0% so far in today in Germany, France, Italy and the U.K., and U.S. equity futures show an upturn of about 0.9%. The mood change accompanying the start of a new calendar chapter may represent no more than wishful bottom-fishing after the big declines sustained in 2022. Yesterday’s 50-basis point rate hike by the Bank of Israel served as an early reminder that central banks are not done tightening monetary policies, and the IMF Director Georgieva made news with a warning that 2023 will be a harder year than 2022 from a global growth standpoint.
Hope in Asia springs from the Chinese about-face on Covid restrictions, but the true implications of the policy shift are highly uncertain amid unconfirmed reports of skyrocketing coronavirus cases there. Also, the Chinese manufacturing purchasing managers survey out today delivered a 3-month low reading of 49.0 in December, indicating a lack of boost so far from lessening restrictions.
Price news today reflected a greater-than-forecast deceleration of inflation. Investors await the preliminary German December report but have been heartened already by regional CPI inflation drops to 8.7% from 10.4% in North Rhine Westphalia, 9.1% from 10.5% in Bavaria, 8.1% from 9.7% in Hesse, 8.5% from 9.6% in Baden-Wuerttemberg, 9.1% from 10.5% in Brandenburg, and 8.7% from 9.9% in Saxony.
In the former Soviet Bloc country of Georgia, consumer price inflation slowed to a 19-month low of 9.8% in December from 10.4% in November and a 127-month high of 13.9% in December 2021.
In Turkey, which has experienced one of the world’s highest rates of inflation, CPI inflation slowed to a 9-month low of 64.3% in December from 84.5% in November, while producer prices recorded their first post-pandemic month-on-month decline, which resulted in an 11-month low of 97.7% in year-on-year PPI inflation. Such had peaked just two months earlier at 157.7%. Turkey’s price reports did not bring any immediate relief to the beleaguered lira which plunged over 40% in 2022, providing significant fuel to the economy’s inflation problem.
Other manufacturing purchasing manager surveys reported today produced the following December results:
- A 31-month low of 50.2 in Australia, revised marginally down from a preliminary estimate of 50.4.
- A 31-month low of 45.3 in Great Britain, further underscoring what a colossal mistake Brexit has been.
- A 16-month low of 47.8 in Malaysia.
- A 15-month low of 46.4 in Vietnam.
- No change from Ireland’s November 30-month low of 48.7.
- A six month high of 53.1 in the Philippines. Readings above 50 indicate improving activity and vice versa.
- A 5-month high of 44.6 in Taiwan, still not much better than the record low of 41.5 in October.
- A 2-month high of 54.1 in Switzerland versus 62.7 at the end of 2021.
- Saudi Arabia’s non-oil PMI dropped 1.6 points to a 3-month low of 56.9.
GDP in Singapore grew considerably more slowly in the final quarter of 2022, at 0.2% versus the previous quarter and 2.2% compared to the year-earlier quarter.
In other financial market action today, 10-year sovereign debt yields have dropped back 15 basis points in Switzerland, 12 bps in the United States, 8 bps in the U.K., 7 bps in Spain, 6 bps in France, 5 bps in Germany but not at all in Japan, which remains closed for holiday.
Gold has climbed 0.8% to a half-year high, while WTI oil dropped 1.1% so far this Tuesday. Bitcoin ticked up 0.2%.
The dollar has traded strongly today, rising so far by 1.6% against the Swiss franc and Australian dollar, 1.3% relative to the euro, 1.1% according to the DXY weighted dollar index, 1.0% versus sterling, and 0.5% vis-a-vis the Canadian dollar. Dollar/yen is steady, by contrast.
Just In: German CPI inflation decelerated half a percentage point more than expected to to a 4-month low of 8.6% in December from 10.0% in November and a record 10.4% in October. Germany experienced back-to-back monthly CPI declines for the first time in a year, but not all aspects of the report were positive. Among services, inflation accelerated to 3.9% year-on-year from 3.6% in November, and the latest 8.6% overall inflation rate was still above both the average-2022 level of 7.9% and the end-2021 pace of 4.9%. Energy price inflation dived back to 24.4% from 38.7% in the prior month, while food price inflation of 20.7% was less than a half percentage point lower than in November.
Still ahead: U.S. and Canadian PMI manufacturing surveys.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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