In Portfolioticker today
Today at the stock market
“U.S. stocks rose on Tuesday after company earnings reports were better than expected, with the Dow Jones Industrial Average breaching the 23,000 mark for the first time, while the U.S. Treasury yield curve flattened and the USD rose to a one-week high on increased inflation expectations.
- The S&P 500 index rose 1.72 points, or 0.07%, to 2,559.36
- The Dow Jones Industrial Average rose 40.48 points, or 0.18%, to 22,997.44
- The Nasdaq Composite index dropped 0.35 points, or 0.01%, to 6,623.66.
The Dow briefly touched a new high of 23,002.20, powered by earnings from UnitedHealth and Johnson & Johnson. The S&P 500 had been negative as traders were left unimpressed by some bank earnings, but it ticked up before the market closed.
Gains on world stock markets petered out near record-high levels, in part because a rally in commodities helped underpin one of the most durable bull runs in recent history.
Goldman Sachs Group Inc and rival Morgan Stanley topped analysts’ expectations with their third-quarter earnings, but shares of Goldman fell because the results were fueled by a volatile unit that has sharp revenue swings, analysts said.
European shares lost ground, with the FTSEurofirst 300 index dropping 0.17%, though they were underpinned by solid earnings from food group Danone and education specialist Pearson and talk of a break-up of investment bank Credit Suisse (CSGN.S).
MSCI’s gauge of stocks across the globe shed 0.11%.
Meanwhile, the yield spread between U.S. 5-year and 30-year Treasuries fell to its lowest since Nov 2007, and 2-year yields rose to their highest in nearly nine years.
Spread compression between shorter- and longer-dated maturities was due to increased expectations for interest rate tightening by the Federal Reserve and minimal signs of a pick-up in long-term inflation.
Speculation that U.S. President Donald Trump was leaning toward nominating Stanford University economist John Taylor to head the Federal Reserve helped drive the expectations for rates and inflation rises.
“Taylor is perceived as more hawkish than Ms.(Janet) Yellen so under his potential tutelage, the central bank might lift borrowing rates more aggressively, which would bolster the dollar’s allure,” said Joe Manimbo, senior marker analyst at Western Union Business Solutions in Washington.
The increased expectations, also pushed by the strongest reading on U.S. import prices in more than a year, helped lift the dollar.
The Labor Department said import prices jumped 0.7% last month, the biggest gain since Jun 2016, after an unrevised 0.6% rise in Aug 2017.” Reuters
The S&P500 and Dow Jones Industrial Average indices closed on record highs today.
^ Market indices today (mouseover for 12 month view) Chart: Google Finance
|Index||Ticker||Today||Change||31 Dec 16||YTD|
|S&P 500||SPX (INX)||2,559.36||+0.06%||2,238.83||+14.31%|
^ USD and AUD denominated indices over the past 52 weeks Chart: Bunting
|Index||Currency||Today||Change||31 Dec 16||YTD|
Portfolio stock prices
Alphabet Class A shares closed on a record high of $1,011.00 – up 0.16% on yesterday’s record of $1,009.35.
Alphabet Class C shares closed on a record high of $992.18 – up 0.02% on yesterday’s record of $992.00.
Alphabet Class A+C shares closed on a record high of $2,003.18 – up 0.19% on yesterday’s record of $2,001.35.
Facebook closed on a record $176.11 – up 0.91% on yesterday’s record of $174.52.
VMware closed on a record $115.60 – up 0.39% on yesterday’s record of $115.15.
|Stock||Ticker||Today||Change||31 Dec 16||YTD|
“A fourth day of gains for the Bloomberg Dollar Spot Index (DXY), which hit a one-week high, was also supported by broad-based weakness for the euro and the GBP.
Knocked by the stronger USD, the EUR slipped to a one-week low of USD 1.1734, having fallen almost 3% since hitting a 2½-year high last month.
The EUR was last down 0.24% to USD1.1767, and Sterling (GBP) last traded at USD 1.3188, down 0.45% on the day, after comments from Bank of England policymakers that were interpreted as dovish.
“Comments coming out (from BoE policymakers) uniformly signaled a dovish and cautious stance among policymakers and indicated a growing debate internally on the path for interest rates forward,” said Neil Jones, Mizuho’s head of currency sales for hedge funds in London.
Mexico’s MXP gained 1.49% versus the USD at 18.75 after NAFTA trade ministers spoke of some progress in talks about the trade deal.” Reuters
^ Bloomberg Dollar Spot Index (DXY) movements today (mouseover for 12 month view) Chart: Bloomberg
“The USD was supported by U.S. two-year Treasury yields hitting 9-year highs on Tuesday. Yields climbed as well on growing expectations that Trump favored Stanford economist John Taylor to head the U.S. Federal Reserve.
