Tags: economic | slowdown | fears | central | banks

Brexit, Trade, Politics Vex Investors as Central Banks Neutered

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Friday, 14 December 2018 10:15 AM Current | Bio | Archive

Brexit Saga Continues

In the interminably tedious process of separating the UK from the European Union, nothing stirs.

UK Prime Minister Theresa May went to Brussels. May came back from Brussels.

Nothing changed.

The only thing that may possibly be of interest is that Austria’s Chancellor Kurz said yesterday that “Britain must not leave without a deal” and added that Brexit “damage control” was needed for the EU but also most importantly for the United Kingdom.

He also hinted that there might be a need to have an EU summit in January. That in fact would fit with a scenario where a UK Parliamentary vote on the withdrawal agreement fails in January. There were then some very modest concessions on “language” from the EU and if a second vote passes the UK Parliament.

However, the language of the EU around the summit was not terribly encouraging.

The British pound is weaker at below $1.26

Meanwhile, the dollar index is up and the Swiss franc is up against the dollar and quotes around parity.

The overall picture has reignited the risk fears in the markets at a moment that the main central banks (Fed, ECB and BoJ) are boxed into a corner.

Euro Area Business Growth Slows to 4-Year Low

The latest flash PMI survey data for the Euro area indicate that growth of business activity slowed to the weakest for over four years in December.

Companies are worried about the global economic and political climate, with trade wars and Brexit adding to increased political tensions like in France within the euro area. Surveys also point to further signs that the struggling autos sector continued to act as a drag on the region’s economy.

US Industrial Production in November

Industrial production rose 0.6 percent in November after moving down 0.2 percent in October; the index for October was previously reported to have edged up 0.1 percent.

In November, manufacturing production was unchanged, the output of mining increased 1.7 percent, and the index for utilities gained 3.3 percent.

Total industrial production was 3.9 percent higher in November than it was a year earlier.

Capacity utilization for the industrial sector rose 0.4 percentage point in November to 78.5 percent, a rate that is 1.3 percentage points below its long-run (1972–2017) average.

US Retail Sales and Food Services Sales for November

Advance adjusted estimates of U.S. retail and food services sales for November 2018, were $513.5 billion, an increase of 0.2 percent (±0.5 percent) from September, and up 4.2 percent (±0.5 percent) year-on-year.

Total sales for the September 2018 through November 2018 period were up 4.3 percent (±0.5 percent) from the same period a year ago. The September 2018 to October 2018 percent change was revised from up 0.8 percent (±0.5 percent) to up 1.1 percent (±0.2 percent).

Retail trade sales were up 0.3 percent (±0.5 percent) from October, and 4.0 percent (±0.5 percent) above last year. Non-store retailers were up 10.8 percent (±1.4 percent) from November 2017, while Gasoline Stations were up 8.2 percent (±1.6 percent) from last year.

This retail sales report should further allay fears of a significant slowdown in the U.S. economy.

Commerce Secretary Wilbur Ross Says China Has to Do More

U.S. Commerce Secretary Wilbur Ross said that China will need to do more than what it has promised so far to ease trade tensions, Reuters cited Bloomberg as reporting.

He also didn’t expect China to deliver on all 142 of the requests put forward by the U.S.

Ross said the success of the current negotiations will depend on how many requests are met and whether China agrees to enforceable actions.

China’s Economy Slows Down

China’s industrial production number was a little bit weaker than expected on the headline, but Chinese companies are apparently not too worried.

The manufacturing sector is increasing its investment spending. This sort of detail is important.

China’s imports from the United States were at the lowest since July 2016 although China has just made its first major purchase of U.S. soybeans.

China’s retail sales growth slowed with a moderation in sale of cars. China has now agreed to reduce the tax on American made cars, Reuters reports. However, that’s mainly about European car companies whose models account for about two thirds of cars sold from the U.S. to China.

The overall impression from the Chinese data today is a stabilization of economic activity at a somewhat lower level of growth.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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The overall picture has reignited the risk fears in the markets at a moment that the main central banks (Fed, ECB and BoJ) are boxed into a corner.
economic, slowdown, fears, central, banks
Friday, 14 December 2018 10:15 AM
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