Geopolitical Market Havoc

August 27, 2013

The Middle East again is holding the rest of the world hostage, as the U.S. feels compelled to respond to Syria’s alleged use of chemical weapons against its own citizens.

  • Commodities have spike 1.4% in the case of gold to $1412.0 per ounce and 1.2% in the case of WTI crude oil to $107.21 per barrel.
  • Emerging market currencies like the Indian rupee and Turkish lira fell to new record lows.
  • The U.S. dollar has advanced 1.0% and 0.8% against the New Zealand and Australian currencies.
  • Share prices plunged 4.0% in the Philippines, 3.7% in Indonesia, and 3.2% in India.  Smaller losses were incurred of 1.2% in Malaysia, 0.9% in Malaysia, 0.9% in Taiwan, 0.7% in Japan, and 0.6% in Hong Kong.
  • In Europe, selling pressure continues on equities, with losses so far of 1.7% in Spain, 1.6% in the U.K. and Italy, and 1.5% in France and Germany.
  • The ten-year British gilt yield plunged eleven basis points.  The ten-year JGB is down two bps, and the comparable German bund is off a single basis point.  In futures trading, the 10-year U.S. Treasury yield of 2.77% is 13 bps below its recent high.
  • The yen has gained 0.6% against the dollar, which otherwise is up 0.4% against sterling and 0.2% versus the loonie and euro.  The Swissie and yuan are unchanged.

A Vice Finance Minister in China predicts growth there of 7.5% this year but is worried about the impact that tapering by the Fed will have on emerging market economies.  China’s index of leading economic indicators went up 0.4% in July, while industrial profits were 11.6% higher than a year earlier.  That beat a first-half 11.1% on-year increase.

The German IFO Institute released its monthly business climate indicator, which exceeded analyst forecasts and compelled the IFO group to claim that “the German economy moved up a gear.”  An overall reading of 107.5 in August was the best score of 2013, 1.3 points higher than in July, and 7.4 points better than the October 2012 low.  Current conditions improved by 1.9 points to 112.0, while the forward-looking expectations component rose 0.9 points to 103.3, best since March.  Retailing and construction dipped 0.4 points and 2.7 points, while readings for manufacturing and wholesaling went up respectively by 3.2 and 7.9 points.  The sister service-sector climate index weakened 0.4 points to 17.9 in August after jumping 6.6 points between June and July.

Auctions of Spanish and Italian sovereign debt produced decent results.

With a near-neutral reading of 49.7, the Shoko Chukin index of Japanese small business confidence rebounded 0.3 points in August from a 0.2-point dip in July.

GDP growth in South Africa accelerated threefold to 3.0% at an annualized rate in 2Q.  Second quarter-over-2Q12 growth was 2.0%.

Dutch business sentiment posted a fourth straight increase, rising 1.9 points to minus 1.6 in August.  Finnish business sentiment weakened 4 points between July and August, when a reading of minus 12 was posted.  Finnish consumer confidence stagnated at +5 in August, as did South Korean consumer sentiment at a reading of 105. 

The filipino trade deficit of $370 million was a tad bigger in June than May and embodied a 4-year low in imports.  Hong Kong’s trade deficit narrowed 25% to HKD 37.15 billion last month.  Sweden’s trade surplus of SEK 3.7 billion in July was 21% narrower than a year earlier.  Imports dropped 3.0% on year versus a 1.9% shrinkage of exports.

Scheduled U.S. data today are the Case-Shiller house price index, the Richmond Fed manufacturing index, the Conference Board index of consumer confidence, and weekly chain store sales.  Central bank interest rate policy announcements are expected in Hungary and Brazil.  One report out of the U.S. claims that Larry Summers has emerged as the front-runner to replace Ben Bernanke in January as Fed Chairperson.

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

Tags: ,


Comments are closed.