Little Overnight Change in the Dollar but European Stocks Firming Further

May 16, 2019

The dollar shows no net change against the euro, Swiss franc, Australian dollar, or yuan. The greenback has risen 0.2% against sterling and 0.1% relative to the yen but is down 0.3% versus the loonie and peso and 0.2% against the kiwi.

European equity markets have thus far today risen 0.9% in Switzerland, 0.7% in Germany, 0.5% in Italy, 0.4% in Spain and 0.3% in the U.K. and France. The performance of stocks in the Pacific Rim is more mixed, with declines of 0.6% in Japan, 1.4% in Indonesia, 0.8% in Taiwan, and 1.2% in South Korea but gains of 0.6% in China, 0.8% in India, 0.7% in Australia, and 0.4% in Singapore.

Among 10-year fixed income sovereign debt, yields fell 6, 4, and 1 basis points in Italy, Spain and both Britain and Japan, respectively, while edging up a basis point in the United States. The 10-year German bund yield is unchanged but, at -0.10%, remains below its Japanese counterpart.

WTI oil rallied 1.1%. Comex gold is 0.3% softer.

After the latest review of Indonesian monetary policy, the 7-day reverse repo rate was left unchanged at 6.0% as expected. Last year, such had been hiked by two percentage points in a series of moves between May and November to its current level. A released statement stresses the promotion of economic growth, which lately has been lower than assumed. Officials now expect GDP growth this year to be in the lower half of the 5-5.4% projected range. CPI inflation, meanwhile, has been “low” and hovering near the bottom of the 2.5-4.5% target range. Officials noted the rupiah’s decline since end-April and also mention persistent global financial market uncertainties.

Japanese domestic producer prices for goods rose 0.3% for a third straight month in April, but the 12-month rate of increase dipped 0.1 percentage point to 1.2%. Import prices and exports prices were respectively 1.8% and 0.2% higher than in April 2018.

Australian April labor market statistics were mixed. The jobless rate rose 0.2 percentage points to an 8-month high of 5.2%. However, that’s because of higher labor participation. The number of employed workers rose 28.4k, which is more than forecast and nearly as much as the 27.7k increase in March.

Malaysian GDP growth slowed last quarter, rising 1.1% from 4Q18 and by 4.5% from a year earlier. Malaysian recorded a MYR 16.39 billion current account surplus in the first quarter, its largest size in five years and up from MYR 13.61 billion a year earlier. The surplus in 2018 had equaled 2.3% of GDP.

Euroland’s seasonally adjusted trade surplus settled back to EUR 17.9 billion in March from EUR 20.6 billion in February but was still greater than any of the five previous monthly totals. The unadjusted surplus in the first quarter, EUR 43.5 billion, was EUR 3 billion less than a year earlier.

Italy recorded a stronger EUR 8.189 billion trade surplus last quarter than the surplus of EUR 7.532 billion in the first quarter of 2018.

Italian CPI inflation rose 0.1 percentage point to a 4-month high of 1.1% in April.

French mainland unemployment ticked 0.1 percentage point lower to a 10-year low of 8.7% last quarter. That’s down from 9.2% in the first quarter of 2018 and 10.0% in the final quarter of 2016.

Dutch unemployment in April of 3.3% matched March’s 16-year low. Dutch business sentiment recovered 1.4 points to a reading of 12.0 this quarter from 10.6 in the first quarter but remained south of the 18.1 reading in the first quarter of last year.

Mexico’s index of leading economic indicators was unchanged in March.

The main geopolitical news is that President Trump invoked national security to ban internationally made 5G technologies from U.S. markets. The target of this action is the Chinese firm Huawei.

Today’s menu of U.S. economic data releases features housing starts, building permits, the Philadelphia Fed regional manufacturing index, and weekly jobless insurance claims. Canada’s monthly survey of manufacturing sales, orders and inventories also arrives. U.S. Treasury TIC data released late yesterday revealed net capital outflows in March and the first quarter.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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