Continuing Adjustment of World Financial Markets to U.S. Election Results
November 12, 2024
President-Elect Trump’s early appointments conform to an America First agenda and one that will treat China more as an adversary than a competitor. As expected, unqualified loyalty to Trump has been a litmus test for consideration, and his chief of staff choice’s reputation for organization, winning and avoiding factional infighting should go a long way to avoiding pitfalls in Trump’s first term that impeded securing several of his goals. With the GOP declared seat total in the House of Representatives now just four shy of a majority, Trump is on the brink of securing all the political support he will need to achieve whatever plans he seeks.
Financial markets are concluding that the growth gap favoring the United States against other economies will widen. The DOW and Nasdaq closed yesterday 6.0% above their closings on November 4, while the S&P 500 was up 5.0% in the same span. U.S. stock futures shortly before today’s release of CPI figures had backed off a mere 0.1%, whereas stock markets in Europe and Asia experienced significant losses this Tuesday, including drops of 2.8% in Hong Kong, 2.3% in Taiwan, 1.4% in China, 1.9% in South Korea, 1.0% in India, 0.4% in Japan and at least 0.9% so far in the U.K., Germany, France, Italy and Spain.
In contrast to the ecstasy of the U.S. stock market, the U.S. bond market shows concern that the Trump program may lift inflation higher again and, at a minimum, cause the Federal Reserve to cut interest rates less quickly than otherwise and ultimately to a higher level than might have been the case. The U.S. 10-year Treasury yield is eight basis points above its pre-holiday close last Friday. Comparable European sovereign debt yields are higher too but to a much less degree today.
The dollar remained well-bid overnight, rising 0.3% in weighted terms to its best level since midyear. The greenback gained 0.4% versus the euro and sterling, 0.3% against the yen and Australian dollar, and 0.2% vis-a-vis the yuan.
The astonishing price comeback of bitcoin touched an intra-day high of $89,742 versus a low of $16,212 touched on November 28, 2022 but then backed off almost 3% to around $86,000 in a stark reminder of the ultra-speculative nature of crypto trading. The price of gold has slipped 0.3% further and touched its lowest level since around mid-September. Oil rose 0.7% overnight on diminishing projected global oil demand.
Contrasting moods in the United States and Europe were reinforced by data released today. On the one hand, the NFIB index of U.S. small business confidence improved 2.2 points to a three-month high, matching June’s 28-month peak.
On the other hand, the ZEW Institute indices of investor sentiment toward Germany and the euro area unexpectedly weakened in November. In Germany’s case, expectations about the future, which had been projected higher, instead fell back to a reading of 7.4 from 13.1 in October and 47.5 in June. The accompanying index measuring current conditions, in turn, fell deeper below zero to a six-month low of -91.4. Regarding all of Euroland, expectations fell from 20.1 in October to 12.5 this month, and the present situation printed at a 6-month low of -43.8. These results reflect security worries in the wake of the U.S. election and the collapse of German Chancellor Scholz’s coalition majority. The one bright spot from the ZEW Institute data is the inflation expectations continue to shrink.
Britain reported disconcerting labor market news today. Jobless insurance claims rose almost three times faster in October than September. Unemployment increased to 4.3% in the third quarter, and average wage earnings growth, which had slowed from 8.3% in July 2023 to 3.9% a year later, rose to 4.3% in the third quarter of this year. The Bank of England base rate has been cut twice by 25 basis points since August 1, but officials stress a continuing need to be cautious as they consider further moves.
A lot of inflation reports around the world are scheduled this week, including U.S. CPI tomorrow followed by PPI figures on Thursday and import prices on Friday. Today’s assortment of price data show that
- The preliminary estimates of a 0.4% monthly rise and 2.0% year-on-year pace German consumer price inflation in October did not require revision. The 12-month pace was up from a 43-month low of 1.6% in September. Core inflation increased to 2.9% and included a 13-month high 4.0% rise in service sector prices.
- Dutch consumer price inflation last month matched September’s 3-month low of 3.5%. Such bottomed a year earlier at -0.4% after setting a record high of 14.5% in September 2022.
- CPI inflation in India leaped 1.3% on month and to a one-year high of 6.2% year-on-year in October from 5.5% in August and 3.6% in June. These results exceeded analyst expectations.
- Romanian October CPI inflation was 0.1 percentage point above September’s 39-month low of 4.6% but well under 16.8% in November 2022.
- In Hungary, likewise, CPI inflation rose from a 3.0% 44-month low in September to 3.2% in October. Such crested at 25.7% in January 2023.
Among other data out today, Japanese machine tool orders were 9.3% higher than a year earlier in October in contrast to an average 2.8% year-on-year drop during the first nine months of the year. The stock of Japanese M3 money rose only 0.7% year on year in October versus 1.5% in the first half of the year, 2.0% in 2023 and 2.9% in 2022.
Australia‘s Westpac-Melbourne consumer confidence index improved significantly this month to a 31-month high. The NAB index of business confidence rose for a second straight month, but the parallel index of business conditions stayed steady.
Turkish retail sales climbed 2.3% on month and 15.9% on year in September.
Brazilian retail sales in the same month grew 0.5% but only 2.1% from a year earlier, marking the smallest 12-month gain in nine months.
Factory output in South Africa was unchanged on month and down 0.8% year-on-year September. Unemployment in that economy has exceeded the 30% threshold for seventeen straight quarters including 32.1% in the third quarter of this year.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British labor market statistics, German and Euroland ZEW expectations, Retail sales in Turkey and Brazil
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