A Geopolitically Predisposed Market

August 18, 2014

Not much is happening this Monday from a data release standpoint, so market direction has come from geopolitical developments.

  • Russian/Ukraine talks began in Berlin Sunday towards a ceasefire in their border clash.
  • Officials at the German Bundesbank said geopolitical risks have been weighing on Euroland’s largest economy.
  • Russia’s Central Bank widened the Ruble’s allowed trading range.
  • Conflict continued over the weekend in Gaza.
  • Governor Nixon ordered the Missouri National Guard into the St. Louis suburb of Fergusson.

Stocks in Europe have rebounded by 1.2% in France, 1.4% in Germany, 1.1% in Spain, 0.8% in Switzerland and Italy, and 0.7% in Britain.  The DJIA opened almost 100 points (o.6%) stronger.  Earlier today, Japan’s Nikkei closed unchanged.  Equities rose 1.1% in India, 0.6% in China and 0.4% in Australia but fell be 0.7% in Taiwan, 0.5% in South Korea, and 0.1% in New Zealand.

The dollar is narrowly mixed, with dips of 0.2% against sterling and 0.1% versus the Australian dollar and yuan, no change relative to the kiwi, and upticks of 0.3% relative to the Swiss franc, 0.2% vis-a-vis the yen and 0.1% against the euro.

Ten-year sovereign debt yields are up 8, 3, and 2 basis points in Britain, Germany and the United States.  The 10-year Japanese JGB has stayed at 0.49%.

The main overnight pieces of economic news involved China where home price inflation slowed further to 2.5% in July from 4.2% in June and year-to-date foreign direct investment (down 0.35%) was negative for the first time since May 2013.  Property prices were higher in July than June in just two of seventy cities.

The seasonally adjusted euro area trade surplus narrowed to a 5-month low of EUR 13.8 billion in June from EUR 15.2 billion in May but exceeded analyst forecasts.  A 0.5% decline in exports was the third drop in four months and contrasted with a 0.5% on-month increase in imports.  The unadjusted first-half surplus of EUR 79.0 billion compared to EUR 71.2 billion a year earlier.  First-half exports grew 0.9% on year versus a 0.1% uptick in imports.

Britain’s Rightmove house price index plunged 2.9% on month in August, the worst result since April 2013.  This cut the 12-month rate of increase to 5.3% from 6.5% in July.

Real GDP in Thailand was 0.4% greater than a year before in the second quarter after posting a 0.6% on-year drop in the first quarter of 2014.  Chilean on-year GDP growth slowed to 1.9% in 2Q from 2.6% in 1Q.

Hong Kong recorded a 3.3% jobless rate last month.  Singapore’s trade surplus narrowed 30.6% on month to SGD 4.09 billion in July.

Czech PPI inflation remained negative in July.  Producer prices firmed 0.3% from June but were 0.1% lower than a year earlier.

The New Zealand service-sector purchasing managers index climbed 3.2 points to a robust 58.4 reading in July.  Australian new motor vehicle sales declined in July.

The U.S. National Association of Home Builders housing market index rose two points to a reading of 55 in August.  This was the third improvement in a row and the best reading since 56 in January.  Readings from February through June had been below 50.  U.S. consumer prices will be released Tuesday, followed by the FOMC minutes due Wednesday, existing home sales on Thursday and the start of the Jackson Hole Central Banking Symposium on Friday.  That day, Fed Chair Yellen gives an impor

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


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