“Taylor is perceived as more hawkish than Ms.(Janet) Yellen so under his potential tutelage, the Fed might lift borrowing rates more aggressively, which would bolster the dollar’s allure,” said Joe Manimbo, senior marker analyst, at Western Union Business Solutions in Washington.
MUFG currency economist Lee Hardman, in London, said the bank would “not be surprised” to see an initial jump in the USD of between 3% and 5% should Taylor be chosen. Bloomberg reported on Monday that Trump was impressed with Taylor after meeting with him last week.
Trump’s shortlist also includes:
- Janet Yellen, whose term as Chair of the Federal Reserve’s Board of Governors expires in Feb 2018;
- Jerome Powell, member of the Federal Reserve Board of Governors;
- Gary Cohn, Trump’s top economic adviser; and
- Kevin Warsh, a former Fed governor, sources have said, though investors say the chances of Warsh being selected have fallen.
Trump is expected to announce his pick before going to Asia in early Nov 2017.” Reuters
^ AUD movements against the USD today (mouseover for 12 month view) Chart: xe.com
Oil and Gas Futures
“Oil prices steadied after losing ground, as expectations of high U.S. production and exports offset concerns that fighting between Iraqi and Kurdish forces could threaten the country’s crude output.
U.S. crude rose 0.4% to $52.08 per barrel and Brent was last at $58.24, up 0.73% on the day.” Reuters
Prices are as at 15:48 EDT
- NYMEX West Texas Intermediate (WTI): $51.97/barrel +0.19% Chart
- ICE (London) Brent North Sea Crude: $58.09/barrel +0.47% Chart
- NYMEX Natural gas futures: $2.93/MMBTU -0.61% Chart
“The Baghdad government recaptured territory across northern Iraq from Kurds on Tuesday, widening a campaign that has shifted the balance of power in the country. The fighting in one of Iraq’s main oil-producing areas helped to restore a risk premium on oil prices, though officials said that oilfields in the region were operating normally.
“The security premium built into prices from the (Iraqi-Kurdish) situation is in the process of vanishing,” said John Kilduff, partner at Again Capital LLC in New York. “Everyone is looking to see if the high level of (U.S.) crude oil exports will pull down inventories again,” Kilduff said.
Analysts forecast U.S. crude inventories declined by about 4.2 million barrels in the week to 13 Oct 2017.
The American Petroleum Institute (API), an industry trade group, will release U.S. weekly petroleum inventory data at 4:30 p.m. EDT (2030 GMT), ahead of the government’s report on Wednesday.
“Market participants will closely watch the rising oil-production profile in the United States and persistently high exports from the country – factors that will continue to limit gains in oil prices,” said Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics in London.
Tension between the United States and Iran is also rising, increasing the global risk premium for oil. U.S. President Donald Trump on Friday refused to certify Iran’s compliance over a nuclear deal, leaving Congress 60 days to decide on further action against Tehran. During the previous round of sanctions against Iran, about 1 million bpd of oil was cut from global markets.
“Oil and geopolitics are very much interlinked,” Fatih Birol, executive director of the International Energy Agency, told Reuters. “Oil security remains a critical issue.” With supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) tightening the market, analysts have been raising their oil price forecasts. Birol said the rate of compliance by OPEC and its partners in their targeted cutting of about 1.8 million barrels per day between Jan 2017 and Mar 2018 was about 86%.
Bank of America Merrill Lynch said it was raising its oil price forecasts. “We see Brent averaging $54 this quarter and $52.50 per barrel in 1H18, compared with our previous forecasts of $50 and $49.50 per barrel respectively,” it said.” Reuters
AU: RBA Minutes
Press Release Extract [ser_rba]
“Domestic Economic Conditions
Members commenced their discussion by noting that the Australian economy had grown by 0.8 per cent in the June quarter, in line with the Bank’s forecast. Growth in consumption and the contribution from net exports had been higher than in the March quarter, partly reflecting the unwinding of temporary factors. Members noted that the effect of the decline in mining investment had mostly passed and, with resource exports increasing, recently the mining sector had been contributing to overall growth. Growth in public demand and non-mining business investment had picked up and private sector investment intentions for 2017/18, as recorded in the June quarter ABS capital expenditure survey, had been revised higher.
