Can’t Trust Mondays
July 9, 2018
Trade disputes haven’t been resolved, but global equities and emerging market currencies have risen with the second quarter earnings season now close at hand. Japan’s Nikkei closed 1.2% stronger, and share prices elsewhere in the Pacific Rim rose by 2.5% in China, 2.0% in Indonesia, 1.7% in Hong Kong, 1.2% in Singapore, 1.1% in Taiwan, 0.8% in India, 0.6% in South Korea and 0.2% in Australia. European equities currently show overnight gains of 0.5% in Switzerland, 0.4% in the U.K. and Greece, 0.3% in Italy, 0.2% in France, and 0.1% in Spain and Germany.
Ten-year sovereign debt yields increased three basis points in the U.S., two basis points in Germany and the U.K. and a basis point in Japan.
The dollar declined 0.6% against the Aussie dollar, 0.4% relative to the yuan, 0.2% versus the kiwi and 0.1% vis-a-vis the euro and loonie. The Swiss franc is unchanged. Dollar advances of 0.3% and 0.2% have been recorded against sterling and the yen, respectively. Theresa May’s government is in crisis after the resignation of her Foreign Secretary and Brexit Secretary. The Bank of Japan’s quarterly branch managers survey improved the assessment regarding business spending in a third of Japan’s regions, but Governor Kuroda also said that officials remain determined to stay the easy policy course even as other central banks proceed down a tightening path. Emerging market currencies such as the Turkish lira experienced a well-bid day.
Gold (+0.6%) and other commodity metals firmed. WTI oil slipped 0.5% overnight.
Japan’s JPY 1.938 trillion current account surplus in May was larger than forecast and 14.5% wider than in May 2017. The seasonally adjusted JPY 1.185 surplus was at a 4-month high. Japan’s economy watchers index rebounded 1.0 point but stayed below the 50 neutral level at 48.1 in June. The economy watchers outlook component was right at 50, a 2-month high. Japanese bankruptcies, down 2.3% in June, recorded their smallest on-year decline in three months. Finally, bank lending was 2.1% greater in the second quarter than a year earlier. That matches the first-quarter result but was a half percentage point less than the on-year growth experienced in the final quarter of 2017.
The German current account surplus narrowed sharply in May to EUR 12.6 billion from EUR 23.5 billion in April. Both the services deficit and net investment income moved adversely. The seasonally adjusted merchandise trade surplus of EUR 20.3 billion was larger than April’s surplus of EUR 19.0 billion and similar to the 2017 average monthly surplus of EUR 20.4 billion.
Euroland’s Sentix, a monthly measure of economic sentiment, bounced back to a reading of 12.1 in July after diving 9.9 points to 9.3 in June. But the German Sentix deteriorated for a sixth straight time to a score of 16.2. Such had been at 36.2 as recently as February before the recent wave of anxiety over Trump’s tariff threats.
Swiss unemployment dipped 0.1 percentage points to 2.6% in June on a seasonally adjusted basis.
Ireland’s construction purchasing managers index had a robust reading of 58.4 in June, which nonetheless was the lowest since 57.5 in March.
Czech industrial production rebounded in May by 2.9% from April and 1.4% compared to a year earlier.
China’s international reserves grew $1.5 billion last month.
Mexican CPI inflation rose a tad to 4.65% in June, but core inflation edged down to its slowest 12-month increase (3.62%) since end-2016.
The Bank of Israel maintained its policy interest rate at 0.1% as expected after the latest review. It’s been at that level since a 15-basis point cut in February 2015. The Monetary Policy Committee reaffirmed that it “intends to maintain the accommodative policy as long as necessary in order to entrench the inflation environment within the target range” of 1-3%. Such is currently at 0.5% but edging upward along with measures of expected inflation.
Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British Prime Minister Theresa May, German current account, Japanese current account