Aftermath of U.S. GDP Shocker

June 26, 2014

Markets continue to ponder the implications of yesterday’s announced revision in U.S. GDP last quarter to a contraction of 2.9% from previous estimates of -1.0% made in May and +0.1% made in April.  After such a weak start to 2014, GDP will not expand as much as presumed previously in full-2014.  Slack in the U.S. economy will persist for longer, and the Fed’s data-driven policy will probably take longer before getting around to an initial hike to the fed funds interest rate target.

Data released overnight have been scant and not especially meaningful.  Investors await weekly U.S. jobless insurance claims,  personal income and spending, and the personal consumption price deflator for fresh direction.

The dollar is hugging to handles of 101 against the yen and 1.36 versus the euro.  Compared to Wednesday closing levels, the U.S. currency has risen 0.2% against the euro and 0.1% versus the Swissie but fallen by 0.3% against the kiwi, 0.2% relative to sterling and 0.1% vis-a-vis the yen, loonie, yuan and Australian dollar.  The kiwi touched a 51-day high.

Share prices are unchanged in Germany, France and Britain but earlier rose by 1.5% in Hong Kong,1.2% in Australia, 0.9% in Taiwan, 0.7% in Indonesia and South Korea, 0.5% in Singapore and New Zealand and 0.3% in Japan.

After dropping yesterday, the 10-year German bund and British gilt yields rebounded by one and two basis points.  The 10-year Japanese JGB slid a basis point.

Comex gold is down 0.8% at $1,311.60 per ounce.  WTI oil is 0.1% softer at $106.42 per barrel.

Taiwan’s central bank retained a 1.875% policy interest rate yet again as analysts were expecting.

Likewise the Czech National Bank kept its monetary policy unchanged.  The key money rate is 0.05%, and officials are capping the strength of the koruna against the euro.

The Conference Board’s index of euro area leading economic indicators rebounded 0.3% in May from a 0.2% drop in April, but the index of coincident economic indicators was only steady.

Industrial production in Singapore plunged another 5.7% last month and posted a 12-month 2.5% rate of decline.

Hong Kong’s trade deficit of HKD 42.35 billion in May was 23% narrower than the gap in April.

Swedish PPI inflation accelerated to 2.8% from 1.6% in May, thanks to a monthly increase of 1.1%.  PPI inflation in South Africa slowed marginally, however, to 8.7% from 8.8% the month before.

French consumer sentiment recovered a point to a reading of 86 in June.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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