Slow Start to a Busy Week
March 6, 2023
The dollar is mostly higher so far today, with gains of 0.7% relative to the Australian and New Zealand dollars, 0.4% versus the Chinese yuan, 0.3% against sterling, 0.2% vis-a-vis the Japanese yen, Canadian dollar and and Mexican peso. That said, the euro has moved in lock-step with the dollar, the Swiss franc has risen by 0.1%, and consequently the dollar’s trade-weighted uptick has been only 0.1%.
Share prices in Asia extended Friday’s North American rally, with gains of 1.1% in Japan, 1.0% in Taiwan, and 1.3% in South Korea, but China’s Shanghai Composite dipped 0.2% after a smaller-than-expected 5.0% Chinese growth target for 2023 that was revealed at the ongoing National People’s Congress that runs through March 13. In Europe, the British Ftse is 0.6% weaker, and the German Dax and Paris Cac have edged up only 0.2%.
U.S. stock futures are merely marking time, with investors waiting to see what Fed Chairman Powell says Tuesday and Wednesday during his semi-annual congressional testimonies on monetary policy before the Senate Banking Committee and the House Financial Services Committee. Other potential market movers this week included the Federal Reserve’s Beige Book of regional economic conditions, U.S. February labor market statistics, and revised GDP growth last quarter for Japan and Euroland.
Ten-year sovereign debt yields have settled back four basis points in the U.S. and Germany and three basis points in the U.K., France and Italy.
Among commodities, oil (-1.3%) reacted sensitively to the disappointing Chinese GDP growth target, but gold (+0.1%) was muted. The price of Bitcoin tokens slipped 0.2%.
Officials at the Central Bank of Sri Lanka ended an 8-month pause in monetary tightening, lifting their standing deposit facility interest rate to 15.5% from 14.5%. The standing lending facility rate was increased to 16.5% from 15.5%. Early in the pandemic, the SDF rate had been nearly halved by July 2020 to 4.5% from 7.0% at the start of that year. Subsequent tightening began slowly enough with half percentage point hikes in August 2021 and January 2022. These were followed by a full percentage point increase to 6.5% a year ago and then a huge 700 basis point move in April 2022. Another 100 bps were added in July 2022 followed by a pause that ended today. Sri Lanka has experienced a cycle of reinforcing currency depreciation and accelerating inflation in the face of both political and economic upheaval. To be sure, on-year CPI inflation had eased from 69.8% last September to 50.6% in February, but such still dwarfs the year-earlier pace of 15.1%.
The volume of retail sales in the euro area rose by a much smaller-than-anticipated 0.3% in January after dropping 0.9% last quarter including a 1.7% monthly dive in December. Compared to a year earlier, sales were down by 2.3%, marking the 7th drop in the last 8 months of 2022, the exception being a mere 0.1% uptick last September. In January, sales fell 0.3% on month in Germany and rose just 0.1% in France, resulting in on-year declines of 6.8% and 2.9%, respectively.
Euroland’s construction purchasing managers index (47.6) printed below the 50 breakeven threshold for a tenth straight time in February but signaled the smallest rate of contraction in nine months. The German and Italian construction PMIs (48.6 and 48.9) were at 11- and 3-month highs, whereas their French counterpart worsened to a 2-month low of 45.2.
The British construction sector purchasing managers index leaped improved 6.2 points from a 32-month low of 48.4 to a 9-month high of 54.6 in February.
Egypt’s non-oil PMI index rose in February by 1.4 points to a 2-month high of 46.9, in contrast to Saudi Arabia’s non-oil PMI reading that at a 95-month high of 59.8 was 1.6 points higher than January’s score.
Consumer price inflation in South Korea slowed 0.4 percentage points to a 10-month low of 4.8% in February. That’s down from July’s peak of 6.3% but above the February 2022 12-month increase of 3.7%.
A sign of a new wave in price pressure reported in several countries lately, Switzerland experienced back-to-back monthly CPI increases of 0.6% in January followed by 0.7% in February. That followed 0.2% dips in September and December that flanked October’s 0.1% rise and November’s unchanged result. Year-on-year Swiss CPI inflation rose to a 6-month high of 3.4%.
CPI inflation in Tunisia of 10.4% in February was the most in 38 years, but Serbian PPI inflation fell 1.2 percentage points last month to a 20-month low of 9.4%.
Investor sentiment toward the euro area economy improved in March to a one-year high, according to the Sentix gauge.
Sweden’s current account surplus of SEK 252 billion last year was 29% narrower than than the 2021 surplus but still equal to a comfortable 4.3% of GDP versus 5.3% of GDP in 2021.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Central Bank of Sri Lanka, Euroland retail sales, Swedish current account, U.K. and Euroland construction purchasing manager surveys