Worried but Bottom-Fishing After a String of Down Weeks
February 27, 2023
Bearish European reported today didn’t deter investors from testing the upside potential of share prices.
European stock markets prior to the U.S. open were up by 0.7% in the U.K. and 1.4-1.9% in Germany, France, Italy and Spain. U.S. equity futures show more modest gains, and stock markets in the Pacific Rim closed down this Monday by 1.1% in Australia, 0.9% in New Zealand, 0.7% in Taiwan, 0.4% in South Korea, 0.3% in China and Hong Kong and 0.1% in Japan.
A more consistent bearishness can be observed in ten-year sovereign debt yields, which rose overnight by 16 basis points in the U.K., 5 bps in Germany, 4 bps in Spain and France and two basis points in U.S. Treasuries.
The weighted DXY dollar index has dipped 0.1% but is currently 0.5% below its overnight peak. In bilateral terms, the dollar has fallen today by 0.4% against sterling, 0.2% versus the loonie, and 0.1% against the euro and yen, but it has risen 0.4% and 0.3% versus the New Zealand and Australian dollars.
Prices for WTI oil and Bitcoin tokens are down 0.4% and 0.5%. Gold remains depressed but has ticked up 0.1%.
The monthly Euroland economic sentiment index did not improve further in February as had been expected but instead edged down 0.1 point to a 2-month low. The industrial and service sectors dropped to 2-month lows as well, while construction and retail went up. The preliminary consumer confidence reading was reconfirmed at a 1-year high. Continuing problematic inflation expectations support the rhetoric forward guidance of ECB officials that continuing aggressive interest rate hikes will be needed.
Money and credit growth last month reflect the European Central Bank’s progressive policy tightening. On-year growth in the stock of broad M3 money slowed to 3.5% in January from 4.1% in December and 4.7% in 4Q as a whole. Loans to households (both overall and for home mortgages) and to non-financial firms slowed last month, too. So did both credit to private residents and to the public sector.
Icelandic consumer price inflation accelerated 0.3 percentage points to a 161-month high in February of 10.2%.
Finnish producer price inflation slowed significantly further in January to but a third of last June’s peak of 32.5% but remained in double digits at 10.7%.
Japan’s index of leading economic indicators in December was left unrevised at a 2-year low. The index of coincident economic indicators was at a 7-month low, prompting officials to downgrade the trend designation to “weakening.” The designation had been “improving” for the nine previous months.
Mexico’s $4.125 billion trade deficit in January was wider than the $2.2 billion shortfall per month average in 2022 but smaller than the deficit of $6.28 billion in January 2022.
Turkey’s trade deficit of $14.237 billion in January was the widest monthly gap ever and 56% larger than its monthly average in 2022, and that happened before a devastating earthquake.
Italian manufacturing sector sentiment improved this month to a 5-month high, and consumer confidence reached a one-year peak.
Canada recorded a C$ 10.64 billion current account deficit, which accounted for almost all of the C$ 10.83 billion deficit accrued in 2022. The deficits in 3Q 2022 and in the last quarter of 2021 had been C$ 8.41 billion C$ 0.32 billion.
A 4.5% drop in U.S. business orders for durable goods last month reversed most of December’s 5.1% increase and left the level 1.4% less than in October and just 3.0% above the year-earlier level. Although January’s decline exceeded expectations, the report all in all was a mixed one because core non-defense orders excluding aircraft went up by 0.8% in the month.
Still ahead: U.S. pending home sales and Dallas Fed manufacturing survey.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland economic sentiment, U.S. durable goods orders
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