Troubles in China, Big Drop in Oil Price, and Just Three Weeks Left Before America’s Election – Currency Thoughts

Troubles in China, Big Drop in Oil Price, and Just Three Weeks Left Before America’s Election

October 15, 2024

The latest barrage of stimulus measures from China’s government hasn’t persuaded doubting investors to believe the economy may be turning the corner. The Shanghai Composite index fell 2.5% today, dragging Hong Kong’s Hang Seng down 3.7% but lifting Taiwanese share prices by 1.4%. Stock markets in Japan and Australia each gained 0.8%, meanwhile.

One bright spot to emerge from concern over China’s growth outlook involves the price of oil. West Texas Intermediate oil plunged 4.5% overnight and has alleviated inflation worries.

In other overnight financial market developments, the dollar fell 0.5% against the yen and 0.2% versus the Swiss franc, sterling and Canadian dollar but held steady relative to the euro.

Japanese fixed asset investments are looking a bit more attractive. The ten-year JGB yield edged a basis point higher, while comparable sovereign debt yields fell overnight by 7 basis points in France and Italy, six bps in Spain and Great Britain, and five basis points in Germany and the United States.

There have been many price data releases this Tuesday, which for the most part didn’t contradict oil-inspired hopes of lessening inflation.

• Canadian consumer prices fell 0.4% on month in September, twice as much as predicted, and this reduced their 12-month rate of rise to a 43-month low of 1.6% from 2.0% in August, 2.7% in June and 8.1% in mid-2022. Core inflation also was 1.6%.
• German wholesale prices were 1.6% lower in September than a year earlier, extending the string of sub-zero percentage changes to sixteen straight months and expanded the depth of the 12-month drop from 1.1% in August. The WPI was also 0.3% below August’s level.
• With the Paris Olympic games over, French consumer prices registered their biggest month-on-month decline (1.3%) in 34 years. That was greater than the 1.0% drop estimated initially and associated with a 42-month year-on-year low inflation rate of 1.1%. The peak of 6.3% had occurred in April 2023. Core French inflation fell to 1.4%.
• Spanish consumer prices fell 0.6% on month and rose by a 42-month low 1.5% on year in September. Both rates were unrevised from initial estimates.
• Swedish consumer price inflation last month of 1.6% was at a 38-month low. Core inflation of 1.1% was its lowest since the end of 2020.
• In Bulgaria, CPI inflation decelerated 0.9 percentage points in September to a 42-month low of 1.2%.
• Slovakian CPI inflation fell back to a 2-month low of 2.6% in September. Such fell from a 15.4% early in 2023 to a 38-month low of 2.1% in June.
• Inflation accelerations were reported in Nigeria, Poland and Kyrgyzstan. Nigerian CPI inflation rose from a 6-month low of 32.2% in August to 32.7% last month. September CPI inflation in Kyrgyzstan of 4.9% was at a 5-month high, and Polish CPI inflation also rose to 4.9%, a 9-month high.

The likelihood of a second act for former President Donald Trump cannot be understated. Despite trailing his Democrat opponent in pre-election day polls in both 2016 and 2020, he won the first time and lost in 2020 by only a razor-thin electoral college margin. This time the polls point to a dead heat, and if anything momentum in the last ten days seems to be drifting Trump’s way. Harris has a deeper financial resources to spend on ads, but there have been plenty of cases lately when money advantage didn’t translate to voting victory. With just three weeks remaining in the campaign, financial markets are not exhibiting any influence from an election that offers enormously different visions of the future.

Revised Japanese industrial production for August matched the preliminary finding of a 3.3% drop compared to July and a year-on-year decrease of 4.9%. Capacity utilization in Japan fell 5.3% on month and 9.8% on year.

Euroland industrial production advanced 1.8% on month, the most in a year and a half. A 0.1% year-on-year uptick was in positive territory for the first time in eight months.

The Empire State monthly manufacturing survey conducted by the New York Fed suffered a setback this month, printing at a 5-month low of -11.9 after +11.5 in August.

British labor market statistics were mixed. Jobless insurance claims rose 130.5k last quarter, up from increases of 96.6k in 2Q and 27.7k in the first quarter. But the jobless rate averaged 4.0% in June-August, down from 4.4% in April-May, wage inflation measured by ex-bonus average weekly earnings growth slowed to a 26-month low of 4.9% in June-August.

Investor sentiment toward Germany’s economy according to the ZEW expectations index rebounded to a 2-month high of 13.1 this month from an 11-month low of 3.6 in September. However, the accompanying index of perceived current conditions fell further to a 53-month low of -86.9. The expectations index for the whole Euroland economy improved to a 3-month high of 20.1 in October even as current conditions were marked down to a 5-month low of -40.8.

Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: British labor statistics, Japanese and Euroland industrial production, lower oil price, U.S. election impact on financial markets

ShareThis

This entry was posted
on Tuesday, October 15th, 2024 at 7:44 am and is filed under New Overnight Developments Abroad – Daily Update.
You can follow any responses to this entry through the RSS 2.0 feed.