Chinese Data, Big Week for Central Banks, and U.S. Share Prices Fall Further Behind Other Stock Markets – Currency Thoughts
Chinese Data, Big Week for Central Banks, and U.S. Share Prices Fall Further Behind Other Stock Markets
March 17, 2025
The dollar lost fractional ground overnight, losing 0.6% against the kiwi, 0.4% against the Swissy and Australian dollar, 0.3% relative to sterling and the euro and 0.1% versus the yen, peso and loonie.
Equities in most markets around the Pacific Rim responded positively to the Chinese government’s consumption-promoting plans, which are intended to mitigate the drag from the evolving global trade war. Share prices closed up by 1.7% in South Korea, 0.9% in Japan, 0.8% in Australia, 0.6% in Singapore, 0.5% in India and 0.2% in China. It helped, too, that released Chinese industrial production and fixed asset investment figures beat analyst expectations. Another source of optimism has come from annual wage negotiations in Japan, which have been robust enough to remove a key factor heretofore limiting the speed of Bank of Japan interest rate hikes.
The Bank of Japan and Federal Reserve headline a slew of central bank reviews of monetary policy this week. Neither the Fed nor the BOJ are expected to modify rate levels this week, but important and divergent forward guidance about future actions are anticipated. Meeting the Fed’s dual mandates of price stability and employment maximization has been complicated by the Trump Administration’s combination of radically different policies and their confusing back-and-forth way that the changes are being communicated. Investors are increasingly worried that a recession might commence sometime in the coming year. When the FOMC met several weeks ago, only 1 or 2 rate cuts seemed plausible in 2025, and Chairman Powell did now try to dispel that consensus, but now analysts are entertaining the possibility again of more than two moves even if inflation moves somewhat higher. The BOJ will likely suggest that a rate increase before midyear is in play.
European stock markets are also showing green on the screens, with Spain and Italy up around a half percent and the German DAX, Paris CAC and British FTSE have only marginal advances. Europe’s big news over the weekend was the finalization of a ground-breaking deal that creates a coalition led by the right-of-center CDU/CSU and also including the Greens and Social Democrats. More importantly, there is agreement to relax constitutional limits on fiscal debt financing and defense spending. The 10-year German bund yield is down five basis points. Comparable Dutch and Spanish yields are also five bps lower, while those in Italy and France show even larger decreases of six basis points from Friday. By contrast, the 10-year U.S. Treasury yield and Japanese JGB are off just 2 and 1 basis points, while the British gilt is up a basis point.
Bitcoin‘s price rose 1.1% overnight, and gold and oil prices have strengthened 0.6% and 1.3%.
Chinese industrial production in the first two months of 2025 was 5.9% greater than a year earlier, and fixed asset investment recorded a 4.1% year-on-year advance for the same span. Each of those results was about a half percentage point above forecasts.
Chinese retail sales growth of 4.0% matched expectations, and a 4.8% year-on-year drop in house prices in February was the smallest in eight months. The one sour note from today’s batch of Chinese economic statistics came from unemployment, which climbed to a 24-month high of 5.4% versus a 37-month matching low of 5.0% as recently as November.
Price data were released in several economies today.
- In India, wholesale price inflation, which tumbled from 16.6% in May 2022 to -4.18% in June 2023, edged up marginally last month to a 7-month high of 2.38%.
- In Kyrgyzstan, consumer price inflation of 7.0% in February was at a 1-year high and up from a 55-month low of 3.8% last August.
- Bulgarian CPI inflation of 4.0% in February was at a 14-month high and up from last September’s 42-month low of 1.2%.
- Croatian CPI inflation settled back 0.3 percentage points to 3.7% in February from January’s 10-month high of 4.0%.
- February producer prices in the Czech Republic slid 0.1% both monthly and in year-on-year terms.
- Danish producer price inflation swung from +37.5% in August 2022 to -7.8% one year later but has rebounded to 14.4% as of last month.
New Zealand’s service sector purchasing managers index slid back to 49.1 in February from its first above-50 reading in 11 months during January.
This month’s British Rightmove house price index was 1.0% above its year-earlier level.
The Trump Administration’s roll-out of federal job cuts, deportation of undocumented immigrants, feared deep cuts in Medicaid, and higher expected U.S. inflation have not only depressed consumer confidence sharply as learned last week but also are depressing actual retail sales. Sales rose just 0.2% last month, a third of their expected rebound from a drop of 1.2% in January. A 3.1% year-on-year increase in retail sales was the smallest since the month before November’s election.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Chinese monthly retail sales and industrial production, Indian wholesale prices, U.S. retail sales
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