Share and Bond Prices Fall, Dollar Little Changed Ahead of Tuesday-Wednesday FOMC Meeting
January 30, 2023
U.S. equity futures point to a drop of around 1% at the opening bell. Share prices closed down 2.7% in Hong Kong, 1.4% in South Korea, 0.5% in Singapore, 0.4% in Indonesia but up 0.2% in Japan and 0.1% in China. Major European stock exchanges are down about 0.5% thus far.
Ten-year sovereign bond yields are up 8 basis points in Italy, 7 bps in Spain, 6 bps in Germany and France, 5 bps in the United States but just 0.2% in Great Britain. The consensus of Fed watchers is that the FOMC will approve a smaller 25-basis point interest rate hike to be announced Wednesday. Opinions are divided over the path of inflation in the first half of 2023.
The dollar has risen 0.4% against the Australian dollar, 0.2% relative to the Japanese yen, and 0.1% versus the Canadian dollar but down 0.4% vis-a-vis the euro, 0.5% against the yuan. There’s been no net movement of the dollar against the Swiss franc or sterling.
One of the biggest financial market moves today has been a 2.8% slump in the price of Bitcoin. Oil and gold prices are down just 0.4% and 0.2%.
Euroland’s monthly economic sentiment index unexpectedly climbed to a 7-month high in January. Indices for the retail sector and consumer confidence were at their best levels since just before Russia invaded Ukraine in February 2022. Sector indices for services and industry printed at 7- and 5-month highs. The gauge for employment was at an 8-month peak, whereas that for construction, which is very sensitive to interest rate changes dropped to a 4-month low. Officials at the ECB and Bank of England will be reviewing interest rate policy this week as well as the FOMC.
Turkish economic sentiment also surpassed expectations in January, rising 2.8 index points to a 7-month high.
Finnish consumer confidence bounced off December’s 28-year low of -18.5 to an 8-month high in January of -12.7. Spanish business confidence rose 0.8 points to -4.3 this month from -5.1 in December and a 23-month low of -7.6 in November.
Today’s batch of price data releases delivered mixed results. Spanish consumer price inflation this month edged a tenth of a percentage point above December’s 5.7% 13-month low but was five percentage points below July’s 454-month peak. However, core CPI touched a new 36-year high.
Icelandic CPI inflation of 9.9% in January represents a half-year high and remains well above 5.7% a year ago.
Producer price inflation accelerated in Italy and Malaysia to 3- and 2-month highs of 31.7% and 3.5% but continued to recede in Greece and Austria to 16- and 15-month lows of 16.5% and 13.3%.
Germany, Belgium, Sweden and Ireland reported fourth-quarter GDP statistics this morning.
- German GDP contracted 0.2% on quarter. That weaker-than-forecast result was sub-zero for the first time since 1Q 2021 and was also associated with a 7-quarter low year-on-year advance of 1.1%.
- Belgian GDP rose only 0.1% on quarter, resulting in a 7-quarter low year-on-year pace of 1.4%.
- Swedish GDP slumped 0.6% both relative to the prior quarter and the same quarter a year earlier. The average Swedish growth rate in 2022 was positive, however, at +2.4%.
- Irish GDP grew 3.5% on quarter (most since 1Q 2022) and 13.5% on year (up from 10.9% in 3Q and the fastest since the year through 4Q 2021.
New Zealand’s trade deficit widened sharply from NZD 7.1 billion in 2021 to NZD 14.3 billion last year.
Spanish and Portuguese retail sales dropped 1.7% and 3.1% during December relative to the prior month.
In Ghana, where consumer price inflation soared from 12.6% at end-2021 to 54.1% last month, officials at the Bank of Ghana increased the policy interest rate from 14.5% coming into March 2022 to 27.0% by last November. The near doubling was accomplished in just five months, with increments of 250 basis points in March, October and November, 200 basis points in May and 300 bps in August. Today’s further policy rate hike to 28% was only 100 basis points in size, matching an initial tightening in November 2021. Ghana has experienced a textbook vicious cycle of reinforcing currency depreciation and domestic price inflation. The U.S. dollar is worth 127% more against Ghana’s currency than a year ago.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Ghana, Euroland economic sentiment, German GDP
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