There had been a pick-up in household consumption growth in the June quarter despite ongoing weakness in household disposable income growth. Members noted that consumption growth had increased in most states, although it had remained noticeably weaker in Western Australia than in the eastern states, consistent with weaker income growth in that state. Recent strong growth in employment across all the states was expected to support income growth, and therefore consumption growth, in the period ahead.
Both full-time and part-time employment had recorded solid growth in August. Members noted that this growth had been well above that required to absorb increases in the labour force owing to population growth. Since early 2017, employment growth had been above trend, the unemployment rate and other measures of labour underutilisation had declined a little (although the unemployment rate had remained steady at 5.6 per cent in recent months) and labour force participation had increased, particularly for older workers and prime-aged (25–54 year old) females. By industry, employment growth over the preceding year had been strongest in the household services sector, particularly health care and education, and had picked up notably in the construction sector. Forward-looking indicators of labour demand, including data on job advertisements, vacancies and hiring intentions, continued to point to slightly above-average growth in employment over the remainder of 2017.
Members observed that residential construction appeared to have plateaued, with dwelling investment largely unchanged in the June quarter. The pipeline of work already approved or under way was expected to continue supporting dwelling investment around current levels over the subsequent year or so; the peak of apartment completions was expected to occur during this period. At the current level of dwelling investment, growth of the housing stock was expected to outstrip that of the population, as it had done in the preceding few years.
Established housing market conditions had continued to ease in Sydney and Melbourne, but had been broadly unchanged in other cities. This pattern was evident in revised housing price data released by CoreLogic in September, as well as in auction clearance rates. Housing prices had continued to decline gradually in Perth. Nationwide measures of housing prices had increased by around 9 per cent over the year to September.
Members noted that the national accounts indicated that private non-mining business investment had increased in the June quarter to be almost 10 per cent higher than at the start of 2016, following an upward revision to non-residential construction in the March quarter. Mining investment had declined a little in the June quarter. The outlook for non-mining business investment remained positive; firms’ estimates of future capital spending had increased, non-mining sector profits had picked up over the preceding year and survey measures of capacity utilisation were well above average. Members noted that business conditions, as reported in surveys, had picked up in most states, although they remained subdued in Western Australia.
Public demand had picked up in the June quarter. Public consumption had increased solidly and new public investment had risen very strongly across most states. This recent strength had been supported by a number of large infrastructure projects, especially related to the construction of roads and railways. Given the large pipeline of public infrastructure work that had been announced or was under way, public investment was expected to continue supporting economic activity over the next couple of years. Members noted that some of this work would be undertaken by the private sector on behalf of the public sector. There had been liaison reports that this had led to some increase in private sector investment in machinery and equipment.
Export volumes had rebounded strongly in the June quarter. Members noted that the increase in resource export volumes had been pronounced, driven by the ongoing ramp-up in liquefied natural gas production. The terms of trade had declined in the June quarter, reflecting lower bulk commodity prices. The terms of trade were likely to have been relatively steady in the September quarter, as the recent falls in iron ore prices had occurred late in the quarter. These falls were largely related to weaker-than-expected data on Chinese industrial production and investment and expectations of cuts to Chinese steel production. Bulk commodity prices had been higher than expected over the preceding year. Members noted that some mining companies had used higher prices to pay down debt and that there had been reports of plans to increase capital investment to sustain the output of existing resource projects.
Recent data had pointed to subdued price pressures across the economy in the June quarter. Retail electricity prices were expected to increase significantly in the September quarter and liaison with businesses had suggested that a number of firms, particularly in the retail and manufacturing sectors, were largely absorbing increases in energy costs into margins rather than passing them through to final prices.
International Economic Conditions
Members noted that indicators of global economic conditions had remained consistent with growth continuing around recent rates. Indicators of industrial production had picked up in many of Australia’s trading partners since 2016, which had contributed to a rise in investment growth and investment intentions in many of these economies. Members noted that growth in exports of electronics and conditions in the electronics-manufacturing sector had increased significantly. This had been particularly stimulatory for the high-income Asian economies. Labour markets had continued to tighten in the major advanced economies, but nominal wage growth had remained low. Headline inflation had increased modestly over the previous month, in line with an increase in oil prices, but core inflation had remained subdued and had even declined lately in the United States.
In China, growth in output appeared to have moderated a little in recent months following stronger-than-expected growth in the first half of 2017. Growth in industrial production and fixed asset investment had eased a little in recent months, while growth in consumption had been relatively resilient. Property price inflation in China had continued to moderate, but a range of other indicators of activity in the housing sector had been more resilient than expected.
