A Wide Spectrum of Developments to Watch Today
October 25, 2023
Germany has been among Euroland’s weakest economies this year. Real GDP was flat in the second quarter following back-to-back contractions in the prior two quarters, and average GDP in the first half of 2023 was 0.2% below its year-earlier level. But today’s release of the IFO Institute’s October German business climate index offers a ray of hope, having risen 1.1 points to a 3-month high and embodying less pessimism about current economic conditions and the half-year-ahead outlook. Indices rose in the manufacturing, services, and construction sectors but slid further to a 1-year low in trade. The overall business confidence gauge of 86.9 was nonetheless still well below this year’s high-point of 93.2 and even more so versus the June 2021 81-month peak of 101.7.
Australian CPI inflation last quarter exceeded expectations and seemingly raises the chance of a rate hike by the Reserve Bank of Australia next month greatly. Consumer prices increased 1.2% versus the second-quarter level, producing a year-on-year price advance of 5.4%. Although 5.4% is the lowest gain in six quarters, such is still roughly twice the 2-3% target that monetary officials are seeking. Core inflation was at 5.2%.
Israeli air strikes on Gaza escalated overnight, but the promised ground war offensive still has not begun. In the war of public relations, support for Israel’s response to Hamas atrocities seems to be weakening throughout the middle east but also around the world, and comparisons to America’s ill-fated wars in Iraq and Afghanistan are being drawn. Worst case for everybody would be a full-scale middle eastern war.
A category five hurricane has slammed into Mexico‘s Pacific Coast near Acapulco.
Mike Johnson (Rep from Louisiana and a Biden 2020 election victory denier) is the fourth representative to be approved by House Republicans for a full chamber vote to be the next Speaker. It’s unclear that he can garner the necessary 217 votes for that to happen, but the urgency of selecting a leader of the House of Representatives is rapidly mounting, since less than three weeks remain to raise the debt ceiling and avert a catastrophic shutdown of government at such a perilous juncture in American history.
Fed Chairman Powell will be delivering some introductory remarks late this afternoon at the 2023 Moynihan Lecture in Social Science and Public Policy.
In financial market action overnight,
- The parent company of Google, Alphabet, saw its share price tumble 6.2% in after-hours trading on disappointing revenues in its cloud-computing division. Futures trading in the Nasdaq and S&P 500 are down by 0.5% and 0.3%.
- In equity trading elsewhere, share prices closed up 0.7% in Japan, 0.6% in Hong Kong and 0.4% in China but fell by 0.9% in South Korea, 0.8% in India, and 0.7% in New Zealand. Italy’s exchange is also down 0.7% so far, but the German DAX and Paris CAC have nudged 0.1% higher.
- Ten-year sovereign debt yields rose seven basis points in Italy, four bps in France and Spain, three bps in Germany, two bps in Japan and a basis point in Great Britain.
- Bitcoin token prices jumped another 1.2%. Oil and gold prices edged 0.1% higher.
- The dollar strengthened overnight by 0.4% versus sterling and the kiwi, 0.3% relative to the Swiss franc and Australian dollar, and 0.2% against the euro, Canadian dollar and in weighted terms.
Released September money and credit growth data for the euro area remain very weak. M3 money recorded a 1.0% year-on-year decline in the third quarter following a 1.0% rise in 2Q. A 0.8% rise in loans to households was the least in 99 months and undershot expectations. Mortgage lending in September rose just 0.2% year-on-year, and so did loans to non-financial firms. Overall bank credit was 0.5% below its year-earlier level.
South Korean consumer sentiment dropped to a 5-month low last month.
Japan’s index of leading economic indicators in August was revised 0.3 points lower but still the highest reading since last November.
Turkish business confidence fell 1.1 index points to an 8-month low of 103.3 in October, which compares to May’s one-year high of 108.3.
Investor sentiment toward Switzerland relapsed sharply further into pessimistic territory to a 2-month low of -37.8 in October from -27.6 in September. Readings have been negative since March 2022 and as much so as -72.7 recorded in June 2022.
Brazilian consumer confidence worsened to a four-month low this month but remained comfortably above this year’s trough in February.
Producer price figures for September were reported in Spain, Iceland, and Sweden. Spanish and Swedish producer prices posted sharp monthly jumps of 1.4% and 1.8% but 12-month declines of 8.6% and 4.6% that were not as negative as those recorded in August. Iceland’s PPI edged up 0.1% on month and fell 6.5% on year following a 5.7% 12-month decline in August.
The National Bank of Georgia’s benchmark interest rate was left unchanged at 10.0%. That’s well above on-year CPI inflation of only 0.7% as of September, down from a 127-month high of 13.9% in December 2021 and matched in the first month of 2022. Extreme caution as officials transition away from their restrictive monetary policy as justified by “the acute geopolitical situation that creates an unstable environment globally and creates additional uncertainty around the inflation forecast.”
A 1.0% drop in U.S. mortgage applications last week was the fourth decline in 5 weeks. The 30-year fixed mortgage rate jumped another 20 basis points to 7.90%.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without expressed permission.
Tags: Australia CPI, Euroland money and credit growth, German business climate index
ShareThis
