Typical Deluge of Data as Another Month Ends

May 31, 2016

Market Highlights:

  • The U.S. dollar dropped 1.1% and 0.9% against the Australian and New Zealand dollars on encouraging economic statistics released today.
  • Against other major currencies, the U. S. dollar is narrowly mixed but poised to record a very strong monthly advance.
  • The Shanghai Composite index of Chinese share prices leaped 3.3%.  The cause was technical, not fundamental, and futures point to more difficulties ahead.
  • Stocks also rose 1.0% in Hong Kong and 0.8% in South Korea but fell 0.8% in Indonesia and 0.5% in Australia. 
  • European equities are broadly softer with drops of 0.4% in Paris and Frankfurt, 0.5% in Madrid, 0.6% in Milan, and 0.2% in London.
  • Fed Chair Yellen’s speech last Friday, which lifted the odds of a near-term tightening, depressed sovereign debt prices.  The 10-year treasury yield is two basis points higher following the Memorial Day holiday.  The 10-year British gilt and German bund yields rose four and one basis points.  But the 10-year Japanese JGB is a basis point softer.
  • West Texas Intermediate crude oil at $49.48 will likely post a fourth consecutive on-month advance and is 0.3% higher on the day.  Comex gold is off 0.2% at $1,213.90 per ounce.

Japanese statistical releases:

  • Industrial production posted a better-than-forecast rise of 0.3% in April.  The gain was dampened by the mid-month earthquake, and output was 3.5% lower than in April 2015.
  • Real household consumer expenditures rose 0.2% on month in April but were 0.4% softer than a year earlier.
  • Small business sentiment tumbled 1.1 points in May to a 25-month low of 45.6.  Japan has deflation again, the yen is less competitive, and Abenomics seems to be failing.
  • Motor vehicle output recorded a 9.7% plunge between April 2015 and April 2016.
  • Construction orders posted a 16.9% on-year drop in April, the most in many months, but the 12-month rise in housing starts of 9.0% surpassed expectations.
  • Labor statistics were decent.  The jobless rate stayed at 3.2% in April, and employment recorded a 0.9% 12-month rate of increase.  The job offers:seekers ratio rose 0.04 points to 1.34.

European Monetary Union data highlights:

  • Eurozone consumer price deflation rose 0.1 percentage point to -0.1% in May but was non-positive for a fourth straight time.  Core inflation was just 0.8%.
  • Unemployment in Euroland remained at the prior month’s 10.2% in April but is below 10.4% recorded in December-February and 11.0% in April 2015.
  • On-year growth in M3 eurozone money slowed to 4.6% in April from 5.0% in the first quarter.  Growth in private loans remains weak at just 0.9% on year.
  • German retail sales volume unexpectedly fell 0.9% on month in April.  Analysts were projecting an increase.
  • German unemployment dipped 0.1 percentage point to a new low for the move of 6.1% in May.  Unemployment fell 11K, twice expectations.  Jobs were 1.3% higher in April than a year earlier, matching their 12-month advance in the first quarter.
  • Italian GDP grew 0.3% last quarter and 1.0% on year, matching the flash estimate. 
  • Italian consumer prices fell 0.3% on year in May, and that economy had an 11.7% jobless rate in April.
  • In the year to May, French consumer prices slipped 0.1%.  In the year to April, French producer prices dropped 4.1%.
  • Portuguese 1Q GDP growth was revised 0.1 percentage point higher to an increase of 0.2% from the prior quarter and 0.9% on year.
  • Greek retail sales volume posted a 1.6% on-month decline in March following slides of 6.8% in February and 1.7% in January.

Australia posted a A$ 20.794 billion current account deficit in the first quarter, 8.1% narrowing than the 4Q15 deficit but slightly more than 50% wider than the year-earlier shortfall.

Australian building permits jumped 3.0% in April.  In on-year terms, approvals edged up 0.7% versus 12-month declines of 9.0% in February and 5.4% in March.  This improvement and news that exports made a bigger contribution to first-quarter GDP growth triggered an overnight rise in the Aussie dollar.

In neighboring New Zealand, business sentiment rose to a reading of 11.3 in May from 6.2 in April and 3.2 in March, and building permits, which had risen 10.8% in February but fallen 9.7% in March, rebounded 6.6% in April.  The kiwi was also well bid.

Turkey had a $4.21 billion trade deficit in April.  Both exports and imports fell sharply on year.  The Thai current account surplus in 1Q16 of $16.4 billion was 61% wider than in 4Q15.

Icelandic producer prices plunged 10.4% on year in April.

U.S. data releases today include personal income, personal spending, the personal consumption price deflator, the Dallas Fed manufacturing index, the Case Shiller house price index, the Chicago and Milwaukee region purchasing manager manufacturing indices, and the Conference Board estimated index of leading economic indicators.

Canada releases monthly and quarterly GDP figures.

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

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