GDP growth in the major advanced economies had increased over the preceding year, driven by continued strong growth in consumption and, in some cases, investment. Members noted that this had been accompanied by a further tightening in labour markets. In the United States and Japan, unemployment rates had been at multi-decade lows and were below most estimates of full employment. The euro area unemployment rate had declined to its lowest rate in eight years, although there was significant variation across member economies. Nominal wage growth and core inflation had remained low. Inflation in the major advanced economies was expected to increase towards central banks’ targets over the next few years, as the lack of spare capacity started to put upward pressure on wages and prices.
Members commenced their discussion of financial market developments by noting that long-term government bond yields had generally increased over the previous month. The increase has been partly in response to higher-than-expected, although still modest, headline inflation data and further announcements by central banks relating to the gradual reduction of monetary policy stimulus. Nevertheless, long-term government bond yields remained at low levels and overall conditions in financial markets remained accommodative, with volatility at a low level.
As had been widely expected, the US Federal Open Market Committee (FOMC) announced at its September meeting that in October it would begin to reduce the size of the Federal Reserve’s balance sheet. The median of FOMC members’ projections for the federal funds rate continued to point to another policy rate increase in 2017 and further increases in 2018. Market pricing continued to suggest that the federal funds rate was expected to increase more slowly than this.
The Bank of Canada increased its policy rate in September in response to stronger-than-expected economic growth. Market participants were now pricing in two further increases in the first half of 2018. At its September meeting, the Bank of England indicated that some tightening in the policy rate was likely to be appropriate in coming months. Market pricing suggested that two rate increases were expected to occur by mid 2018. The European Central Bank (ECB) said that a decision about the future of its asset purchase program was likely to be made in October. The ECB was widely thought to be considering extending the scheme into 2018, but reducing the pace of asset purchases.
Members observed that, over September, the actual and expected removal of monetary policy stimulus had contributed to the increase in long-term government bond yields across the major markets. One exception was Japan, where the Bank of Japan’s policy of yield curve control remained in place, involving a 0 per cent target for 10-year Japanese government bonds.
Members noted that the yield on Australian 10-year government bonds had increased over September in response to both global financial market developments and stronger-than-expected domestic economic data, although the yield remained low. Yields on Australian 10-year government bonds had risen by more than yields on US Treasuries over preceding months, which was also the case for a number of other sovereign bonds.
Financial conditions remained highly favourable for companies in major markets. Global share prices had risen over 2017, supported by rising corporate earnings and the improved outlook for global growth. Major market corporate bond spreads to sovereign bonds had continued to narrow over 2017, to be at the lowest level in 10 years.
Financial conditions also remained accommodative in emerging markets, with increases in share prices and declines in government bond yields in 2017. Foreign capital had flowed into these markets seeking higher returns in the global environment of low yields.
Members noted that there had been relatively little movement in most exchange rates over September. The Australian dollar had been little changed over September after having appreciated since mid 2017, partly reflecting a lower US dollar. The Chinese renminbi had depreciated a little in September after having appreciated significantly over preceding months.
In Australia, financial conditions for companies remained accommodative, with price-to-earnings ratios above average and corporate bond spreads at a decade low. Members observed that, nevertheless, companies’ demand for external finance had not increased. Net equity raisings had been subdued and corporate bonds outstanding had been little changed over 2017.
Australian housing credit growth had been relatively stable over 2017, with slowing growth in lending to investors offset by slightly higher growth in lending to owner-occupiers. Members noted, however, that growth in lending to investors had stabilised in July and August. There had been little change in Australian banks’ variable lending rates over September, although some banks had lowered interest rates on fixed-rate loans, with the largest declines for fixed-rate interest-only loans to investors.
Financial market pricing continued to indicate that the cash rate was expected to remain unchanged during the remainder of 2017, although expectations of a rate rise in 2018 had increased and a 25 basis point rise was fully priced in for the second half of 2018.
Members were briefed on the Bank’s regular half-yearly assessment of the financial system.
The strengthening in global economic conditions had reduced some near-term risks to financial stability arising from rare or extreme events. However, low interest rates and low financial market volatility had promoted financial risk-taking, with high and rising asset prices and debt increasing the risk of a disruptive correction. In China, financial risks remained pronounced. The level of corporate debt in China was particularly high for the country’s stage of economic development. The extent to which this borrowing had occurred through opaque and less regulated channels added to the risks. Members noted that Chinese banks’ off-balance sheet activities complicated an assessment of the resilience of the financial system. Globally, banks’ profitability and capital ratios had increased over the preceding year.
