Dollar Begins March with a Decline, and Asian Equities Buoyed by Stronger-than-Expected Chinese Growth
March 1, 2023
The dollar fell back overnight by 1.0% against the euro and Chinese yuan, 1.5% versus the kiwi, 0.8% relative to the Australian dollar, 0.7% vis-a-vis the Swiss franc, 0.5% against the Japanese yen, 0.4% relative to the Canadian dollar and Mexican peso, and 0.3% versus sterling.
The relaxation of Covid restrictions gave China’s economy a greater boost than realized. The government-compiled NBS manufacturing and non-manufacturing purchasing manager surveys revealed the strongest activity in 23 and 132 months with readings of 52.6 and 56.3, respectively. The composite PMI jumped 3.5 points above January’s level to 56.4. The privately compiled Chinese manufacturing PMI also exceeded expectations at an 8-month high of 51.6.
Share prices in Hong Kong and China advanced this first day of March by 4.2% and 1.0%, while stock markets closed up 0.9% in South Korea, 0.8% in India, and 0.6% in Taiwan. The British, German, French and Italian stock markets so far today show increase of 0.7-0.9%, but gains in U.S. stock futures are modest in comparison.
Ten-year German, French, Italian, and Spanish sovereign debt yields have risen four basis points each. Their U.S. and British counterparts are up just one basis point and down 2 bps.
With a 2.5% appreciation, the price of Bitcoin tokens got off to a good start in March. Prices for gold and WTI oil are up 0.5% and down 0.8%.
Among general news headlines today, Russia’s so-called spring military offensive in Ukraine has underperformed greatly; a train accident in Greece has killed over 35 people; and Chicago voters have denied Mayor Lori Lightfoot an opportunity to serve a second term.
Price statistics reported today revealed that German CPI inflation held steady at 8.7% in February instead of slipping 0.2 percentage points as analysts were predicting. A drop to 8.1% in December now looks like an outlier; inflation in all the other months since September have ranged between 8.6% and 8.8% versus the ECB target of 2.0%. More monetary tightening will be unavoidable. Elsewhere, producer price inflation settled in January at 35.0% in Hungary and 14.0% in Croatia. In Britain, shop prices in February were a record high 8.4% above their year-earlier level, but the Nationwide house price index fell 0.5% on month in February and recorded its first year-on-year decline (-1.1%) since mid-2020. That’s down from a 12-month 14.3% increase recorded in March 2022. Consumer price inflation in Indonesia accelerated 0.2 percentage points in February to 5.47% but remained a half percentage point below last September’s 95-month high of 5.95%.
Australian GDP growth remained positive last quarter but continued to subside. Quarterly growth slowed to 0.5% from 0.7% in 3Q and 0.9% in 2Q, and year-on-year growth was more than halved to 2.7% from 5.9% in the previous quarter.
A 2.2% year-on-year drop in Swiss retail sales was the fourth on-year drop in a row. Although down 2.6% on month, Portuguese industrial production posted the largest 12-month rise (4.5%) in 19 months. Germany’s labor market remained tight last month with an unchanged 5.5% jobless rate. Cypriot GDP expanded 1.1% on quarter and 4.5% on year in the final quarter of 2022. Mexican business confidence improved last month to a 1-year high. Taiwanese consumer confidence also improved, reading its best level since September. In energy-producing Norway, the current account surplus widened threefold to NOK 1.691 trillion last year.
Aside from the aforementioned Chinese purchasing manager surveys, manufacturing PMI results from February were reported today for about 30 other economies around the world. The most consistent theme is that Covid’s legacy of supply bottlenecks has diminished greatly, but sustained weak demand casts some doubt on whether improved output will continue.
Euroland’s preliminary manufacturing PMI reading of 48.5 was not revised. That was a 2-month low. Among the eight countries in the euro area for which individual PMI surveys are conducted, Italy, Greece, Ireland and Spain scored above the 50 level (meaning that activity grew positively). The February readings for them were moreover at 10-, 9-, 4-, and 8-month highs. The readings for Germany, Austria, France and the Netherlands, however, ranged from 46.5 to 48.7 and were at respective 3-, 3-, 4- and 2-month lows.
Britain‘s manufacturing PMI of 49.3 signaled the slowest rate of contraction in 7 months versus a 31-month low of 45.3 seen in December. The Swiss manufacturing PMI reading of 48.9 represents a 32-month low.
In Nordic Europe, Sweden’s manufacturing PMI score of 47.0 matched January’s 4-month high. Norway’s PMI sank to a 30-month low of 47.5. The Danish PMI dived from 54.4 in January to 44.1 last month.
Turning to Eastern Europe, Russia’s manufacturing PMI reading of 53.6, a 73-month high, attests to the ineffectiveness of Western trade sanctions. Poland’s PMI of 48.5 was the closest to the 50 threshold in nine months. Hungary’s PMI ticked 1.5 index point higher to a 2-month high of 56.5, but the Czech reading of 44.3 was at a 2-month low.
In Asia, Japan’s manufacturing PMI was revised 0.3 points upward but was still a 17-month low of 47.7. India’s PMI dropped to a 4-month low of 53.3. The Filipino PMI reading of 52.7 was a 3-month low, and Indonesia’s PMI scored 51.2, a 2-month low. But PMIs for Thailand (54.8) and Vietnam (51.2) rose to 5-month highs, and the Malaysian reading of 48.4 was a 4-month high. Optimism and activity in Taiwan have benefited from Russia’s fumbles in Ukraine; Taiwan’s 49.0 PMI reading was up from 44.3 and its best score in 8 months.
Australia’s manufacturing PMI reading of 50.5 was better than the preliminary indication and at a 3-month high. Turkey’s 50.1 matched January’s stagnating 11-month high. The ABSA-compiled South African PMI fell 4.7 points to a 5-month low. Brazil‘s 49.2 reading was 1.7 points above the January reading and its closest to the fifty threshold since October.
U.S. mortgage applications suffered another big drop last week (-5.7%); the 30-year fixed mortgage rate rose by a further nine basis points to 6.71%.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
ShareThis
