Equities Continue Recovery, Greenback Remains Heavy

Overview: Global equities have extended the New Year rally. The MSCI Asia Pacific Index advanced for the fifth consecutive session and the 10th in the past 11. The Dow Jones Stoxx 600 in Europe is rising for the second consecutive session, something it has managed to do only one other time in the past month. The S&P 500 is off to one of its best starts in years. Interest rates are a little firmer. Oil prices are extended their gains into the eighth session in a row, with Brent above $60 and WTI above $50 a barrel. The US dollar is near the lower end of its recent ranges against the euro and sterling, while the Canadian and Australian dollars extend their recent gains. The yen is softer as last week's flash crash gains are peeled back and the greenback probes the JPY109 area.   

Asia Pacific

China reported its first annual decline in auto sales in a couple of decades. Auto sales fell by about 6% last year, and many look for another decline this year. Chinese officials, however, continue to drip-feed stimulative measures. The latest is stimulus to boost auto and household appliance purchases. The central government appears to be projecting a small increase in the budget deficit (2.8% vs. 2.6% in 2018). Note that the World Bank, which shaved its world growth forecast to 2.9% from 3.0% made in the middle of last year, and growth in China was pared to 6.2% from 6.3% (the US forecast was unchanged at 2.5%).  

Cash earnings in Japan rose 2.0% year-over-year in November.  It is the strongest in 20 years and follows a 1.5% increase in October. Many economists had forecast a slower pace in November. When adjusted for inflation, real cash earnings rose 1.1% from -0.1% in October. Ostensibly this is the fuel for future consumption. We are less sanguine and suspect some rebuild in savings to siphon some of the income. Still, the sales tax increase planned for October may bring forward some consumption.  

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Read more by Marc on his site Marc to Market.

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