Sharp Increase of Euroland Long-Term Interest Rates
February 11, 2025
With 2.5 hours remaining before Fed Chairman Powell’s testimony before the Senate Banking Committee, a scarcity of meaningful data releases today, and Japan closed for National Foundation Day, investors continue to dwell on the inflationary implications of U.S. tariff hikes and the inevitable retaliatory responses from other governments. As threatened, Trump signed an executive order imposing tariffs on imported steel and aluminum of 25%. The tariffs are one of a couple of reasons why Federal Reserve officials will be in no hurry to resume interest rate cuts. In Euroland overnight, 10-year sovereign debt yields shot up 11 basis points in France, 6 bps in Spain and Italy and 5 basis points in Germany. Comparable yields in the United States and Great Britain are four and three basis points firmer.
The dollar slid back 0.2% against the euro overnight but extended its climb by 0.4% against the yen, 0.3% relative to sterling, 0.2% vis-a-vis the Chinese yuan and Swiss franc and 0.1% versus the Australian and Canadian currencies.
U.S. stock futures prior to the opening of today’s trading day are in the red. Share prices in Asia closed down by 1.1% in Hong Kong and 1.3% in Indonesia, while those in Europe so far are generally unchanged.
Prices for Bitcoin and oil rose 1.2% and 0.6% overnight, buoyed by the uncertainty triggered by President Trump’s tariff moves and his controversial vision of Gaza’s future.
Consumer price inflation in Moldova jumped to 9.1% in January, a 17-month high, from 7.0% in December, 5.4% in October, and the recent low of 3.3% last May. Prices leaped 2.8% month-on-month, most in almost three years.
In Hungary, a country Trump admires openly, consumer price inflation printed last month at a 13-month high of 5.5%, up from 4.6% in the prior month and a 44-month low last September of 3.0%. Core inflation, which bottomed last June at 4.1%, is now at 5.8% and thus exceeds the overall inflation rate.
Brazilian consumer price inflation settled back to a 4-month low of 4.6% in January but remained above the 33-month low of 3.2% in mid-2024.
Other data release highlights this Tuesday include a 2.5% year-on-year rise of British same store sales in January, down from a 3.1% increase posted in December. Ireland’s construction purchasing managers index coughed back most of its four-point advance in December, dropping back below the 50 no change level to 48.2 from 51.6.
Total Norwegian real GDP contracted 0.6% on quarter and 0.3% on year in the final quarter of 2024. Excluding offshore energy, GDP fell 0.4% versus 3Q, its biggest quarterly slide in six and a half years. GDP still managed to expand 2.1% in full 2024, which was slower than the pace in 2021 and 2022 but above the minuscule 0.1% uptick in 2023.
Factory output in South Africa declined monthly by 2.4% in December and was 1.2% lower than a year earlier.
Year-on-year growth Turkish retail sales during December of 13.5% was down from 16.6% in November but above last July’s two-year low of 6.3%.
Australia‘s NAB-compiled business confidence index rose six points in January to a 3-month high of +4, while the companion business conditions index fell in half to a 2-month low of +3. The Westpac-MI-compiled index of Australian consumer sentiment was only 0.1 point above December’s 2-month low of 92.8.
Consumer confidence last month in Indonesia retreated half an index point below December’s 8-month high.
Small businesses in America were initially heartened by President Trump’s commitment to deregulation, but the unexpectedly large drop of the NFIB index of U.S. small business sentiment to 102.8 in January from December’s 74-month high of 105.1 suggests some misgivings. Trump’s voter approval ratings, however, remain higher than at any time during his first term.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: CPI inflation in Moldova and Hungary, Federal Reserve Chairman Powell, U.S. small business sentiment, U.S. tariff hikes
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