Financial Markets Pause Amid Some Bargain-Hunting
January 18, 2024
Most stock markets rose overnight, breaking the recent streak of early-2024 declines. The Hong Kong’s Hang Seng advanced 0.8%, and Indonesian share prices closed 0.7% higher. The markets in China and Taiwan each closed 0.4% higher, and those in Germany, France and Italy are presently up by 0.8-1.1%, as is the Nasdaq in pre-open trading. But there are a few exceptions to this reversal — declines in Australia, New Zealand and India. Japan’s Nikkei ended unchanged.
Yesterday’s big jump in the 10-year British gilt yield has been trimmed in half, and both the U.S. and German 10-year sovereign debt yields have dipped a basis point, but the 10-year Japanese JGB yield is up three basis points.
The weighted DXY dollar index is off 0.1% and continues to be shadowed by the the euro, which in the early going of 2024 has followed the dollar more closely than other major currencies. The yen hit an overnight high of 148.25 per dollar and is showing a net overnight rise of 0.2% currently. The dollar is flat against sterling and 0.2% firmer relative to the Swiss franc and Canadian dollar.
The price of bitcoin tokens fell 0.8%, while gold recovered 0.5%. Oil is little changed.
Minutes from the December meeting of the European Governing Council generated nothing unexpected. The structure of ECB interest rates were left unchanged, and committee members showed a wide consensus for proceeding with balance sheet normalization at a “measured and predictable pace.” They consider the policy stance to be sufficiently restrictive, allowing leeway to hold in a wait and see postures while watching how the outlook for inflation and the transmission of past policy tightening evolves. While mostly confident that the 2% inflation target will be restored in 2025, there was some disagreement over whether that restoration will be timely enough.
Three Euroland data reports came out. The current account widened on an unadjusted basis to EUR 31.71 billion in November from EUR 28.4 billion in October and EUR 6.6 billion in November 2022. There was a surplus of 226 billion euros over the past dozen reported months, equivalent to 1.6% of GDP versus a deficit equal to 0.5% of GDP during the previous twelve months. The seasonally adjusted surplus in November narrowed to a 2-month low of EUR 24.6 billion from EUR 32.3 billion in October. Separately, construction output in the euro area fell 1.0% in November, the third decline in four months and resulting in the largest year-on-year drop (-2.2%) in 33 months. Finally, new car sales in December were 3.3% below their year-earlier level, which broke a streak of sixteen straight months showing a rise.
Among countries using the euro, Portuguese producer prices posted their fifth consecutive on-year decline in December. The 4.4% drop compared to a record high PPI inflation rate of 26.3% set in August 2022.
Revised Japanese industrial production figures for November were the same as reported initially — a drop of 0.9% from October’s level and a decline of 1.4% from November 2022. Capacity usage increased just 0.3%, the least in four months, and were 3.0% lower than a year earlier, marking the fifth 12-month rate of decline in a row.
A 4.9% monthly drop in core domestic machinery orders in Japan was much greater than forecast. The year-on-year decline was by 5.0%.
Australian December labor market statistics were softer than expected. The 3.9% rate of unemployment held at November’s year and a half high, and employment fell by 65.1k, reversing most of October’s increase.
Food prices in New Zealand posted the smallest year-on-year advance (4.8%) in two years during December. That was down from 12.5% last June.
U.S. new jobless insurance claims last week fell by 16k to 187k, lowest since the week of September 24, 2022. Analysts had expected a small uptick. The timing and speed of interest rate cuts by the Fed will hinge critically on whether softer labor market conditions emerge. This piece of news is a step in the wrong direction.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: ECB minutes, Japanese industrial production and machinery orders, U.S. jobless insurance claims
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