Volatile Markets

April 25, 2017

In the aftermath of the French election and with the risk of a partial U.S. government shutdown still looming, big market moves continued on Tuesday.

Better-than-expected U.S. corporate earnings reports from the likes of Caterpillar are extending the U.S. stock market rally. Equities in Asia closed up 1.4% in Hong Kong, 1.3% in Taiwan, 1.1% in Japan and South Korea, and 1.0% in India.

New Zealand and Australian markets were closed for ANZAC Day.

Gold and oil are 0.7% and 0.2% softer at $1,268.1 per ounce and $49.14 per barrel.

Stocks in Europe have jumped 1.9% in Greece and gained another 0.7% in Switzerland and Italy, 0.5% in Spain, 0.4% in France, 0.3% in the U.K. and 0.2% in Germany.

Ten-year sovereign debt yields climbed another six basis points in France, 5 bps in Germany, 4 bps in the U.K. and 3 bps in the United States.

The dollar advanced 0.9% against the yen, 0.7% relative to the kiwi, 0.6% versus the loonie, and 0.5% vis-a-vis the Australian currency. The dollar also slipped 0.3% against the euro and sterling and is 0.1% lower versus the Swiss franc. There’s been a rise, too, against the peso.

Canada’s currency reacted adversely as the U.S. imposed a steep tariff on imports of softwood lumber.

Euroland’s fiscal deficit to GDP ratio slid to 1.4% in the final quarter of 2016 from 1.6% in 3Q, 2.2% in the final quarter of 2015, and 2.5% in the last quarter of 2014.

A 20 billion drop in British public sector net borrowings to GBP 52 billion last fiscal year (ending March 2017) mostly reflected temporary factors. The debt to GDP ratio at the end of fiscal 2016/17 equaled 86.6%.

French business sentiment stayed unchanged in April with a reading of 104. Manufacturing sentiment rose three points to its most optimistic level since mid-2011, but retail and service-sector confidence dipped.

Hungary’s central bank┬ábase rate remained at a record low of 0.90% after the Monetary Council’s latest meeting. It’s been at that level since May 2016. Officials project in-target inflation and falling unused capacity.

In the U.S., the FHFA house price index advanced 0.8% on month in February, lifting the 12-month rate of increase by 0.7 percentage points to 6.4%. The Case Shiller house price index that compiles conditions in 20 U.S. metropolitan areas advanced 0.7% in February, raising that on-year trend to 5.9%.

Japanese corporate service price inflation remained at 0.8% in March, twice the calendar year 0.4% increases in both 2015 and 2016.

South Korean consumer confidence 5.6% to 101.2 this month.

Hong Kong’s trade deficit in March was 25% smaller than the month before.

In Nordic Europe, Icelandic wage cost inflation slowed half a percentage point to a 35-month low of 5.0% in March. Swedish unemployment fell to a 9-month low of 6.4% in March, and Danish retail sales rebounded in February to post a 2.6% rise from a year earlier.

U.S. new home sales and the Richmond Fed manufacturing index will be released shortly.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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