Stronger Dollar, Weaker Bonds and Stocks Ahead of FOMC Minutes

August 21, 2013

Investors hope to get fresh insights into what the FOMC might announce next month on QE3 from minutes of the prior FOMC meeting, which get published at 18:00 GMT today.

Meantime, the dollar has risen 0.6% against the kiwi, 0.5% versus the Australian dollar, 0.3% relative to the loonie and 0.2% against the yen, euro and Swiss franc.  Both sterling and the yuan are steady against the U.S. currency.

Share prices fell 1.9% in India, 0.9% in Taiwan, 0.7% in Hong Kong, 0.6% in Singapore and 0.2% in China but rose 0.2% in Japan, 0.4% in Australia, and 1.0% in Indonesia.  In Europe, stocks show losses of 0.7% in the U.K. and Spain, 0.6% in Italy, 0.3% in Germany, and 0.1% in France.

Ten-year sovereign debt yields rose three basis points in Britain and a basis point in Germany.  A rise at the open in U.S. Treasury yields is also indicated by futures, but the 10-year JGB slid a basis point further to 0.72%.

Gold settled back 0.8% to $1361.50 per ounce, while the price of WTI crude oil edged down 0.1% to $105.00 per barrel.

Two central banks left interest rates unchanged.  Both decisions were as expected.

  • Sedlabanki of Iceland retained a 6.0% seven-day collateralized lending rate amid more elevated inflation.  The last rate change was a 25-basis point hike in November 2012.
  • A 6-1 majority of policymakers at the Bank of Thailand voted to keep its benchmark rate at 2.5%, the level since a 25-bp cut late in May 2013.

The radiation leak alert at Japan’s Fukushima nuclear facility has been elevated to a code 3 from code 1.  Japanese supermarket sales dropped 0.5% on year in July following a 2.7% on-year advance in June.  Data yesterday showed that department store sales were 2.5% lower than in July 2012.

The rand weakened and is near June’s record low following new that South African CPI inflation accelerated to an 18-month high of 6.3% in July from 5.5% in June.  A monthly jump of 1.1% surpassed expectations.

A two-year peak of zero was attained in the British CBI industrial trends index for August, up from negative readings of 12 in July, 18 in June, 20 in May and 25 in April.

Higher-than-presumed expenditures produced weaker-than-expected British public finance results for July.  The public sector net borrowing was GBP 1.635 billion and a deficit of GBP 0.1 billion even if intervention is excluded.  The public sector net cash requirement of GBP 19.64 billion dwarfed June’s GBP 0.99 billion.

According to the Conference Board, China’s index of leading economic indicators improved 1.4% in July, almost twice as much as in June, and the index of coincident economic indicators recorded a second straight advance of 1.1%.

The Westpac-MI index of Australian economic indicators was unchanged in June following a 0.1% dip in May.

Three Malaysian indicators were reported.  1) Real GDP recovered 1.4% in 2Q from a 0.4% drop in 1Q and was 4.3% higher than a year earlier.  2) The current account surplus decreased to MYR 2.6 billion from MYR 8.7 billion in 1Q.  3) CPI inflation picked up to 2.0% in July from 1.8% in June.

Swiss M3 money growth slowed to a 12-month increase of 10.8% in July from 11.6% in June, and Swiss reserves at end-July stood at $507.99 billion.

U.S. existing home sales and Mexican retail sales get reported today.

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

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