T.G.I.F. after Another Difficult Week

July 10, 2020

The New York metropolitan area is bracing for a tropical storm front coming later today.

The coronavirus’ grip on world financial markets remains relentless. In the United States, the daily total of newly reported cases surpassed 60k for a second straight day, and deaths from the disease climbed by almost 1k to a grand total so far of 135.8k. Trump administration officials continue a barrage of blame against China while ignoring why the United States among other countries has handled the epidemic so much worse. There’s been a fresh outbreak in Hong Kong, forcing schools there to be closed, and Singapore went ahead with today’s planned election in spite of the risk of fanning its Covid-19 outbreak. With European labor markets softening, ECB President Lagarde doesn’t imagine a let-up in monetary support for quite a while, and investors are bracing for a weaker and more prolonged recovery from lockdowns prompted by the pandemic.

The dollar slipped overnight by 0.4% against the yen and 0.1% versus the euro and kiwi.

Sterling slid 0.1% against the dollar amid scant progress in the EU-British post-Brexit talks.

Following Thursday’s difficult stock market session in the United States, share prices around the Pacific Rim closed down 2.0% in China, 1.8% in Hong Kong, 1.1% in Japan, 1.0% in Taiwan, 0.8% in South Korea 0.6% in Singapore and Australia, and 0.4% in India and Indonesia. While European markets show moderate advance, U.S. futures suggest a further drop.

Ten-year sovereign debt yields have declined 3 basis points in the United States, 2 bps in Germany and the U.K., and a basis point in Japan.

The price of West Texas Intermediate crude oil tumbled 2.1%, but that of gold rose 0.6%.

Industrial production data were reported for France, Italy, Greece, Finland, and the Netherlands.

  • After drops of 17% in March and 20.6% in April, French output recovered 19.6% in May but was still 23.4% lower than a year earlier.
  • After declines of 1.0% in February, 28.4% in March, and 20.5% in April, a 42.1% rebound of Italian industrial production left such down 20.3% in year-on-year terms.
  • Greek production only recovered 0.9% in May after an 8.5% drop in April and was 7.5% weaker than in May 2019.
  • Finnish industrial production remained in a downtrend in May, falling 1.2% on month and 3.8% on year.
  • Dutch factory output recorded the largest year-on-year drop (12.5%) since April 2009.

Malaysian retail sales reversed April’s 30.5% monthly decline in May but were still 16.2% lower than a year earlier.

Filipino exports and imports in May were 35.6% and 40.6% below their year-earlier levels, and the $9.89 billion trade deficit in January-May was 41% smaller than that in the first five months of 2019.

China continues to lead other economies in the pandemic cycle. Car sales had plummeted by 79% in February and 43.3% in March from a year earlier. On-year gains of 4.4% in April, 14.5% in May and 11.6% last month haven’t matched the severity of the earlier plunge and that hoped-for V-shaped business cycles are not going to happen.

Japanese domestic corporate goods prices rose monthly in June for the first time since January but were still 1.6% below a year earlier. Import prices and export prices were 15.6% and 4.1% below June 2019 levels.

Danish and Portuguese CPI inflation in June was very subdued at 0.3% and 0.1%. Romanian CPI inflation accelerated 0.3 percentage points above May’s 32-month low of 2.3%. Norwegian CPI inflation ticked 0.1 percentage point higher to a 5-month high of 1.4%, but the 12-month 14.4% slide in producer prices there was quite deflationary. Greek consumer prices were unchanged on month, which depressed the deflationary on-year trend by half a percentage point to -1.6%. Czech consumer price inflation climbed 0.4 percentage points to a 3-month high in June of 3.3%.

Investors await the release of U.S. producer prices and Canada’s monthly labor market report.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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