More Reasons to Keep Investments Safe
April 3, 2024
The news from the Middle East keeps going from bad to worse, and evolving U.S. activity and price data haven’t been quite cooperating with the hope of some Federal Reserve officials to start reducing interest rates at the June FOMC meeting.
Fed Chairman Powell delivers a speech today before the Stanford Business, Government and Society Forum. Vice Chair Barr and Chicago Fed District President Goolsbee also speak publicly today.
The monthly estimate of private U.S. jobs growth compiled by ADP for March was a higher-than-expected 184k, most in eight months, and the report also reflected an acceleration in pay growth. The S&P Global-compiled U.S. composite PMI survey for last month reflected more intensive input and output inflationary pressures. The composite and service sector PMIs printed at 2- and 3-month lows of 52.1 and 51.7. The ISM non-manufacturing PMI fell back by 1.2 points to a 3-month low of 51.4.
The heavy selling seen the past two sessions in U.S. equity trading spilled over into the Pacific Rim and Europe. Stock markets today dropped 1.3% in Australia, 1.2% in Hong Kong, 1.7% in South Korea, 1.0% in Japan and Indonesia, 0.6% in Taiwan, and 0.2% in China. U.S. and Continental European share prices are modestly higher.
The dollar fell overnight by 0.4% against the euro and Aussie dollar, 0.3% relative to the loonie and sterling, and 0.2% versus the Swiss franc but not in the latter case before touching a 2024 high. The yen is 0.1% softer.
Oil’s price keeps grinding upward, fueled by worrisome news from the Middle East. West Texas Intermediate’s price is 1.1% higher so far today.
Bitcoin, up 1.8%, has climbed even more sharply, and gold is at another record high of $2.297 per ounce.
Ten-year sovereign debt yields have risen today by four and two basis points in the U.S. and Germany.
Unemployment in the euro area again printed at 6.5% for a sixth straight month in February, which compares to 6.6% a year earlier, 6.9% in February 2022, 8.2% in February 2021, 8.5% in September 2020 and a record 12.2% in September 2013.
Consumer price inflation in Euroland fell unexpectedly to a 4-month low of 2.4% last month, matching November’s 28-month low, but the all-important services sector showed price inflation stuck at 4.0% for a fifth straight month. Core consumer price inflation also decelerated 0.2 percentage points to a 25-month low of 2.9%. Food price inflation dived from 15.5% in March 2023 to 2.7% last month.
Turkey has one of the world’s biggest inflation problems. Consumer prices rose 3.2% on month in March and by 68.5% on year, the most in 16 months and up from an inflation rate trough of 38.2% in mid-2023. Core CPI of 75.2% last month was the most ever. Meanwhile, producer price inflation has accelerated from a 29-month low of 39.4% last October to an 11-month high of 51.5%.
Today’s installment of purchasing manager survey reports from around the world shows
- A downwardly revised Japanese composite PMI index in March of 51.7, still a 6-month high and associated with a 5-month high in the input price component. The services PMI improved to a 7-month high of 54.1.
- China’s composite PMI ticked 0.2 points higher to a 10-month high of 52.7, including a services reading of 52.7 (a 2-month high).
- The private Singapore PMI fell from February’s 16-month high of 56.8 to a 2-month low of 55.7.
- Russia’s composite and services PMI readings for March were each at 2-month highs of 52.7 and 51.4. Western sanctions aren’t working.
- Non-oil PMI readings of 47.6 for Egypt, 57.0 for Saudi Arabia and 56.9 for the U.A.E. were at a 2-month high, a 2-month low and a 2-month low.
- Brazil’s composite PMI reading of 53.1 in March matched February’s 19-month high. Its services PMI rose 0.2 points to a 20-month high of 54.8.
- Canada’s composite and services PMI readings were at 2-month lows of 47.0 and 46.4 last month. Respective record lows were set this past December and November in these data.
The Central Bank of Chile has reduced its policy interest rate by a further 75 basis points, matching analyst expectations. There has previously been cuts of 100 basis points in January and 300 bps in the second half of 2023 from a peak of 11.25% maintained from November 2022 until July 2023. By contrast during the worst part of the pandemic, the rate was a mere 0.5% until an initial hike in July 2021. A released statement concludes, “The Board foresees that, in line with the central scenario of the March MP Report, the MPR will be further reduced.”
Tags: Euroland CPI and unemployment, service sector purchasing manager survey results, Turkish CPI and PPI inflation
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