Directionless Tuesday Evokes a Hazy Shade of Winter

January 24, 2023

Many markets in Asia including China, Taiwan, Hong Kong, Malaysia, South Korea, Vietnam and Singapore remained closed for the Lunar New Year holiday. Equities closed down 0.4% in the Philippines, 0.2% in Indonesia, and unchanged in India but up by 0.4% in Australia and 1.5% in Japan. Stock markets in Europe are currently unchanged in France, Italy and Spain and down 0.3% in Germany and Great Britain. U.S. stock futures are down by a similar amount.

The dollar has advanced 0.6% against sterling, 0.4% relative to the Swiss franc and 0.1% vis-a-vis the euro, Aussie dollar and Mexican peso. The dollar elsewhere is steady against the Canadian dollar, kiwi and yuan but down 0.3% versus the Japanese yen.

Ten-year sovereign debt yields are steady in Germany and the United States, down three basis points in the U.K. but up three basis points  in Japan. Prices for oil, gold and bitcoin show modest appreciation so far today.

An unexpected central bank interest rate hike of 100 basis points was announced  in Nigeria, and today’s main data news comes from the release of preliminary January purchasing manager survey results. Investors continue to await a host of influential U.S. data due later this week — the earliest estimate of fourth-quarter 2022 GDP growth, as well as personal income and consumption, the PCE price deflator, durable goods orders, and  an advance estimate of the merchandise trade deficit.

Activity in Japan‘s service sector and overall private sector improved to three-month highs, according to preliminary purchasing manager surveys reported today., printing at 52.4 and 50.8, respectively. Both readings exceeded analyst expectations and the 50 level that delineates whether the economy is improving or deteriorating. Input and output price inflation slowed to 17- and 16-month lows. In manufacturing,  however, the PMI score remained unchanged from December’s 26-month low of 48.9.

Australia‘s composite and service-sector PMI readings of 48.2 and 48.3 were also their highest in three months, but the manufacturing PMI edged below 50 to 49.8, ending a 31-month streak of scores above 50.

Euroland’s composite PMI climbed back above 50 in January to a 7-month high of 50.2 from 49.3 in December and 47.8 in November. There were several good signs. Indices for jobs and business sentiment each rose, and demand fell less sharply, but one negative surprise was higher output price inflation than in December. The PMI indices for services and manufacturing were at 6- and 5-month highs and better than analyst forecasts.

Within the euro area, Germany‘s composite purchasing managers index rose 0.7 points to a 7-month high of 49.7, while France‘s PMI slipped 0.1 point to a 2-month low of 49.0. Germany’s services PMI jumped 1.2 points to a 7-month high, whereas the French services index slid 0.3 points to a 22-month low of 49.2.

Sterling’s weakness today relative to both the euro and dollar, followed a disappointing British purchasing managers survey. The composite index dropped 1.2 points to a two-year low of 47.8. A 4-month manufacturing high surpassed expectations but, at 46.7, signaled continuing strong contraction, and services at 48.0 was the fourth sub-50 reading in a row and the lowest of that streak.

In other data news this quiet Tuesday,

German consumer confidence improved to a six-month high, showing relief that the winter has been milder than usual.

French business confidence weakened modestly to a 4-month low in January but, at 102.1, was still above its long-term average, albeit well beneath the pre-Russian invasion level of 112.6 last February. Manufacturing and employment indices climbed to 5- and 9-month highs this month. Construction fell back to a 2-month low.

The orders component of Britain’s monthly industrial trends survey sank sharply further to minus 17 in January from -6 in December and +26 last May.

Finnish producer price inflation slowed to an 18-month low of 14.5% in December from 18.8% in November and a record high of 32.5% last June.

The Swiss trade surplus last month of CHF 2.756 billion was five times wider than in November, but the calendar year surplus narrowed to CHF 43.5 billion in 2022 from CHF 58.5 billion in 2021.

New Zealand’s service-sector purchasing managers index fell to an 8-month low of 52.1 in December from 53.8 in November and a 57-month high of 58.6 last August.

Australia’s NAB-compiled monthly business conditions index dropped 8 points to a 10-month low of +12 in December. In contrast, business confidence rebounded to a 2-month high of minus 1.

In Nigeria where consumer price inflation of 21.3% last month was not far below November’s 17-year high of 21.5%, officials at the central bank raised their policy interest rate by another full percentage point to 17.5% at their first scheduled review of 2023. The rate had been at 11.5% from July 2020 until a 150-basis point hike in May 2022. Three more hikes followed last year of 100 bps in July, 150 bps in September and 100 bps in November. As has been the case in many economies, higher interest rates to combat inflation has started to depress economic growth in Africa’s largest economy.

Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: ,

ShareThis

Leave a Reply

You must be logged in to post a comment.

css.php