Market Focus Swings Back to Inflation
March 11, 2024
This week brings the release of U.S. consumer price data tomorrow, U.S. producer prices on Thursday and U.S. import prices due Friday. China reported CPI and PPI figures today, Japanese producer prices arrive Tuesday as do Brazil’s CPI and the finalized German CPI data. Barring a big surprise, the likeliest initial Fed rate cut is perceived happening at this year’s fourth scheduled policy review in June.
In overnight financial market action this Monday,
- The dollar fell 0.3% against the yen and 0.1% relative to the loonie and Swissy but rose 0.1% versus the euro and Australian dollar. The greenback is holding steady against sterling and Chinese yuan.
- The weighted DXY dollar index is holding at Friday’s closing level and 2.2% softer than its year-to-date high touched four weeks ago.
- Bitcoin extended its record high. At $71,713, the crypto benchmark jumped 3.9% overnight and is up 81% since January 22nd.
- Gold is flat on the day but 9% above this year’s mid-February low.
- Ten-year U.S., German, French, and Italian sovereign debt yields are also so far steady this Monday. The 10-year British gilt yield has slid 3 basis points, whereas its Japanese counterpart is up by two bps.
- WTI oil has dipped 0.5% today.
- There have been some noteworthy stock market swings: drops of 2.2% in Japan, 1.8% in Australia, 1.7% in Singapore, 0.6% in Germany and around 0.4% in U.S. stock futures but advances of 1.4% in Hong Kong and 0.7% in China.
The onset of Ramadan that runs through April 9th has come. This period of daytime fasting risks aggravating the humanitarian strains in Gaza and geopolitical unrest in the Middle East and Ukraine.
Revised Japanese fourth quarter GDP data indicates that the recession evident in the prior estimates was averted barely. Instead of falling at a 0.4% annualized rate, real GDP rebounded 0.4% after having slumped at a 3.2% pace in the third quarter. Non-residential investment performed much better than assumed initially, but personal consumption, public sector spending, and the impact of inventories were more adverse than thought at first. Japanese GDP grew 1.9% on average last year after 1.0% in 2022.
Even as the initial pullback from very restrictive monetary policy in the U.S. and Europe is anticipated later this year, investors now anticipate a less expansive Japanese monetary posture emerging later in 2024. In addition to the better news brought by Japan’s GDP release, investors learned of an 8.0% year-on-year decline in Japanese machine tool orders during February, the smallest decrease in a 13-month string of declines.
A greater-than-forecast 1.0% increase last month in Chinese consumer prices also brought some relief to investors. China has been flirting with deflation, but the 12-month rate of change in consumer prices swung to an 11-month high of +0.7% in February from -0.8% in January, and core CPI inflation hit a 13-month high of 1.2%. Producer price inflation, however, remained negative for a 17th straight month, this time by 2.7%. A separate Chinese data report showed a swing in motor vehicle sales to a 19.9% on-year drop in February from a 47.9% increase in January. That shift reflects the shifting date of the Chinese Lunar Year holiday between 2023 and 2024.
Among other price data reported today, Danish CPI inflation slowed to a 2-month low of +0.8% in February from a 5-month high of 1.2%, 7.6% in February 2023, and 10.1% way back in October 2022. Norwegian consumer price inflation decelerated more rapidly than predicted to a 4-month low of 4.5% last month from 4.7% in January 6.3% in February 2023 and 7.5% in October 2022. Norwegian producer prices dropped 2.5% on month and 12.6% on year during February. CPI inflation in Moldova of 4.3% was down from 4.6% in January and a record high of 34.6% in October 2022. Czech consumer price inflation of 2.0% last month constituted a 62-month low versus the 18.0% high in September 2022.
The middle east woes were reflected in Egypt’s 11.4% record monthly jump in consumer prices in February that lifted the 12-month rate of increase to 35.7% from 29.8% in January.
Revised Israeli GDP figures reveal a bigger 20.7% annualized implosion of GDP in the final quarter of 2023. Calendar year growth slowed as a consequence from 6.5% in 2022 to 1.9% in 2023.
Ireland’s construction purchasing managers index ticked above January’s 3-month low of 45.9 but, at 47.4, printed below 50 for an eighth month in a row.
Turkish unemployment rose in January to a 4-month high of 9.1% but was below the year-earlier 9.7% level and the pandemic peak of 14.2% in July 2020. Turkish retail sales advanced by a solid 2.6% in January, but their year-on-year increase of 13.6% was the smallest in 16 months.
Spanish retail sales fell 0.5% on month and edged just 0.3% higher on year in January, which was the smallest 12-month increase since November 2022.
Dutch factory output slumped 4.7% on month and 5.3% on year in January.
Denmark’s current account surplus of DKK 25.5 billion in January was similar to the 2023 monthly average surplus of DKK 25.9 billion.
Swiss consumer confidence last month became slightly more pessimistic, dropping to a reading of -42.8 after -41.1 in January. Sentiment has printed below zero without interruption since Russia first invaded Ukraine.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: China CPI and PPI, Japanese and Israeli GDP, Turkish retail sales and unemployment
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