Stocks Up in U.S. and Europe After Dropping Overnight in Asia

July 5, 2018

Asian equities fell to 8-9 month lows overnight, including losses of 1.0% in Taiwan, 0.9% in China and 0.8% in Japan. The Trump Administration is set to impose more than $30 billion of additional tariffs on Chinese imports, and China plans to match that raise immediately.

The weakness of Asian markets did not carry over into other regions, however. Share prices are up 1.2% in Spain, 0.9% in Gerfmany, 0.8% in Italy and France, and 0.3% in Great Britain. U.S. market indices rose about 0.4% at the open despite mixed U.S. data. Many workers in the U.S. may be taking a day off today to extend the July 4th holiday.

Commodity prices and sovereign debt yields are little changed. Likewise, the dollar is narrowly mixed against most other major currencies, with gains of 0.4% against the euro and 0.1% relative to the yen, yuan, and sterling but declines of 0.3% vis-a-vis the kiwi and 0.2% against the loonie and Australian dollar. A post-election rally of the Mexican peso has been extended further. Mexican consumer confidence climbed to a 7-month high in June of 88.0 from readings of 87.1 in May and a recent low of 84.8 hit in March.

ADP’s estimated 177K increase in U.S. private-sector employment during June was lower than expected. The Labor Dept’s monthly labor force survey gets reported tomorrow, and minutes of the FOMC meeting on June 12-13 are being released today at 14:00 EDT (18:00 GMT).

The ISM’s U.S. non-manufacturing purchasing managers index advanced 0.5 points to a 4-month high last month of 59.1. Both production and orders grew considerably more quickly. But weekly jobless insurance claims of 231K last week exceeded analyst forecasts. The 4-week average edged up to 224.5K.

Bank of England Governor Carney in a speech was generally upbeat about growth but cited trade tensions as a key risk factor. Odds seem to be rising that the Bank of England will raise its interest rate at next month’s monetary policy committee meeting.

Another Bank of Japan Board member, Masai, has defended keeping the ultra-stimulative monetary policy and said that banks there need to adjust the ways they do business to cope with such as well as other realities like declining population and technological changes in the financial sector.

German industrial orders rebounded 2.6% in May to a 3-month high and were 4.4% greater than a year earlier. Domestic orders climbed 4.3%, while export orders went up 1.6%.

Germany’s construction-sector purchasing managers index slipped back 0.9 to 53.0 in June, a 2-month low. But the German retail PMI¬†climbed 1.6 points to a 35-month peak of 57.1. That overcame faster contractions in the French and Italian retail sectors to lift Euroland’s overall retail PMI to a 4-month high of 51.8.

Swiss consumer prices were unchanged on month, but their 12-month rate of increase ticked higher to 1.1% in June from 1.0% in May and 0.6% in February. Core CPI inflation was at 0.5% in June. Dutch CPi inflation likewise accelerated to 1.7% last month from 1.4% in May, and Cypriot inflation increased a full percentage point to 2.3%.

Spanish industrial production, which had dropped sharply in April, rebounded 0.9% in May. British new car sales were 3.5% lower in June than a year earlier.

Hong Kong’s private purchasing managers index dipped further below the 50 neutral level to 47.7 in June, which implies the quickest rate of contraction in nearly two years.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

 

 

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