Daily Briefing – Wednesday, November 15, 2017
After Germany’s GDP yesterday broke well above expectations, the ZEW economic sentiment index soared 4 points up to 30.9 in November – even though industrial production and GDP growth were well within expected boundaries. European indexes yesterday ended in the red for the 6th day in a row, as economic growth spurs the Euro and Chinese buyers pushed mining shares down. UK data came in red yesterday, producer and consumer inflation steady, and retail sales missing the mark. Sweden’s housing bubble is showing signs of deflating after SEB banking posted a 2nd largest drop in prices, prompting the regulator to tighten mortgage repayment rules. Also some good news from Greece, where a €5.35bn budget surplus so far this year has surpassed the country’s bailout target; the surplus will be distributed amongst Greeks most badly hit by the decade-long recession. And on the regulatory side, MiFID-2 writers (the Financial Conduct Authority – FCA), who will release their wrath upon Europe’s financial markets in January, have decided to expand the unbundling of research costs directive to include emails and Bloomberg messages between traders and dealers.
Deleveraging in China is beginning to take effect, as can be seen by weakness in stocks and bonds . Indexes this morning were in the red throughout Asia, led by the Nikkei (-1.51%) on a strengthening Yen due to political turmoil in Africa, followed by the Shenzhen Composite (-0.12%), Shanghai (-0.72%) and the Hang Seng (-0.67%). For the Nikkei, this is the 6th day of declines in a row, driven down by commodities – especially oil’s debacle overnight. Also helping matters – Japan’s GDP annualized increase of 1.4% during the previous quarter, marking a straight 7th quarter of improvement – its longest streak in 16 years. Finally, wage growth in Australia remained stagnant in November increasing 2% YoY, and consumer confidence in New Zealand contracted by 1.7% after increasing by 3.6% in October.
The Federal Reserve has issued a subprime warning, as household debt reaches record highs – credit card debt having risen above the trillion dollar mark. Yesterday’s producer inflation exceeded expectations at 2.8% YoY for October (its fastest increase in 6 years), and the Redbook index of same-store sales for November fell 3 ticks to 2.3% growth. Meanwhile, on the equities front, major indexes yesterday closed in the red, the DOW to a 3-week low on the oil downturn and share devaluations for Goldman Sachs, Apple, Disney and Dow-DuPont – this as the VIX rose to its 3-week record.
WTI crude tumbled overnight towards the $55 level after the American Petroleum Institute yesterday reported a 6.5mB increase in inventories – primarily on increased US supplies. Brazil and Russia seem to be creating a dent in the OPEC freeze agreement. And gold has had a turbulent day after plunging on Monday towards its 200-day moving average at 1275, then overnight swooping back past 1281 as the dollar index hits a 3-week low.
|9:30 AM GMT||UK: Average Earnings & Unemployment|
|10 AM GMT||EU: Trade Balance|
|1:30 PM GMT||US: Retail Sales, CPIs and Business Inventories at 3.|
|3:30 PM GMT||EIA: Oil Inventories|
|0:30 AM (+1)||Australia: Unemployment, and Consumer Inflation at 1.|