Solid German IFO and Robust Japanese CPI Fail to Lift Riskier Assets

European stock markets are moving sideways ahead of Draghi’s speech at Jackson Hole. The DAX managed to reclaim the 12200 mark after a better than expected Ifo reading, but the daily gain is rather modest. The FTSE 100 is also higher but elsewhere gains are more muted and the CAC 40 is swinging between gains and losses, leaving the Euro Stoxx 50 nearly unchanged after a largely positive session in Asia. The ASX underperforming and fluctuated, while Hang Seng and CSI 300 surged higher and the Nikkei closed with a 0.51% gain, led by automakers as the Yen headed for a weekly loss. U.S. stock futures are also moving higher and oil prices are higher on the day, trading at 47.75 per barrel.

German IFO Business Confidence Declined Less than Expected

German Ifo business confidence fell back slightly to 115.9 from 116.0 in the previous month. The drop back from the record high in July was less pronounced than feared and the breakdown showed a very encouraging jump in business expectations, which nearly compensated for the decline in the current conditions indicator. The breakdown showed sentiment improved both in both construction and manufacturing. Retail sentiment fell back in August, however, but could also have been impacted by weather conditions.

German import price inflation came in lower than anticipated, with the annual rate falling back to 1.9% from 2.5% year over year in the previous month. Prices were down -0.4% month over month. The strong EUR is leaving its mark and will likely to continue to bring import price inflation down, with the annual rate now back below the ECB’s 2% mark.

U.S. government shutdown odds were on the rise even before Trump threw down the gauntlet over the Mexican Wall budget. Goldman has them at 50/50, while a “top Republican source” pegged them as high as 75%. At a minimum that could well push tax reform into next year and it may be better to get the internal shutdown spat out of the way sooner than later, while Democrats will stonewall and let conservatives duke it out.

House Speaker Ryan said the White House and Congress are on the same page. Tax reform was a key promise during the election and Ryan said Republicans will keep their word. He also confirmed the debt limit will be increased before the ceiling is hit, stating “I know we will get this done.” On tax reform, he said they are working hard on it. He wants a permanent reduction in tax rates, but the overhaul may have some temporary provisions. They are looking to maintain mortgage deductions even while simplifying the code.

Japan’s core consumer prices rose 0.5% in July year over year which marked the seventh straight gaining month. The increase was driven by higher fuel bills as subdued wage growth discouraged consumers from increasing their spending. Japanese core consumer prices in Tokyo, available a month before the nationwide data, were up 0.4% in August year over year, against expectations of a 0.3% gain.