Rhetorical Trade War, Teetering Foreign Governments, and Manufacturing Purchasing Manager Surveys Headline Today’s Financial Market News – Currency Thoughts
Rhetorical Trade War, Teetering Foreign Governments, and Manufacturing Purchasing Manager Surveys Headline Today’s Financial Market News
December 2, 2024
Amid repeated U.S.-led economic sanctions in response to geopolitical mischief, the block of countries known by the acronym BRICS (standing for Brazil, Russia, India, China and Saudi Arabia) are considering steps toward a new currency in which to invoice and transact trade and financial transactions. President-elect Trump is now threatening to impose a 100% tariff on the BRICS group if this is done.
Being the first business day of a new month, manufacturing purchasing manager survey results from November were also reported today. Manufacturing happens to be the economic sector most sensitive to changes in international trade, so the two dominant themes of this Monday are quite linked.
The centricity of trade in Trumponomics is meant to revive U.S. manufacturing, bringing jobs that had been outsourced to other countries back home and doing this by enhancing the price competitiveness of American exports and import-competing goods. Tariffs distort the cost of foreign goods upward, but a rise of the dollar could counteract that effort. In this early stage of barking but not yet biting, Trump’s verbal saber-rattling has shown a tendency to lift the dollar, which so far today has climbed 1.0% against the euro, 1.1% relative to the Australian dollar, 0.9% versus the kiwi and sterling, 0.8% vis-a-vis the Swiss franc, 0.5% against the U.S. Northern and Southern neighbor currencies (the loonie and peso), and 0.4% relative to the Chinese yuan.
Other financial markets have exhibited diverse reactions as well. The ten-year U.S. Treasury yield is six basis points higher, and the Japanese JGB yield has risen half that total. In contrast, the German bund yield is five basis points lower. Share prices strengthened today by 2.1% in Taiwan, 1.1% in China, 0.7% in Hong Kong and 0.8% in Japan, and the German DAX so far has gained 1.0%. The Nasdaq is also showing green, but the DOW and Russell 2000 have lost some ground. Ahead of Thursday’s OPEC Plus monthly meeting, the price of oil has firmed, but gold and Bitcoin cost somewhat less than last Friday’s closing levels.
German Chancellor Scholz’ coalition has lost popularity, leading to the defection of junior partner Free Democrats and and inviting calls for early elections. Now France’s political situation has turned fragile as well, and far-right opposition there are considering a vote of no confidence in PM Barnier.
Purchasing managers surveys are summarized by diffusion indices in which a score of 50 represents neutrality (neither improving or deteriorating conditions) and the further above or below that threshold, the faster that conditions are either improving or getting worse. That being said, sub-50 purchasing manager indices in manufacturing last month were below 50 in the United States, Euroland, Germany, France, the Netherlands, Ireland, Switzerland, Italy, Poland, the Czech Republic, Great Britain, the Czech Republic, Australia, Indonesia, Malaysia, and Mexico. That’s a longer list than those with readings above 50 such as Taiwan, the Philippines, Thailand, Vietnam, South Korea, China, India, Sweden, Norway, Brazil, Hungary, Spain, Russia, Greece, Brazil and Singapore. Within Euroland, only Spain and Greece had scores above 50, and the three weakest readings on Euroland’s leader board corresponded to the joint currency bloc’s three largest economies of Germany, France and Italy.
Slower rates of decline or faster rates of improving conditions in November were reported for the United States, Australia, Taiwan, Thailand, the Philippines, Indonesia, China, Sweden, Hungary, Russia, Turkey, Mexico, and Singapore. The German PMI matched October’s highly depressed 43.0 reading, which nonetheless was at a 3-month high. Faster rates of decline or slower rate of improvement happened in Vietnam, Japan, Malaysia, Poland, the Czech Republic, Great Britain, Romania, Greece, France, Ireland, the Netherlands, India, Norway, Switzerland, Italy, Spain, Brazil, Euroland, South Africa and Brazil.
In other data news today, consumer price inflation in Indonesia slowed to 1.56%, a 40-month low.
Kazakhstan’s 8.4% CPI inflation rate last month was just 0.1 percentage point above September’s 39-month low.
U.S. construction spending increased 0.4% in October, twice what analysts were expecting and associated with a 5.0% increase compared to a year earlier.
Britain’s Nationwide house price index posted a 3.7% year-on-year advance in November, most in 25 months.
Real GDP in Lithuania rose 1.2% on quarter in 3Q and 2.4% compared to its year-earlier level. Similarly, Cypriot GDP went up 1.0% on quarter and by 3.8% from a year earlier.
In summarizing the totality of Euroland purchasing manager survey findings from November, those compiling the numbers called the results “terrible” and consistent with a 0.7% fourth-quarter contraction of manufacturing activity in the final quarter of 2024. Capital goods have taken the biggest hit.
Swiss retail sales dipped 0.1% in October and posted only a 1.4% year-on-year advance, considerably less than forecast.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: latest Trump tariff threat, Manufacturing PMI surveys, U.S. construction spending
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