Domestically, household balance sheets remained a key area of attention for policymakers. Household indebtedness remained high and had edged higher in an environment of low interest rates and weak income growth. Despite this, members noted that, relative to income, households’ borrowing from banks, net of offset balances, was only slightly higher than it had been a decade earlier. Interest payments relative to income had declined over the previous decade owing to the reduction in interest rates. However, the high level of debt also meant that households were sensitive to any increases in borrowing interest rates. Members also observed that household assets far exceeded debt, with non-housing assets alone being over two times larger than total household debt. The household savings rate was higher than in the early 2000s, although it had declined over the previous few years in the environment of low income growth.
Members discussed the effects of supervisory measures taken by regulators to curtail riskier borrowing for housing. Interest-only lending as a share of new lending had declined substantially following the introduction of a 30 per cent cap for this lending by the Australian Prudential Regulation Authority (APRA) early in 2017. The share of lending at loan-to-valuation ratios exceeding 90 per cent had also declined. Following the introduction of the supervisory measures, borrowing by investors had been growing more slowly, offset by slightly higher growth in borrowing by owner-occupiers.
Members discussed trends in housing demand, supply and prices given the high level of household debt and the importance of housing as collateral in the banking system. A large number of apartments were expected to be completed in 2018 and 2019 in the largest cities, following several years of increasing apartment construction. Members noted that strong population growth had seen demand for inner-city apartments in Melbourne absorb the city’s large increase in supply. Generally, demand for smaller apartments targeted at foreign buyers in the major cities had eased. Prices and rents of inner-city apartments had fallen slightly in Brisbane and also in Perth, where economic conditions were weaker.
Australian banks had continued to tighten their commercial property lending standards and their overall commercial property exposures had declined a little over the preceding year. This had been offset by strong growth in the commercial property exposures of Asian banks in Australia. Unlike previous episodes of strong expansion in lending by foreign banks, this had not seemed to have led to an easing in lending standards by Australian banks. Members noted that banks’ retail property exposures had continued to grow as retail developments were repurposed to be more flexible given the changing composition of retailing.
Members observed that the profits of Australian banks remained at a high level, which was enabling the banks to increase their capital through retained earnings and dividend reinvestment schemes. The banks had substantially increased their capital ratios since the onset of the financial crisis. Consequently, the major banks were already close to meeting APRA’s new target for ‘unquestionably strong’ capital ratios to be applied from 2020 and the smaller banks generally already exceeded the higher capital requirements. The banks had also increased their liquid asset holdings and their Liquidity Coverage Ratios were well above the 100 per cent minimum requirement.
Australian banks’ non-performing loans were a very low share of their assets compared with banks in other advanced economies. Overall, banks’ non-performing loan share had declined over the preceding year, with a fall for business lending more than offsetting a small rise for household loans. Members noted that the increase in non-performing housing loans was most pronounced in Western Australia, where the labour market was weakest and housing prices had fallen. Nevertheless, the share of non-performing loans in Western Australia remained at a low level. Further, most non-performing loans remained well secured across all states.
Members noted that housing loans as a share of banks’ domestic credit had increased markedly over the preceding two decades. APRA intended to publish a discussion paper later in 2017 addressing the concentration of banks’ exposures to housing. Members also noted that APRA had intensified its focus on Australian banks strengthening their risk culture.
Considerations for Monetary Policy
In considering the stance of monetary policy, members noted that economic conditions internationally and domestically had been more positive since 2016. Growth in global trade and production had strengthened and the sources of growth had broadened. Unemployment rates in the advanced economies had declined, but the tighter conditions in labour markets had not flowed through to higher growth in wages or broader inflation pressures. Members also noted that asset valuations were generally quite high.
A number of major central banks had either started to reduce the degree of monetary stimulus or were considering doing so. Nevertheless, financial market pricing suggested that policy rates were expected to remain low for some time. Members observed that moves towards higher interest rates in other economies were a welcome development, but did not have mechanical implications for the setting of policy in Australia, where the timing of any changes in interest rates would be dependent, as always, on developments in domestic economic conditions. Members also noted that monetary conditions in other advanced economies had been eased significantly more than in Australia since the onset of the financial crisis.
Domestically, the increase in GDP growth in the June quarter confirmed that some of the weakness in the previous quarter had been temporary and was consistent with expectations that growth would increase gradually over the coming year, supported by the current stance of monetary policy. Members noted that the increase in spending on public infrastructure projects was supporting a brighter outlook for activity in the non-mining sector. At the same time, recent data continued to indicate that the drag on growth from the end of the mining investment boom was nearing completion.
