No Place to Hide as Commodities, Stocks and Bonds Tumble in Wake of Bernanke’s Press Conference

June 20, 2013

Gold dived 5.4% and is under $1300 per ounce.

West Texas Intermediate crude oil dropped 2.2% to $96.11 per barrel.

In futures trading, the 10-year Treasury yield jumped 8 basis points on top of a 12-bp post-Bernanke rise on Wednesday.  At 2.43%, such is 81 basis points or 50% higher than the level when the Fed met May 1 and hinted that QE tapering is in the offing.

Ten-year sovereign debt yields have climbed 11 basis points in Germany and 15 bps in Britain.  The 10-year JGB is up only one basis point, however.

Equities tumbled by 3.3% in China, 3.7% in Indonesia, 2.7% in India, 2.9% in the Philippines and Hong Kong, 2.1% in Australia, 1.7% in Japan, 1.6% in Taiwan and 1.1% in New Zealand.  In Europe, the Paris Cac and German Dax have so far lost 2.4%.  The British Ftse and Madrid Ibex are off by 2.3% and 2.2%, while Italian share prices have lost a comparatively small 1.8%.

Risk-off trading buoyed the dollar by 1.4% against the yen, 1.6% relative to the kiwi, 1.1% versus the Australian dollar, 0.8% against the euro, 0.7% vis-a-vis the loonie, 0.5% versus the Swissie and 0.2% against sterling.  The yuan was unchanged as China’s central bank continued to turn its back to strong money market demand for liquidity.

The preliminary HSBC manufacturing Chinese purchasing managers index sank 0.9 points to a reading of 48.3, which was under the 50 no-change threshold for a second straight time and at a nine-month low.  Output and orders contracted.

Japan’s April index of leading economic indicators was revised downward to 99.0 from 99.3 reported June 7.  The coincident index, in contrast, was revised upward by 0.5 points to 95.3, and the index of lagging Japanese indicators was bumped upward to 87.9 from 86.8 reported initially.

Japanese supermarket sales recorded an on-year drop of 1.2% in May after declining 1.9% between April 2012 and April 2013. CPI inflation in Hong Kong dipped to 3.9% in May from 4.0% in April.

Stock and bond transactions in Japan last week generated a JPY 842 billion capital inflow versus JPY 452 billion in the prior week of June 8.

In Britain’s annual Mansion House speeches, outgoing Bank of England Governor King warned against excessively rapid interest rate increases, and Chancellor of the Exchequer Osborne spoke of an emerging economic upturn and plans to return state-owned banks to the private sector.

GDP grew only 0.3% in New Zealand last quarter, down from 1.5% in 4Q12.  This weaker-than-expected outcome trimmed on-year growth to 2.4% from 3.2%.  Consumption went up 0.4%, while business investment rose 0.3% sequentially.

Today’s difficult financial market conditions have disregarded rather encouraging preliminary Ezone purchasing manager surveys for June.

  • Euroland’s preliminary composite PMI reading of 48.9 constitutes the best score since March 2012 and was 1.2 points higher than May’s reading.  The manufacturing PMI of 48.7 was a 16-month high, while the services PMI of 48.6 was at a 15-month peak.  The rate of contraction outside of Germany seems to be flattening.  GDP in the second quarter likely dipped about 0.2%, but conditions were improving as mid-year approached.
  • The German composite PMI score of 50.9 was a 4-month high and above 50 for a second straight time.  Improvement was concentrated in services, whose PMI index rose 1.6 points and, at 51.3, surpassed 50 for the first time since March.  The manufacturing PMI fell 0.7 points in Germany to a 2-month low of 48.7.
  • The French composite PMI, 46.8 after 44.6 in May, was at a 10-month high.  Manufacturing rose 1.9 points to a 10-month peak of 48.3, while services went up 2.2 points to 46.5, also a 10-month high.

The CBI in the United Kingdom released its monthly industrial trends survey, whose 2-point rise to minus 18 represented less improvement than anticipated by analysts.

British retail sales rose 2.1% in May both overall and excluding auto fuel.  That rebound from a 1.1% drop in April was stronger than expected.

After a quarterly review of monetary policy, the Swiss National Bank kept the franc/euro cap at 1.2000 and against characterized the Swissie as too strong.  Projected deflation in 2013 was revised from minus 0.2% to minus 0.3%, and the 0.0-0.25% target interest rate range was left unchanged.  Officials warned of slower Swiss GDP growth this quarter than seen in 1Q13.  The Swiss trade surplus widened 31% on month to CHF 2.224 billion in May.

Norway’s central bank maintained a 1.5% key policy interest rate as expected but lowered the likely future path of such and even insinuated that a cut is possible.

German producer prices slipped 0.3% on month in May and were just 0.2% higher than in May 2012.  On-year PPI inflation had been at 1.7% back in January.  In Ireland, PPI inflation held steady in May at +1.9%.

Italian industrial orders and sales each rose by 0.6% between March and April.  Versus a year earlier, such declined by 1.6% and 7.2%.

Dutch consumer confidence fell four points to minus 36 in June from -32 in May, while Belgian consumer sentiment improved a point to minus 18.  Danish consumer confidence improved 6.0 points to a reading of +3.4 in June, but retail sales in Denmark were 0.7% lower in May than a year earlier. 

Regarding the U.S., today data reports include existing home sales, the Conference Board index of leading economic indicators, the Philly Fed manufacturing index, weekly jobless insurance claims, and the Markit preliminary manufacturing purchasing managers survey results.  Ezone consumer confidence and Mexican retail sales arrive, too.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.


Comments are closed.