Moody’s Downgrades China… FOMC Minutes Due

May 24, 2017

Only industrial metal prices have reacted much to news that Moody’s downgraded its Chinese credit rating for the first time in nearly 30 years.

Commodities have been the main mover today. Comex gold fell 0.3% to $1,251.70 per ounce. Industrial metal prices like nickel, iron ore, and copper tumbled much more steeply. But WTI oil edged up 0.3% a day before the meeting of OPEC oil ministers in Vienna.

The dollar is unchanged against the yen, Swissie, Aussie dollar and yen. The greenback lost 0.7% against the peso, 0.4% versus the kiwi and 0.1% relative to the euro and loonie.

The Bank of Canada is holding a monetary policy meeting but not expected to change its 0.5% key interest rate. In other central bank news,

  • The Bank of Thailand maintained a 1.5% key interest rate. The decision to keep that level was unanimous. The last change was a 25-basis point cut in April 2015.
  • Magyar Nemzeti Bank on Tuesday retained a 0.90% Hungarian central bank interest rate. Policy risk remains tilted to the downside, as inflation is still below target. The rate has been at 0.90% since a trio of 15-basis point reduction in March-May of last year.
  • FOMC minutes will be published today. Investors look for clues to the likelihood of a cut next month and more clarity regarding the coming gradual reduction of the Fed’s balance sheet.

Japan’s Nikkei closed 0.7% higher today. In other Pacific Rim markets, share prices rose 0.6% in New Zealand, 0.4% in Taiwan 0.2% in South Korea and Hong Kong and even 0.1% in China but fell 0.5% in Indonesia. Stocks are down 0.1% in Germany, Greece and Switzerland but up 0.2% in Britain.

Ten-year German bund and British gilt yields fell two basis points. Their Japanese counterpart edged up a basis point.

Japan’s index of leading economic indicators in March was unrevised at 105.5, its best level since mid-2015. The index of coincident economic indicators slid 0.8 points to a 3-month low, but the index of lagging economic indicators climbed to its best level since October 2008.

German consumer confidence for June is higher than forecast at 10.4, its best result in over three calendar quarters.

Swiss industrial production posted on-year declines of 1.3% in the first quarter and 2.9% in the month of March.

In the year to April, producer prices rose 5.0% in Finland, 5.9% in Spain and 7.2% in Sweden.

Finnish retail sales volume was 0.4% higher than a year earlier in April, and its jobless rate that month of 10.2% was 0.4 percentage points greater than a year earlier. Norwegian unemployment averaged 4.5% in February-April.

New Zealand experienced a NZD 3.481 billion trade deficit in the twelve months through April despite a NZD 578 million surplus in April that was 65% larger than a year earlier.

Australia’s index of leading economic indicators compiled by Westpac dipped 0.1% last month. This reversed a 0.1% uptick in March and no change in both January and February. Construction completions in Australia were 7.2% smaller in the first quarter than a year earlier.

President Trump’s trip has now taken him to the Vatican.

The U.K. government is warning of possible other terrorist attacks.

U.S. existing home sales and the FHFA home price index will be reported today, but the big event of the day will be the release of FOMC minutes.

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

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