The current and prospective strength in employment growth in Australia was expected to support household spending in the period ahead, although slow growth in real wages and high levels of household debt were likely to be constraining influences. Remaining spare capacity meant that wage and price increases had been subdued. Wage growth was expected to increase gradually as spare capacity in the labour market diminished, which was in turn expected to contribute to a gradual rise in inflation over time.
The appreciation of the Australian dollar since mid 2017, partly reflecting a lower US dollar, was expected to contribute to ongoing subdued price pressures. A material further appreciation of the exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.
The most recent information about conditions in the established housing market suggested that growth in housing prices had eased from the previously brisk pace in some cities, most notably Sydney, and had remained soft in some others. Housing debt had been outpacing the slow growth in household incomes for some time. Recently, growth in credit to investors in housing had eased a little, although overall growth in household credit had been little changed. Members discussed the importance of continuing to assess the various risks in household balance sheets.
Taking account of the available information, the Board judged that holding the stance of monetary policy unchanged at this meeting would be consistent with sustainable growth in the economy and achieving the inflation target over time.
The Board decided to leave the cash rate unchanged at 1.5 per cent.”
Reserve Bank of Australia, “Minutes of Monetary Policy Committee Meeting“, 17 Oct 2017 More
EU: Economic Sentiment. Oct 2017
Press Release Extract [ser_zew]
“The ZEW Indicator of Economic Sentiment for Germany continued to improve in October 2017, however, not as strongly as in the previous month. The indicator currently stands at 17.6 points, which corresponds to an increase of 0.6 points compared with the September result. The indicator, however, still remains below the long-term average of 23.8 points.
“The improved outlook for the coming six months is not least the result of the surprisingly positive growth figures seen in the previous months. In August, figures for both production and incoming orders were significantly better than expected. The framework conditions for German exports, which have already seen a significant rise, are further improved by positive growth figures for Europe. The fact that the inflation rate is rising again, and expected to climb further, equally points towards a positive economic development in Germany, making a change in the ECB’s monetary policy more likely,” comments ZEW President Professor Achim Wambach.
The assessment of the current economic situation in Germany has slightly decreased, but is still at a very high level. The indicator currently stands at 87.0 points, falling by 0.9 points compared to the previous month.
The financial market experts’ sentiment concerning the economic development of the Eurozone has considerably decreased. The corresponding indicator has fallen by 5.0 points, to a reading of 26.7 points. In contrast, the indicator for the current economic situation in the Eurozone has climbed by 1.0 point to a level of 36.5 points.“
ZEW, “ZEW Indicator of Economic Sentiment-Economic Expectations Continue to Improve. Oct 2017“, 17 Oct 2017 More
EU: Inflation. Sep 2017
Press Release Extract [ser_eu_hicp]
“Euro area annual inflation was 1.5% in September 2017, stable compared with August 2017. In September 2016 the rate was 0.4%. European Union annual inflation was 1.8% in September 2017, up from 1.7% in August 2017. A year earlier the rate was 0.4%. These figures come from Eurostat, the statistical office of the European Union.
The lowest annual rates were registered in Cyprus (0.1%), Ireland (0.2%) and Finland (0.8%). The highest annual rates were recorded in Lithuania (4.6%), Estonia (3.9%) and Latvia (3.0%). Compared with August 2017, annual inflation rose in eleven Member States, remained stable in seven and fell in nine.
The largest upward impacts to the euro area annual inflation came from fuels for transport (+0.20 percentage points), restaurants & cafés (+0.15 pp) and tobacco (+0.10 pp), while social protection (-0.05 pp), telecommunication (-0.04 pp) and vegetables (-0.02 pp) had the biggest downward impacts.”
Eurostat, “September 2017: Annual inflation stable at 1.5% in the euro area, Up to 1.8% in the EU“, 17 Oct 2017 More
US: Import and Export Price Indexes. Sep 2017
Press Release Extract [ser_ser_trade_prices]
“U.S. import prices increased 0.7 percent in September, the U.S. Bureau of Labor Statistics reported today, after advancing 0.6 percent in August. The price index for U.S. exports rose 0.8 percent in September, after increasing 0.7 percent the previous month.
All Imports: Import prices rose 0.7 percent in September, the largest monthly rise since an increase of 0.7 percent in June 2016. The last time import prices advanced by more than 0.7 percent was a 1.2-percent increase in May 2016. Higher prices for both fuel and nonfuel imports contributed to the overall rise in import prices for September. Prices for U.S. imports also increased on a 12-month basis, advancing 2.7 percent.
