Many Factors for Investors to Digest

June 18, 2015

After the Fed’s decision and press conference, the dollar and sovereign debt yields fell, while share prices and commodities rose. 

The dollar lost further ground overnight, dropping 1.0% against the Australian dollar, 0.7% versus the yen, 0.6% vis-a-vis the loonie, euro and Swissie, and 0.5% relative to sterling.  Against the pattern, the dollar also rose 0.6% against the kiwi, as New Zealand GDP data disappointed.

Chinese share prices plunged 4.1% overnight amid mixed news from that economy that saw foreign direct investment post a much smaller 7.8% on-year rise in May after 10.5% in April but property prices edge upward on month for the first time in thirteen month.  Such rose 0.2% from April and posted a smaller 5.7% on-year decline.

In other stock markets around the Pacific Rim, equities fell 1.3% in Australia, 0.7% in Hong Kong, 0.6% in New Zealand, 1.1% in japan, and 0.8% in Singapore.

Greece continues to edge closer to a default soon after the end of this month, and abandonment of the euro may then be unavoidable.  Share prices in Europe tumbled 2.6% in Greece and also have so far fallen 0.9% in Switzerland, 0.5% in France, 0.4% in Spain, 3.0% in Germany, and 0.1% in the U.K. and Italy.

Ten-year Treasury yields are seen in futures falling another four basis points to 2.28%.  There have been sovereign debt yield declines of seven basis points in the U.K., four bps in Germany and three bps in Japan.

Comex gold and WTI crude oil are trading 0.9% and 1.2% higher at $1,195.92 per ounce and $60.64 per barrel.

Three central bank meetings today resulted in the following actions:

  1. The Bank of Norway cut its deposit rate by 25 basis points to a record low of 1.0% in an expected move.
  2. The Swiss National Bank retained a 3-month Libor target of -1.25%/-0.25%, with a sight deposit point of -0.75%.  Officials promise not to tighten throughout their target time horizon to 1Q18.  These have been the levels since January 15.  CPI inflation is projected at -1.0% this year, -0.4% in 2016, and 0.3% in 2017.  The SNB will stay active in the foreign exchange market but no longer has a target for the franc.
  3. Bank Indonesia’s BI rate was kept at 7.5%, its level since an unexpected cut of 25 basis points this past February.

Investors await some key U.S. data releases:  consumer prices, the quarterly current account, weekly jobless insurance claims, and the monthly Philly Fed manufacturing index and Conference Board index of leading economic indicators.

In other data already out,

  • Eurozone labor cost inflation jumped to 2.2% in the first quarter from 1.2% in 4Q14 and 0.7% in the first quarter of 2014.
  • British retail sales in May rose 0.2% on month and 4.6% on year (4.4% excluding automotive fuel).  These gains were smaller than in April but beat forecasts.
  • Real GDP growth in New Zealand slowed to 0.2% on quarter in 1Q, down from 0.7% in 4Q14 and 1.0% in 3Q14, because of weak business investment.
  • Japanese stock and bond transactions generated a JPY 1.005 trillion net capital outflow last week versus JPY 707 billion the week before.
  • The ECB’s latest targeted LTRO amounted to a greater-than-forecast EUR 73.8 billion but was about 25% smaller than the previous one.
  • Japanese labor cash earnings recorded a smaller 0.7% on-year rise in April versus 0.9% in March.
  • The Swiss trade surplus widened 29% in May to CHF 3.433 billion on 5.4% growth in exports together with a 3% contraction of imports.

Also, wholesale sales in South Africa fell 5.7% in the year to April.  Dutch unemployment dipped 0.1 percentage point to 8.9% in May, while Dutch consumer sentiment improved four points to a reading in June of +6, best since August 2007.  Hong Kong’s jobless rate stayed at 3.2% in May, and Portuguese producer prices fell be a smaller 1.7% in the year to May while rising 0.7% on month.

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

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