Calmer Conditions than Yesterday

May 27, 2015

Following the Memorial Day closure, the dollar climbed sharply on Tuesday, sending equities lower including a 190-point drop in the DOW.  Whether the Fed hikes the federal funds target on June 17 remains uncertain.  Richmond Fed President Lacker overnight said his vote hasn’t yet been decided and will hinge on data between now and then.

G7 central bankers and finance ministers began a 3-day meeting in Dresden, Germany.

Share prices in the Pacific Rim overnight picked up the risk-off tone, with looses of 1.3% in Indonesia, 1.7% in South Korea, 1.0% in Singapore, 0.8% in Australia, 0.7% in New Zealand, 0.6% in Hong Kong and 0.3% in China.  Japan’s Nikkei closed 0.2% higher in spite of Bank of Japan minutes from April 30 that showed a divided Board regarding views on the likelihood of securing stable 2% inflation a year from now.

European markets have been more stable, too.  Stocks are down 0.2% in Germany but up by 1.3% in Greece, 0.6% in Switzerland, 0.5% in the U.K., 0.7% in Italy, 0.4% in Spain and 0.2% in France.

Dollar/yen’s advance was extended 0.5% further overnight.  But the greenback is unchanged against the yuan, kiwi and sterling and settled back 0.4% against the Swiss franc and 0.1% vis-a-vis the euro.  The IMF no longer believes the yuan is undervalued.  The dollar firmed 0.2% relative to the Australian and Canadian dollars.  The Bank of Canada’s interests rate announcement at 14:00 GMT today is not expected to change the key interest rate.

Among overnight changes in ten-year sovereign debt yields, the Japanese JGB slipped three basis points, the German bund is steady, and the British gilt is three basis points firmer.

West Texas Intermediate oil rebounded 0.4% to $58.25 per barrel.  Comex gold is 0.2% softer at $1,185.90 per ounce.

Japanese small business sentiment recovered this month to a two-month high of 48.1 from a reading in April of 47.4.  The Japanese government did not modify its overall economic assessment this month.

Chinese consumer sentiment, which had dropped 3.1% in April, remained steady in May.  Chinese corporate earnings were 2.6% higher than a year earlier in April.  This was the first on-year increase in seven months.

The Westpac Australian index of leading economic indicators edged 0.1% higher in April after posting a 0.3% drop in March.  Construction completions in Australian fell 2.4% in 1Q, marking their sixth consecutive quarterly contraction.

German consumer confidence improved for an eighth straight month, reaching a 14-year peak of 10.2.   Swedish consumer sentiment jumped 2.0% to a better-than-expected 98.8 reading in May.  Business confidence rose as well in Sweden, and Finnish consumer confidence leaped 4.1 points to a 4-year high of 15.5.  However, French consumer confidence produced a negative surprise, dropping lower in May for the first time in seven months with a reading of 93, same as in March but a point lower than April’s 5-year high.

After a heavy U.S. data release calendar on Tuesday, Wednesday has little to await besides weekly chain store sales.  Yesterday’s reports showed

  • A 0.5% dip in durable goods orders in April but a 1.0% further advance in nondefense orders that also exclude aircraft.  Durables had risen 5.1% in March.
  • A 1.0% rise in the Case-Shiller house price index in March, keeping the 12-month increase at a decent 5.0%.
  • A 4-point rise in the Richmond Fed manufacturing index but a 4.8-point slide in its Dallas Fed countperpart.
  • Stronger-than-forecast consumer confidence, which rose 1.1 points to 95.4 in May.
  • A 6.8% increase in new home sales in April, consistent with the improvement of weather after the winter quarter.
  • A 0.3% rise in the FHFA house price index.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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