Fuel Imports: Fuel prices increased 3.9 percent in September, after rising 4.4 percent in August. The monthly movements were the first advances since the index rose 0.3 percent in February, and the August rise was the largest advance since the index increased 6.1 percent in January. Prior to August, prices for import fuel fell 8.2 percent between February and July. The September advance was driven by a 4.5-percent rise in petroleum prices which more than offset a 7.8-percent drop in natural gas prices. Between September 2016 and September 2017 the price index for import fuel increased 18.2 percent, led by a 20.1-percent advance in petroleum prices over the same period. Prices for natural gas declined 16.3 percent for the year ended in September.
All Imports Excluding Fuel: The price index for nonfuel imports advanced 0.3 percent in September, following an identical increase in August. The major end-use categories largely increased in September and contributed to the rise in overall import prices. The most significant contributor was a 1.4-percent advance in nonfuel industrial supplies and materials prices, although rising prices for foods, feeds, and beverages, capital goods, and automotive vehicles also contributed to the September advance in nonfuel prices. Prices for nonfuel imports increased 1.3 percent for the year ended in September.
All Exports: U.S. export prices rose 0.8 percent in September following a 0.7-percent increase in August. The September advance was the largest monthly rise since an increase of 0.8 percent in June 2016. The last time the index increased by more than 0.8 percent was a 1.1-percent advance in May 2016. Prices for exports rose 2.9 percent over the past year. The September advance was driven by rising prices for nonagricultural commodities; agricultural export prices decreased in September.
Agricultural Exports: The price index for agricultural exports declined 0.7 percent in September, the first monthly decrease since the index fell 1.4 percent in June. Lower prices for meat, wheat, and corn drove the September decline. Despite the monthly decrease, export agricultural prices rose 2.2 percent over the past year, driven by increasing meat, wheat, and vegetable prices over the 12-month period.
All Exports Excluding Agriculture: Nonagricultural export prices increased 1.0 percent in September following an advance of 0.8 percent in August. Rising prices for nonagricultural industrial supplies and materials drove the overall increase in nonagricultural export prices in September, though higher prices for capital goods and automotive vehicles also contributed. The price index for nonagricultural exports advanced 3.0 percent for the year ended in September, led by rising nonagricultural industrial supplies and materials prices.
Imports by Locality of Origin: Import prices from China recorded no change in September, after edging down 0.1 percent in August. Prices for imports from China fell 0.7 percent for the year ended in September, the smallest over-the-year decline since the index fell 0.5 percent between April 2014 and April 2015. Import prices from Japan advanced 0.2 percent in September, the first monthly increase since the index rose 0.2 percent in March. In September, rising petroleum prices contributed to higher import prices from Canada, the European Union, and Mexico. Import prices from Canada rose 0.5 percent, the price index for European Union imports advanced 0.3 percent, and prices for imports from Mexico increased 1.4 percent.”
Bureau of Labor Statistics, “U.S. Import and Export Price Indexes, Sep 2017“, 17 Oct 2017 (08:30) More
^ JPY movements against the USD over the past month (mouseover for inverse) Chart: xe.com
Stockmarket: Nikkei 225
^ Nikkei N225 movements over the past week Chart: Google Finance
“The Nikkei 225 closed up 81 points, or 0.4%, at a 21-year high of 21,337 on Tuesday, the eleventh straight session of gains, with automakers and manufacturers among the best performers. Historically, the Japan Nikkei 225 Stock Market Index reached an all time high of 38,915.87 in Dec 1989 and a record low of 85.25 in Jul 1950.” TradingEconomics
^ CNY movements against the USD over the past month (mouseover for inverse) Chart: xe.com
Producer Prices (PPI). Sep 2017
“In September 2017, Producer Price Index (PPI) for manufactured goods increased 6.9 percent year-on-year, and increased 1.0 percent month-on-month. The purchasing price index for manufactured goods increased 8.5 percent year-on-year, and increased 1.2 percent month-on-month. On average from January to September, the PPI increased 6.5 percent year-on-year, the purchasing price index for manufactured goods went up by 8.4 percent year-on-year.
1. Year-on-Year Changes of Prices of Different Categories
The year-on-year change of producer prices for means of production increased 9.1 percent, meaning 6.7 percentage points increase in the overall price level. Of which, producer prices for mining and quarrying industry increased 17.2 percent; that of raw materials industry increased 11.9 percent; that of manufacturing and processing industry increased 7.3 percent. Producer prices for consumer goods increased 0.7 percent year-on-year, meaning 0.2 percentage points increase in the overall price level. Of which, producer prices for foodstuff increased 0.7 percent, that of clothing increased 1.2 percent, that of commodities went up by 1.3 percent, and that of durable consumer goods remained at the same level (the amount of change was 0).
