Investors More Hopeful Than Yesterday about Debt Ceiling Talks

May 17, 2023

The dollar rose overnight by 0.8% against the Mexican peso, 0.6% versus the Japanese yen and Swiss franc, and 0.4% relative to the euro.

The Japanese Nikkei closed up 0.8%, but share prices in Hong Kong, Singapore, South Korea, India and Australia closed lower. Continental European equities are slightly higher, and so are the DOW and Nasdaq. Republican sources struck a slightly more optimistic tone about ongoing debt ceiling talks between President Biden and Speaker McCarthy.

While the U.S. 10-year U.S. Treasury yield ticked a basis point higher, comparable sovereign debt yields fell by 5 basis points in Spain and Italy and four basis points  in France and Germany.

The price of WTI oil advanced 1.6%; those of Bitcoin and gold fell by 1.1% and 0.2%.

The first look at Japanese GDP last quarter showed above-consensus quarterly growth of 1.6% at an annualized rate, most in three quarters along with a rise of 1.3% between the first quarters of 2022 and 2023. GDP got positive impulses from personal consumption, non-residential business spending and inventories but experienced a 1.3 percentage point drag from net foreign demand. Japan’s GDP price deflator posted the largest year-on-year advance (2.0%) in 33 quarters.

Japan’s monthly rise in industrial production in March has been revised upward to 1.1% from 0.8% estimated initially. Compared to a year earlier, however, industrial production fell 0.6% in March and 1.4% in the first quarter. Capacity utilization went up 0.3% on month and 1.2% on year in March but fell 4.0% on quarter and 0.4% on year in 1Q 2023.

House prices in China experienced their smallest year-on-year drop (0.2%) in 11 months during April.

U.S. housing starts and building permits last month respectively rose 2.2% and fell 1.3%, but their year-on-year declines both remained sizable at 22.3% and 21.1%. U.S. mortgage applications last week dropped 3.7%, as the 30-year fixed mortgage rate increased from 6.48% in the prior to week to 6.57%.

In a comparatively new data series going back to 2013, Australian wage costs rose 0.8% last quarter and recorded their largest year-on-year advancement (3.7%).

The early estimate of 7.0% Euroland consumer price inflation during April has been verified by more complete information. That up from 6.9% recorded in March but down from 8.5% in February and 10.1% last November. Core inflation eased to 5.6% from 5.7%, but service sector prices continued to crest, reaching 5.2% versus 5.1% in March, 4.4% at end-2022, and 4.3% in April 2022.

Retail sales in March were 3.2% higher than a year earlier in Brazil but 1.6% fewer in South Africa.

Zambia’s central bank interest rate was raised for a second time this year to tame inflation that remains excessive. An increase of 25 basis points to 9.5% followed a similar-sized rise  in February. During  2022, the rate was lifted by a full percentage point. No changes were made in the rate during 2021, but 2020 saw a total reduction of 350 basis points as a response to the global pandemic. Consumer price inflation in Zambia of 10.2% in April was up from 9.4% in January and at the highest level in eleven months.

Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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