Investors Turn to Risk Trades

July 27, 2010

Lessening risk aversion saw the dollar climb 0.9% against the Swiss franc and 0.7% relative to the yen.  The euro advanced to a 5-week high against the Swiss franc of CHF 1.3778.  The Chinese yuan again remained steady against the dollar, which otherwise slid by 0.3% against sterling, the Aussie dollar and kiwi and by 0.2% against the Canadian dollar and 0.1% against the euro.

Stocks mostly advanced overnight with gains of 1.6% in Thailand, 1.1% in Sri Lanka, 0.6% in Indonesia and Hong Kong and 0.3% in India and Australia.  Equities have traded up 1.1% in Spain, 1.0% in France, 0.7% in Great Britain and 0.5% in Germany.

Japan’s Nikkei did not share in the advance, instead dipping 0.1%, and the ten-year JGB yield slid a basis points to a lowly 1.06%.  Japanese corporate service price deflation widened in June to minus 1.0% from minus 0.8% in May despite a seasonal on-month 4.5% increase in advertising costs.

The ten-year British gilt yield rose 2 basis points.

Oil and gold prices held steady at $79.05 per barrel and $1186.50 per troy ounce.

The Reserve Bank of India raised its key reverse repo rate by 50 basis points, exceeding forecasts for a 25-bp increase, to 4.5%.  The reverse repo rate was lifted by 25 basis points to 5.75%.  India’s central bank also decided to henceforth hold interest rate policy meetings once every six weeks instead of quarterly.

Euro area M3 posted on-year growth of 0.2% in June and zero in 2Q10.  Private loans and private credit recorded on-year changes of 0.3% and zero.  M1 growth slowed to 9.2% from 10.3% in the year to May and 10.7% in the year to April.  Lending to firms remained below year-earlier levels (by 1.9%), while mortgage lending accelerated to 3.4% from 3.1%.

German consumer confidence rose three-tenths from 3.6 in July to 3.9 in August, best since October 2007.  Import prices in Germany increased 0.9% in June and were 9.1% higher than a year earlier, the biggest on-year increase since November 2000.  Non-oil import prices rose 0.7% on the month and 6.8% from June 2009.  Export prices firmed 0.4% on month and 3.9% on year.  In calendar 2009, import and export prices fell by 8.6% and 2.2%.  Consumer price inflation has remained very low despite accelerating imported costs.

Switzerland’s UBS consumption indicator rose to 1.81 in June, strongest since July 2008, from 1.71 in May.

Swedish producer prices increased 1.3% in June but by just 1.6% from a year earlier.  Import prices advanced 1.8% on the month, while domestic producer prices climbed 0.5%.  Swedish lending to households was 8.9% greater in June than a year earlier.  Such had risen 7.8% in the previous statement year to June 2009.  Lending to firms was 3.5% lower than a year earlier, an adverse swing from positive growth of 4.5% in the year to June 2009.

Britain’s monthly survey of retailers by the CBI revealed a big improvement to +33 in July from minus 5 in June and minus 18 in May.  Such was the strongest result since April 2007.

Finland released July data showing slightly weaker business confidence but a small improvement in consumer confidence.

Australia’s index of leading economic indicators climbed 0.3% in May, while the index of coincident indicators went up by 0.2% that month.

South African unemployment edged up another tenth to 25.3% last quarter.

Taiwan’s index of leading economic indicators slid 0.1% in June after rising 0.3% in May.  The Hong Kong trade deficit was HKD 30.6 billion in June.  Exports and imports posted on-year growth of 26.7% and 25.3%.

Investors await the release of the Case-Shiller U.S. house price index later today as well as the Conference Board measure of consumer confidence and weekly chain store sales data.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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