A Risk Averse Tuesday

June 25, 2019

Persistent concerns about U.S. relations with Iran and China are weighing on stocks and lifting the price of gold. Another worry is the greater perceived likelihood of a non-negotiated Brexit.

Share prices in Asia fell 1.2% in Hong Kong, 0.9% in China, 0.7% in Taiwan and 0.4% in Japan.

Stocks in Europe have declined so far by 0.6% in Spain and Italy, 0.3% in the U.K., 0.2% in France, and 0.1% in Germany.

Gold climbed by a further 1.1% to $1,434.4o per troy ounce. WTI oil slipped back 0.6%.

Ten-year U.S. Treasury and British gilt yields dipped a basis point.

The dollar overnight fell 0.5% against the kiwi, 0.3% versus the yen, and 0.1% relative to the loonie, Australian dollar and sterling. Alternatively, the dollar rose 0.4% against the Swiss franc and Mexican peso and edged 0.1% higher relative to the euro.

South Korean consumer confidence declined to a 4-month low in June.

Japanese corporate service price inflation decelerated 0.2 percentage points to 0.8% in May, its lowest reading since the first quarter of 2018.

Hong Kong’s HKD 34.7 billion trade deficit in May was the smallest shortfall in four months and down from HKD 43.3 billion a year earlier thanks to a 4.3% on-year drop in imports.

New Zealand recorded a NZD 264 million trade surplus lat month, up from a NZD 199 surplus a year earlier, but the cumulative deficit over the last dozen reported months, NZD 5.5 billion, was almost 50% greater than in the prior 12-month period.

Portugal’s EUR 8.6 million current account surplus in April was the first non-deficit since October.

French overall business sentiment posted its third straight reading of 106 in June. Confidence in manufacturing fell two index points to the second worst level since mid-2018, but sentiment in services improved.

Spanish producer price inflation dropped 1.3 percentage points to a 16-month low of 1.1% in May and was just a quarter of the 5.3% reading last September.

Swedish PPI inflation of 3.5% last month was a 15-month low and down from 4.9% in April and a high of 10.1% last September.

Austrian industrial production dropped 1.4% on month in April and to a 12-month rate of increase of 4.5% versus 7.7% in March.

The sales measure in the British distributive trade survey slumped to a 123-month low of minus 42 in June from -27 in May and +13 in April. As much as the hard Brexit proponents profess that leaving the EU will be painless, the data say otherwise.

On the central banking front, minutes from the Bank of Japan April Board meeting reveal a debate over the merits and costs of the prolonged ultra-loose monetary policy with a negative short term interest rate. The majority continued to favor staying the course but clarified forward guidance to indicate that at least another year will pass without raising the rate.

Hungary’s central bank will announce the result of its latest monetary policy review later today. Hungary’s base rate is expected to be kept at 0.90%, its level since a 15-basis point reduction in May 2016.

Several U.S. economic indicators will be reported today, including the Case Shiller and FHFA house price indices, new home sales, consumer confidence, and the Richmond Fed manufacturing index.

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

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