Dollar Falters Amid Lots of Data Reports

February 3, 2016

There’s a whiff of currency warfare in the air.  N.Y. Fed President Dudley warned that either a sustained dollar rise or global slowdown would impair the U.S. economy and affect Fed policy.  Esther George of the K.C. Fed shrugged off stock volatility at not necessarily surprising or worrisome.  Reserve Bank of New Zealand Governor Wheeler said central bank officials are looking at core as well as headline inflation.  Governor Kuroda of the Bank of Japan, which announced plans last week to adopt a negative interest rate, took a page from his ECB colleague, declaring a readiness to do whatever it takes to boost inflation and hinting that the size of quantitative stimulus may get expanded.  A weak yen is one goal of that policy. 

Dudley’s warning carried the day, even though the ADP estimate of a 205K private U.S. employment increase last month exceeded expectations.  The U.S. currency overnight has lost 1.8% against the kiwi, 1.1% relative to the loonie, 0.9% against sterling, 0.7% vis-a-vis the yen, and 0.4% versus the euro, Swissie, and Australian dollar. 

The People’s Bank of China cut minimum down payments required of prospective home buyers.  The Chinese government set a GDP growth goal of 6.5-7% for 2016, which compares with actual growth of 6.9% last year.

Share prices in Europe have declined so far today by 2.9% in Greece, 1.7% in Spain, 1.4% in Italy, 1.0% in Germany, and 0.6% in Britain.  Japan’s Nikkei, which initially got a big boost from the BOJ easing last Friday, fell 3.2% today, and stocks slumped 2.3% in both Australia and Hong Kong.  Equities also fell 1.3% in India, 1.1% in Singapore, 0.8% in South Korea and Taiwan and 0.4% in China.  The DJIA opened 0.5% higher after tumbling on Tuesday, but the non-manufacturing U.S. PMI is due shortly.

Japan’s 10-year JGB yields touched 0.04% but is now down just 1 basis point at 0.06%.  The German 10-year bund yield is below 0.30%.

From below $30, WTI oil recovered 0.8% to $30.11.  There’s a forecast on the wires that oil has bottomed and is poised for a hefty rebound.

But there’s another forecast on the wires that the Dow is going to plunge 80% in 2016.  Needless to say if that happened, the Great Recession would likely be but a mere prelude to America’s second Great Depression in 85 years. It took three years for the Dow to fall 85% in that earlier debacle.

A large amount a data were reported today, including a bunch more purchasing manager surveys for January.  First the other news.

Japanese consumer confidence sank 0.2 points in January to a 3-month low of 42.5.  The reading was weaker than forecast.

Australia’s trade deficit widened nearly 30% on month to A$ 3.535 billion in December.  The deficit was 3.4 times bigger in 2015 (A$33.5 billion) than in 2014.  Australian building permits posted a smaller 2.5% on-year decline in December, just a third as much as forecast.

U.S. motor vehicle sales last month totaled 17.46 million at an annual rate, slightly greater than in December and bigger than forecast.

Fourth-quarter New Zealand labor statistics showed a 0.7 percentage point drop in the jobless rate to 5.3%.  Employment grew 0.9% on quarter and 1.3% from a year before.  Private labor costs recorded a 1.5% year-over-year advance.

Italian consumer price inflation ticked up to 0.3% in January from 0.1% at end-2015.

Fueled by a weak lira, Turkish consumer price inflation accelerated to 9.6% in January from 8.8% in December.  PPI inflation rose 0.2 percentage points to 5.9%.

The National Bank of Poland retained a 1.5% key central bank interest rate as expected.  Nine reductions from November 2012 through January 2014 cut the rate to 2.0% from 4.75%.  A further 50-basis point rate reduction was made last March.

The Bank of Thailand’s policy rate is also 1.5%, and that banks monetary policy committee agreed to keep that level, which is the lowest since mid-2010.  Officials expect above-zero inflation to reemerge before mid-year but warn that risks to the forecast have become more skewed to the downside.

British shop prices were 1.8% lower than a year earlier in January following 12-month drops of 2.0% in December and 2.1% in November.

Retail sales volume in the eurozone increased 0.3% in December, their largest increase since July, but the 12-month increase was trimmed more than expected to 1.4%.  Between 3Q and 4Q15, sales volume fell 0.4% at an annualized rate.  Between November and December, sales slumped 1.8% in Portugal and 1.2% in Ireland.

And now for the purchasing manager survey results:

  • China’s services PMI rose 0.9 points to a 6-month high of 52.4, lifting the composite PMI to a 2-month high of 50.1, which connotes stagnation nonetheless.
  • Japan’s services and composite PMI readings of 52.4 and 52.6 were each the best scores in five months, but business sentiment fell to a 3-month low.
  • Euroland’s services PMI fell 0.6 points to a one-year low of 53.6.  The composite eurozone PMI fell 0.7 points to 53.6, a 4-month low, yet suggesting underlying GDP growth of around 0.4% at the start of the first quarter.
  • Among eurozone members, the French and Irish service-sector purchasing manager readings of 50.3 and 64.0 were at 2- and 115-month highs, while the readings in Spain of 54.6, Germany of 55.0 and Italy of 53.6 were at 13-, 3- and 2-month lows.
  • The British services PMI of 55.6 was 0.1 point better than the month before but not as high as in November.  The U.K. composite PMI, 56.1, was at a 6-month high and a nice level to start the new year.
  • Sweden’s services PMI of 59.3 indicated considerably stronger activity growth than expected.  Such recorded a 3.0-point two-month advance.
  • In the middle east, Egypt’s non-oil PMI was below the 50 no change level for a fourth straight month and at a 2-month low of 48.0.  The Saudi index fell 0.5 points to an all-time low of 53.9, and the U.A.E. non-oil index dropped to a 46-month low of 52.7.  Lebanon’s private PMI climbed 1.2 points to a 6-month high of 49.1.
  • The private purchasing managers index for Singapore rose 0.4 points to an 11-month high of 52.5, while that for that for Hong Kong worsened another 0.3 points to 46.1, which is a 4-month low.
  • India’s services PMI increased 0.7 points to a 19-month high of 54.3, lifting the composite PMI of that economy to 53.3, an 11-month peak.
  • South Africa’s private PMI stayed below 50 but recovered 0.5 points to a 2-month high of 49.6.
  • Russia’s services PMI slumped to a 10-month low of 47.1, with contractions in jobs, orders, sales and business sentiment.  The composite Russian PMI of 48.4 was at a 2-month high, however.
  • Brazil’s composite PMI was still weak at 45.1 but indicates the slowest pace of decline in 10 months.  Services rose 0.9 points to 44.4.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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