U.S.-Sino Strains and Many Data Releases
August 7, 2020
U.S. President Trump has banned all transactions with WeChat and TicToc.
Although today was the planned deadline for a U.S. fiscal stimulus plan, the political parties remain miles apart, and a deal looks doubtful. Globally reported coronavirus cases jumped over 286k in the past 24 hours, and the U.S. death count rose almost 1200 to 162,812.
As has been often the case, the dollar was lifted by the latest strain in U.S.-Chinese relations, and it rose overnight by 0.5% against the euro, Swiss franc and sterling and by 0.4% relative to the Australian dollar and Mexican peso.
In Pacific Rim markets, share prices closed down 1.6% in Hong Kong, 1.1% in New Zealand, 1.0% in China, and 0.4% in Japan. European stocks are also lower just ahead of the U.S. monthly jobs report.
WTI oil and gold prices fell overnight by 1.2% and 0.3%. Risk aversion lifted the 10-year British gilt and German bund yields by 2 and 1 basis points.
The United States recouped 1.763 million jobs in July, a tad more than forecast but considerably fewer than the totals of 4.79 million in June or 2.73 million in May. The jobless rate of 10.2% was lower than forecast and 0.9 percentage points below June’s level or April’s peak of 14.7%. Broad unemployment, including under-employed workers fell to 16.5% from 18.0% in June and 22.8% in April. Labor market participation dipped marginally, however.
China’s trade surplus widened 34% in June to a 2-month high of $62.33 billion and totaled just under $172 billion in the second quarter versus only $13 billion in the first quarter. China’s second-quarter current account surplus of $119.6 billion was the largest since the final quarter of 2008. Chinese forex reserves leaped $42 billion in June to their highest level since the start of 2018.
German industrial production rose by a greater-than-forecast 8.9% in June but was 11.7% below its year-earlier level. The German current account surplus rebounded in June from May’s very depressed EUR 7.0 billion to EUR 22.4 billion. A surplus of EUR 103.9 billion in the first half of 2020 was 11.7% narrower than a year earlier and embodied a 13.4% on-year drop in merchandise exports.
French industrial production shot up 12.7% on month in June but as in Germany posted an 11.7% on-year decline. France experienced a record EUR 8.4 monthly current account deficit in June and a deficit of EUR 33.7 billion in the first half of 2020. Private sector jobs in France shrunk 0.6% or 119.4k in the second quarter to their lowest level in 13 quarters.
Similar patterns were traced in the June data released by other countries today. Spanish industrial production increased 14.0% in June but was 14% lower than in June 2019. Norwegian industrial production dropped 2.2% on month and matched May’s 3.1% 12-month rate of increase. Greek industrial production went up 7.2% on month in June but was still 4.9% lower than a year earlier. Danish IP rose 4.0% from May but dropped 2.0% on year. Malaysian industrial production dipped only 0.4% on month but posted the smallest year-on-year advance (4.9%) since a 12-month rise of 3.9% in March.
The British Halifax house price index was 3.8% higher in July than a year earlier, its largest 12-month increase in half a year.
Household spending in Japan recorded a much smaller-than-forecast 1.2% on-year drop in June after drops of 16.2% in May and 11.1% in April. Japanese labor cash earnings were 1.7% below their year-earlier level in June, but the indices of leading and coincident economic indicators that month recovered to 3- and 2-month highs. Japanese international reserves leaped another $19.3 billion in July, bringing the year-to-date increase to $78.7 billion.
Australia’s AIG-compiled service-sector purchasing managers index jumped 12.5 points to a 5-month high of 44.0 in June.
In the wake of the Beirut explosion, news of a 6-point rise of Lebanon’s private sector purchasing manager index to 43.2 in June is outdated news. The only useful takeaway is that even before that catastrophe, activity in Lebanon was already contracting at a pretty strong pace, albeit more slowly than in previous months.
Among price data reported Friday, Mexican consumer price inflation rose 0.3 percentage points to a 5-month high of 3.6% in July, but core inflation remained very subdued. Austrian wholesale prices were 4.6% lower than a year earlier, their smallest on-year drop since February. And Greek consumer prices dropped 1.7% on month in July to record a 1.8% on-year rate of decrease, which is the most deflationary in five years.
Canadian employment rose 418k last month, five-sixths of which involved part-time workers. The unemployment rate there dropped 1.4 percentage points to 10.9%.
Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Canadian unemployment, China trade balance and current account, French industrial output and current account, German industrial output and current account, U.S. jobs report