To lose one prime minister may be regarded as a misfortune…
…To lose two looks like carelessness
The prime ministers of New Zealand and Italy both resigned at the weekend. John Key's departure came out of the blue and arose because of personal issues. Matteo Renzi's was provoked by the sweeping defeat of his referendum on constitutional reform.
New Zealand's dollar took a minor hit, falling by two thirds of a cent: the euro was slammed, losing one cent to the US dollar and two to the pound. Looking on the bright side, the euro avoided potential further punishment after Austrian voters chose the greens' Alexander Van der Bellen as president rather than the far-right Freedom party's Norbert Hofer.
Although the Italian referendum result had been fairly widely anticipated there had been doubt that prime minister Renzi would carry through his earlier pledge to resign if he lost. In the event the 41%-59% rejection of his proposals was comprehensive enough to force his hand. With the Italian banking sector under severe pressure from non-performing loans the decapitation of the government is absolutely not what was needed to further a solution to its problems.
Jobs good, wages less so
Friday's US employment data were strong, in that 178k new jobs in November took the rate of unemployment down to 4.6%. They were bad because average hourly earnings fell by -0.1% on the month. The dollar had no better than an average day, losing two thirds of a cent to sterling.
Analysts were at a loss to explain the dichotomy of lower unemployment and, at the same time, lower pay. Investors decided that they didn't really like the overall picture and they marked down the dollar through Friday afternoon. It did perk up in the Far East this morning though, when the result of the Italian referendum became clear.
The big winner on Friday was the South African rand. Investors had been resigned to the idea that Standard & Poor's would downgrade the country's credit rating from BBB- to BB+, demoting it from "investment grade" to what is colloquially known as "junk". In fact S&P left the rating unchanged, allowing the rand to enjoy a relief rally that took it 1.1% higher against sterling.
Today's ecostat agenda focuses on the purchasing managers' indices for the services sector. Last Thursday's manufacturing PMIs were mostly better than forecast: Investors will be hoping for more of the same today.
The UK services PMI for November is expected to be down by a third of a point at 54.2. At that level it would exceed the figures already out from Australia (51.1) and China (53.1) but would be beaten by the numbers pencilled in for Germany and the United States.
Today also brings the opening skirmishes of the Supreme Court's hearing of the UK government's appeal against the earlier decision that parliament must approve the Article 50 process to leave the EU. The case will be streamed live on the interweb.