Flat Dollar, Equities Mixed, Many Data Releases, and a Larger-than-Forecast Russian Interest Rate Hike
October 25, 2024
Major dollar relationships show minimal net movement from Thursday closings. Equity markets fell 0.6% in Japan, 0.8% in India and New Zealand and Spain so far, but advanced by 0.7% in Taiwan, 0.6% in China, 0.5% in Hong Kong and 0.2% so far in Germany. U.S. stock futures are modestly in the black but headed for a weekly decline.
Ten-year sovereign debt yields have increased three basis points in France, Italy and Spain and two basis points in Germany, while edging a basis point lower in the United States, Great Britain and Japan. The price of WTI oil rose 1.0% overnight, while those of Comex gold and Bitcoin eased 0.4% and 0.3%.
The last NYT/Sienna U.S. presidential election poll shows an even race. Unless pollsters have sufficiently corrected for systemic errors that under-counted Trump’s support in 2016 and 2020, this result suggests a likely Republican win. The Biden Administration is working overtime to negotiate a truce in the Middle East but so far to no avail. Hostilities there are weighing on support for Harris.
Officials at the Central Bank of Russia had been thought likely to hike their policy interest rate by another percentage point at this month’s scheduled review but surprised analysts by increasing such to 21.0% from 19.0%. The new rate is its highest in just over two decades and five full percentage points above the mid-2024 level. The rate was kept steady in the first half of this year after being raised by 850 basis points of increase undertaken during the second half of 2023, and at 21%, the new rate even exceeds the 20% peak held for about two months in the earliest days after Putin invaded Ukraine at the end of February 2022. CPI inflation of 8.6% last month was more than double the bank’s target of 4%. A statement released by the central bank today revises projected inflation upward, observes upwardly skewed price risks and rising inflation expectations amid a shortage of available workers to balance supply with domestic demand. Market participants are told to expect more rate hikes:
Further tightening of monetary policy is required to ensure the return of inflation to the target and reduce inflation expectations. The Bank of Russia holds open the prospect of increasing the key rate at its upcoming meeting.
The German IFO Institute’s October business climate index rose 1.1 points above September’s 8-month low to a 2-month high of 86.5. This first increase since May persuaded IFO officials to observe that the “Germany economy has stopped the decline for the time being.” Expectations “brightened” to a 4-month high, and perceived current conditions also rose above the prior month’s level. The services sub-index moved above zero, and those for manufacturing and trade were less negative than in September. Construction slid additionally.
October consumer confidence indices reported this Friday dropped to two month lows in Italy and France, to a 3-month low in Brazil and New Zealand, and to a 7-month low in Great Britain. Irish consumer sentiment, in contrast, printed at a 3-month high.
Business confidence among manufacturers dropped this month to a 47-month low in Italy but recovered in Turkey to a 4-month high of 100.9 from 98.8 in the previous month and a 20-month low of 98.5 in August. Business confidence in Hong Kong this quarter fell to a 10-quarter low.
French unemployment claims leaped by 42.2 thousand last month, the most in three years.
The British distributive trades index increased 31 points to +4 in September, its second best reading of 2024 and up from a three-year low of -50 last January.
Core CPI inflation in Tokyo, which gets released a month ahead of the Japanese national figures, slowed to a six-month low in October and, at 1.8%, below the targeted 2.0% level. Separately, the August index of leading economic indicators was revised a tad upward but still printed at a 46-month low. The index of coincident economic indicators was its lowest in six months.
A 2.3% year-on-year drop in Swedish producer prices in September was the most deflationary reading for that economy so far this year. Spanish PPI inflation of -5.2% last month was the most negative since -6.7% in April. Icelandic PPI inflation of 5.6% in September was at a 3-month low.
The one-year-out expectation of consumer price inflation in the euro area dropped 0.3 percentage points in September to a 3-year low of 2.4%. That’s down from 4.1% shown by the index in September 2023 and 5.8% in October of 2022.
On-year growth of Euroland’s stock of M3 money accelerated to 2.8% in the third quarter from 1.7% in the second quarter. On-year loan growth to households (0.7%) and non-financial firms (1.1%) remained pretty limp in September.
Canadian retail sales increased 1.4% in August, most in five months.
China’s provocative stance toward other nations is scaring off business. Net foreign direct investment was 30.4% lower in September than a year earlier, not much less than the record year-on-year drop of 32.6% in January 2009.
U.S. durable goods orders declined 0.8% in September, their third decrease in three months. The latest slide matched August’s decrease.
The U. Michigan/Reuters index of U.S. consumer sentiment for October has been revised upward by 1.6 points to 70.5. That’s a six-month high but still well down from the 101 reading in February when the Covid pandemic first came to America. By the time Trump left office, sentiment had fallen to 79.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Central Bank of Russia, Euroland inflation expectations and money growth, German business climate index
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