Firmer Dollar

August 29, 2013

The dollar has benefited from the lessening imminence of U.S./UN military action against Syria.  The greenback rose overnight by 0.8% against the Swiss franc, 0.6% versus the euro, 0.5% relative to the yen, 0.2% vis-a-vis the kiwi and loonie, and 0.1% against the Australian dollar and sterling.  The yuan is steady.

There were some sizable stock market gains in the Pacific Rim, but action in Europe has been more tepid.  Equities advanced by 3.6% in the Philippines, 2.3% in India, 1.9% in Indonesia, 1.2% in South Korea and Taiwan, 1.1% in Singapore, 1.0% in Malaysia, 0.9% in Japan, 0.8% in Hong Kong.  Stocks rose just 0.2% in New Zealand and 0.1% in Australia, and China’s market fell by 0.4%.  While the British Ftse is up 0.6%, stocks fell 0.3% in Spain and show gains of just 0.2% in Italy and 0.1% in Germany and France.

Central banks in Brazil and Indonesia raised key interest rates by 50 basis points.  Bank Indonesia’s decision to tighten followed an unscheduled meeting of the Policy Board.  The more restrictive monetary postures are meant to counter weakness in the real and rupiah and resulting higher inflation.

Gold and oil prices softened 0.4% and 0.5% to $1412.30 per ounce and $109.50 per barrel.

The ten-year British gilt and Japanese JGB yields have dropped three and two basis points to 2.77% and 0.70%, respectively.

Investors await the release of revised U.S. 2Q GDP figures and weekly jobless insurance claims, and they meanwhile are digesting the implications of several  economic indicators of note released overseas.

  • Japanese retail sales posted a greater-than-forecast monthly drop of 1.8% in July.  Total sales were also 0.3% lower than in July 2012 following a 0.7% on-year increase in the second quarter.  Large-store retail sales were 1.6% weaker than in July 2012 after postings a 0.2% uptick between 2Q12 and 2Q13.
  • Australian private investment grew 4.0% in 2Q, best in five quarters, but new home sales in Australia sank 4.7% in July, their first drop in five months.
  • Germany reported an unexpected 7K advance in unemployment for August following drops of 7K in July and 13K in June.  The jobless rate stayed at 6.8%.
  • German on-year CPI inflation appears likely to have fallen 0.4 percentage points to about 1.5% in August, based on the reports of six regional states.  Belgian CPI inflation slowed to 1.0% in August from 1.5% in July.
  • Swedish retail sales unexpectedly dropped in July, recording a decline of 0.7% in volume and a smaller 12-month increase of 2.1% following a 3.5% rise in June.
  • Italy’s consumer confidence index printed at 98.3 in August, up 0.9 points and the best reading since July 2011.  Today’s Italian government debt auctions were successfully received.
  • Italy’s business sentiment index climbed 1.1 points to 92.9 in August, surpassing analyst forecasts.
  • The French business sentiment index likewise strengthened more than predicted, with a reading of 98 in August after 95 in July and 93 in June.
  • Euroland’s retail purchasing managers index improved for the fifth straight month, reaching a 28-month high of 50.3.  Being above 50, this was the first signal of expansion in nearly two years.  The French retail PMI went up 0.6 points to 51.6, and Italy’s 40.9 reading after 38.2 in July showed somewhat less weakness.  Germany’s 55.8, though a tad under July’s reading of 56.0, nonetheless conveys considerable buoyancy.

In other economic news, a 0.1% drop in Spanish GDP last quarter was confirmed, but the on-year decline was revised inward to 1.6% from 1.7% reported earlier.  GDP had contracted 0.4% sequentially in 1Q and by 2.0% from 1Q12.  The main growth drag involved business investment in 2Q.

Swiss jobs continued on an upward path last quarter, rising by 0.3% to 4.166 million.  Denmark’s 5.7% jobless rate in July was the lowest since October 2009. 

Austria’s purchasing managers index in manufacturing rose to a 27-month high of 52.0 in August from 49.1 in July, 48.3 in June and 47.8 in April.

German real plant and machinery orders were 3% lower in July than a year earlier despite a 10% increase in domestic demand.

Greek producer prices rose 0.8% last month but were 0.5% lower than in July 2012. Icelandic producer prices slid 0.2% on  month and fell by 2.9% from July 2012.

Sweden’s second-quarter current account surplus of SEK 46.9 billion was 18% less than the 1Q surplus.

Portuguese business sentiment and consumer confidence both improved between July and August.

Japanese stock and bond transactions generated a JPY 1.081 trillion net capital inflow in the week of August 24, very similar to the prior week’s inflow.

Filipino GDP in 2Q rose 1.4% on quarter and by a robust 7.5% from a year earlier.  Producer prices in Singapore increased 0.7% on month but only 0.3% on year last month.  South Korea’s current account surplus of $4.97 billion in July was 3.8% wider than the June surplus.  South African producer price inflation accelerated from 5.9% in June to 6.6% in July, and this was higher than forecast.  Turkey’s trade deficit of $9.81 billion in July was 14.5% bigger than June’s deficit.

New Zealand’s business sentiment index of 48.1% was 4.7 percentage points less in August than the July reading.  The Reserve Bank of New Zealand revealed kiwi intervention sales in July for the first time in three months.

Canada reports monthly producer price figures and the quarterly current account today.  Canadian GDP is due tomorrow, along with a slew of Japanese monthly data.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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