May Day and the FOMC
May 1, 2024
Financial markets are shut in a slew of countries — but not in the U.K., Japan or the United States — for May Day observances that extol the rights of workers. The dollar is modestly higher. Japanese officials have not confirmed nor denied yesterday’s strongly suspected intervention triggered after the yen fell to as low as 160.3 per dollar, its weakest value since April 1990. Attention is now focused on today’s FOMC announcement at 14:00 EDT (18:00 GMT) and Chairman Powell’s ensuing statement. 10-year sovereign debt yields are firmer in Great Britain and the United States. U.S. stock futures have extended yesterday’s equity market debacle but only to a slight degree.
Police were called in overnight to disperse protesting crowds at universities in America’s two largest cities where students are demanding the divestment of university assets tied to Israel. The campus unrest poses a fresh threat to President Biden’s dwindling reelection prospects, even as the Fed’s continuing lack of maneuvering room to lower interest rates cuts off a potential lifeline for Democrats.
Crypto continued to be battered overnight and is now almost 22% below its high reached seven weeks ago.
May Day celebrations greatly limited the number of manufacturing purchasing manager surveys that are ordinarily released on the first day of each month. Among PMI reports today,
- Japan‘s index for April was revised 0.3 points lower but, at 49.6, still reflected the slowest rate of contraction in the past eight months.
- The British PMI was alternatively revised 0.4 points higher to 49.1 but remained below March’s 20-month peak of 50.3.
- Australia‘s PMI of 49.6 also exceeded a preliminary estimate by a slight margin and printed at a 3-month high.
- The Dutch PMI climbed 1.6 points to a 20-month high but also signaled an uptick in inflationary pressure last month.
- In Greece, which has lately been sporting Euroland’s fastest expansion in manufacturing, the PMI for that sector declined to a 3-month low of 55.2 last month.
- Ireland’s PMI reading of 49.6 constitutes a 9-month low.
Labor costs in New Zealand increased 0.9% last quarter after climbing 1.1% in the final quarter of 2024. The 12-month 4.1% rate of rise was only 0.2 percentage points below that over the previous one-year span ending in the first quarter of 2023. Moreover, New Zealand’s jobless rate jumped to a 3-year high of 4.3% in 1Q 2024 from 4.0% in the prior quarter and 3.4% in the first quarter of 2023.
The British Nationwide house price index was only 0.6% higher in April than a year earlier. That’s below the on-year increases of 1.6% in March and 1.2% in February, not to mention the peak of 14.3% in March 2022. In between and not long ago, the Nationwide index was running below year-earlier levels by as much as 5.3% in September 2023.
While market attention today will be directed to Fed Chairman’s likely explanation for a need for time and more patience before interest rates can start to be lowered, developing economies have cut their rates. Those in Armenia and Kyrgyzstan announced reductions of 25 basis points to 8.25% and 200 basis points to 11.0% earlier this week. It’s happened again today in Azerbaijan and Colombia.
The Central Bank of Azerbaijan, where CPI inflation of 1.0% in March was at a 111-month low and down from 13.9% touched in December 2022, the refinancing rate has been sliced by another quarter percentage point to a 29-month low of 7.25%. This was the fifth reduction since a peak of 9.0% that prevailed from May 2023 until November 2023 and leaves the rate just a percentage point above its pandemic low seen from late 2020 until September 2021.
The Central Bank of Colombia’s key interest rate was cut to 11.75% from 12.25%. The cumulative reduction since this past December amounts to 150 basis points. There had been 14 increases between September 2021 and April 2023 that catapulted the benchmark from a pandemic low of 1.75% to a peak of 13.25% that was then maintained until the final policy review of last year. CPI inflation in Colombia receded six percentage points from 13.34% in March 2023 to 7.4% a year later.
The monthly estimate by ADP of U.S. private-sector jobs growth in April shows a broadly shared and above-expectation increase of 192k. This less definitive statistics than the employment situation data collected by the Labor Department and due for release at the end of this week merely supports a narrative already in place that leaves the Fed no credible way to start cutting interest rates before it will be to late to influence November’s election. Yesterday’s employment cost index showing a significantly accelerated 1.2% wage increase last quarter already had cast the dye. Studies of the relationship between U.S. economic conditions and presidential elections found that voter perceptions are most aligned with what was known around the middle of the prior spring.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Central Bank of Azerbaijan, Central Bank of Colombia, manufacturing purchasing manager surveys
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