Stronger Dollar, Higher Long-Term Interest Rates, and Softer Equities
April 19, 2023
Equities in the United States are down over a half percent in futures trading as investors react to the latest batch of reported corporate earnings. European shares are only marginally lower. In Asia, stocks closed down 1.4% in Hong Kong, 0.7% in China, 0.3% in India and 0.2% in Japan.
The Fed Beige Book of regional U.S. economic trends will be released this afternoon. In the meantime, more Fed officials have affirmed the need for a rate hike, and at least one has signaled a preference for multiple additional increases.
The dollar overnight rose 0.4% against the Canadian dollar and yen, 0.3% relative to the euro, Swiss franc and Chinese yuan, and 0.2% vis-a-vis the Australian and New Zealand dollars.
Ten-year sovereign debt yields jumped 11 basis points in the U.K. where CPI inflation of 10.1% in March was above the 10.0% threshold for a seventh consecutive month and surpassed the economist consensus that such at last would be in single digits. Such overshadowed news of a 17-month low in producer output inflation of 8.7% and a further drop in producer input inflation to 7.6% from last June’s cresting point of 24.1%. Ten-year U.S. Treasury, German bund, and Japanese JGB yields are 5, 3, and 1 basis point(s) higher today.
The price of Bitcoin tokens more than reversed yesterday’s sharp advance and are down 3.8% so far today. WTI oil has fallen 2.0% in price and, at $79.21 per barrel, signifies the failureĀ of Russian President Putin’s recent attempt to weaponize the oil market by engineering a production cut to goose the price of energy that western countries would need to pay. The price of gold, which tends to move inversely with the dollar, is 1.9% softer.
The preliminary indication on March 31 of Euroland consumer price inflation in March has been confirmed. The bloc’s CPI went up 0.9% on month and showed to a 13-month year-on-year low of 6.9% from 8.5% in February and a record 10.6% last October. Comfort from that deceleration was muted by a record high 5.7% in core inflation that excludes food and energy and a 0.3 percentage point acceleration in the services component to 5.1%. Food prices were 15.5% greater than a year earlier, but energy (-0.9% versus 13.7% in February) posted its first on-year decline in about two years.
Construction output in the euro area jumped 2.3% both on month and on year during February. Construction had been only 0.4% above a year earlier during the final quarter of 2022.
A third euro area indicator released today was the February current account, which widened to EUR 24.3 billion and EUR 21.3 billion not adjusted for seasonal variations. The seasonally adjusted surplus had been only 925 million euros in January. Over the 12 months through February, the unadjusted current account swung to a EUR 114 billion deficit (equal to -0.9% of GDP) from a surplus of EUR 222 billion (or 1.8% of GDP) in the previous 12-month period ending February 2022 (when the Ukraine War began).
Investor sentiment toward Euroland as measured by the monthly Sentix gauge improved to a two-month high but remained pessimistic at -8.7.
Czech producer price inflation fell 1.0% on month in March and receded further to an 18-month low in year-on-year terms of 10.2%. That’s down from 28.5% last June.
South African consumer price inflation rose 0.1 percentage point to a 3-month high of 7.1% in March. Drops of 0.1% on month and 0.5% on year were experienced in South Africa during February.
Moldovian PPI inflation of 23.8% last month was at a one-year low of 23.8%, its lowest point in 265 months.
Producer price inflation in Canada fell below zero percent to -1.8% last month for the first time in 32 months. PPI inflation just a year earlier had touched its highest point since the 1970s.
Month-on-month growth in Japanese industrial production in February has been revised marginally upward to 4.6%. Such followed a 5.3% plunge in January, and the 12-month change remained negative at -0.5% versus -3.1% recorded in January and -0.2% in the final quarter of 2022. Capacity usage dropped 1.2% between February 2022 and February 2023.
Turkish consumer confidence improved to a 55-month high in April.
The Bank of Namibia’s policy interest rate was lifted by another 25 basis points to 7.25%, continuing a streak of seven straight reviews going back to February 2022 that resulted in a tightening of the central bank’s stance. From August 2020 to February 2022, the rate had been at 3.75%.
The 30-year U.S. fixed mortgage rate rose to 6.43% last week, breaking a month and a half streak of declines. Mortgage applications slumped 8.8% in the latest week.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British CPI and PPI, Euroland CPI and current account, Japanese industrial production