Wednesday Hinges on Three U.S. Releases

July 30, 2014

U.S. GDP is not expected to do more than reverse the first-quarter contraction, which would leave first-half growth flat.  Annual data revision introduce extra uncertainty.

The ADP estimate of private U.S. jobs growth in July will affect expectations of this Friday’s Labor Department monthly jobs report.

At 18:00 GMT, the FOMC will release of the fifth of eight scheduled policy statements in 2014.  There is no press conference afterward.  Officials are likely to acknowledge a better labor market and to cut quantitative stimulus to $25 billion per month from $35 billion previously and peak accommodation of $85 billion per month.

Japanese officials reported a greater-than-forecast 3.3% drop in industrial production in June and downgraded their assessment to “has weakened.”  The assessment of industrial output had been “appears to be flat” in April and May and before that had been “continues to show upward movement” from September 2013 to the March 2014 report.  Production recorded a 12-month increase of 3.2% in June, down from 8.2% in the first quarter of 2014.  In June, industrial shipments fell by 1.9%, while inventories went up 1.9%.  METI officials project rises in production of 2.5% in July and 1.1% in August, but the June level already is 2.0% below the second-quarter average.

Euroland sentiment indices were reported.  The economic sentiment index edged up 0.1 to 102.2 in July.  Industrial confidence rose 0.5 points.  Service sector confidence improved 0.8 points.  Consumer confidence stayed unchanged.  Construction confidence improved 3.5 points, and retail confidence worsened by 0.6 points.  The business climate index dipped 0.04 to 0.17. 

The dollar is trading unchanged against the euro, sterling and kiwi but shows overnight gains of 0.2% versus the yen, loonie and Australian dollar.  The dollar is 0.1% firmer against the Swiss franc and 0.1% softer relative to the Chinese yuan.

Share prices in the Pacific Rim were narrowly mixed, with gains of 1.0% in South Korea, 0.6% in Australia, 0.4% in Hong Kong and 0.2% in Japan but losses of 0.4% in China, 0.2% in Indonesia, and 0.1% in New Zealand and Singapore.  In Europe, stocks are down by 0.3% in Switzerland and France and 0.1% in Italy and Germany.  The Spanish IBEX is 0.5% higher, while the British Ftse is unchanged.

Ten-year sovereign debt yields were low in recent context but unchanged overnight in Germany, Britain and Japan.  Comex gold also is steady at $1,300.50 per ounce, while WTI oil has edged up 0.2% to $101.14 per barrel.

Five German states reported July CPI data so far.  There was a deceleration of inflation in North Rhine Westphalia, Hesse and Saxony but no change in Bavaria and Brandenburg.

Austria’s manufacturing purchasing managers index rebounded 0.5 points in July to match May’s reading of 50.9.

Swedish GDP grew more slowly than forecast last quarter, rising 0.2% versus 1Q and repeating the 12-month pace of 1.9%.  Swedish consumer confidence softened in July, but manufacturing confidence ticked a little higher.

There was also mixed Swiss data.  The UBS consumption indicator rose to 2.06 in June from 1.80 in May, but the KOF index of leading economic indicators fell by 2.4 points to a reading of 98.1 in July.

French consumer sentiment stagnated at the low reading of 86 in July. 

Spanish GDP growth of 0.6% on quarter and 1.2% on year in 2Q14 was a shade better than forecast.  Spanish consumer prices fell 0.3% in the year to July.

Portuguese consumer confidence rose by 2.3 points to minus 25.3 in July, the best reading in 90 months.  In the year to June, Portuguese retail sales rose 1.8%, while industrial output slipped 0.2%.

Belgian CPI inflation accelerated marginally to a 12-month pace of 0.34% in July from 0.27% in June.

South Korean industrial production reversed May’s 2.8% drop in June and was 0.6% higher than a year earlier.

Building permits in New Zealand rose 3.5% in June after a 4.4% drop in May.

Consumer confidence in China rose 2.5 points to a reading of 114.8 in July.

Canada releases producer price and raw material price data today, but attention will be focused on the aforementioned U.S. FOMC, GDP, and ADP releases.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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