The year-on-year purchaser price indices for non-ferrous metal materials and wires went up by 18.6 percent, ferrous metal materials increased 16.6 percent, fuel and power increased 11.9 percent, building materials and non-metallic went up by 10.0 percent.
2. Month-on-Month Changes of Prices of Different Categories
The producer prices for means of production increased 1.3 percent month-on-month, meaning 1.0 percentage point increase in the overall price level. Of the total, producer prices for mining and quarrying industry increased 2.0 percent, that of raw materials industry increased 1.9 percent, that of manufacturing and processing industry increased 1.0 percent. Producer prices for consumer goods increased 0.1 percent, month-on-month. Of which, producer prices for foodstuff and commodities increased 0.2 percent, that of clothing increased 0.1 percent, that of durable consumer decreased 0.1 percent.
The month-on-month purchaser price indices for non-ferrous metal materials and wires went up by 3.0 percent, ferrous metal materials increased 2.0 percent, wood and pulp went up by 1.9 percent，fuel and power increased 1.4 percent.“
National Bureau of Statistics of China, “Producer Prices for the Industrial Sector for September 2017“, 17 Sep 2017 More
Consumer Prices (CPI). Sep 2017
“In September 2017, the consumer price index (CPI) went up by 1.6 percent year-on-year. The prices grew by 1.7 percent in cities and 1.4 percent in rural areas. The food prices went down by 1.4 percent, and the non-food prices increased 2.4 percent. The prices of consumer goods went up by 0.7 percent and the prices of services grew by 3.3 percent. On average from January to September, the overall consumer prices were up by 1.5 percent from the same period of the previous year.
In September, the consumer prices increased 0.5 percent month-on-month. Of which, prices increased 0.5 percent in cities and 0.6 percent in rural areas. The food prices went up by 0.5 percent, and the non-food prices went up by 0.5 percent. The prices of consumer goods increased 0.4 percent, and the prices of services increased 0.7 percent.
I. Year-on-Year Changes of Prices of Different Categories
In September, prices of food, tobacco and liquor, went down by 0.4 percent year-on-year, affecting nearly 0.11 percentage points decrease in the CPI. Of which, the prices of meat, went down by 7.5 percent, affecting nearly 0.37 percentage points decrease in the CPI (price of pork was down by 12.4 percent, affecting nearly 0.36 percentage points decrease in the CPI); fresh fruits, down by 3.0 percent, affecting nearly 0.05 percentage points decrease in the CPI; fresh vegetables, down by 1.0 percent, affecting nearly 0.02 percentage points decrease in the CPI; eggs, up by 3.7 percent, affecting nearly 0.02 percentage points increase in the CPI; aquatic products, up by 2.5 percent, affecting nearly 0.05 percentage points increase in the CPI; grain, up by 1.7 percent, affecting nearly 0.03 percentage points increase in the CPI.
In September, the prices of all the other seven categories increased year-on-year. Of which, the prices of health care, residence, education, culture and recreation, increased 7.6, 2.8 and 2.3 percent respectively, household articles and services, other articles and services increased 1.4 percent, clothing, transportation and communication increased 1.3 and 0.5 percent respectively.
II. Month-on-Month Changes of Prices of Different Categories
In September, prices of food, tobacco and liquor went up by 0.4 percent month-on-month. Of which, prices for eggs, went up by 5.3 percent, affecting nearly 0.03 percentage points increase in the CPI; fresh fruits, up by 1.9 percent, affecting nearly 0.03 percentage points increase in the CPI; meat, up by 0.9 percent, affecting nearly 0.04 percentage points increase in the CPI (price of pork was up by 1.0 percent, affecting nearly 0.03 percentage points increase in the CPI); aquatic products, down by 1.8 percent, affecting nearly 0.03 percentage points decrease in the CPI.
In September, the prices of all the other seven categories increased month-on-month. Of which, the prices of health care, residence, transportation and communication, increased 1.8, 0.3 and 0.1 percent respectively, other articles and services, household articles and services, increased 0.2 and 0.1 percent respectively, clothing, education, culture and recreation, increased 0.9 percent.“
National Bureau of Statistics of China, “Consumer Prices for September 2017“, 17 Sep 2017 More
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