China Situation Better, Greek Situation Still Ominous
July 9, 2015
The Shanghai Composite index of Chinese share prices jumped 5.8%, as officials imposed even more restrictions to prevent big sale orders and short selling in general. Elsewhere in the Pacific Rim, stocks rose 4.5% in Hong Kong but fell 0.7% in Indonesia and Taiwan, 0.5% in New Zealand and Singapore and 0.4% in India. The South Korean Kospi and Japanese Nikkei closed with gains of 0.6% each.
With just four days remaining before the summit of EU leaders, Greece abandoning the euro seems unavoidable. But share prices in Europe recovered 2.7% in Spain, 2.4% in Italy, 2.1% in France, 1.9% in Germany, 1.2% in Switzerland and 1.1% in Britain.
Ten-year sovereign debt yields fell by six basis points in Portugal, three bps in Italy and Spain, and one bp in Japan but rose 3 bps in Britain, Switzerland and Australia. An even larger rise in the U.S. Treasury yield is implied by the futures market.
The dollar shows mixed changes. It’s risen 0.7% against the yen, 0.5% versus the Swiss franc and 0.2% vis-a-vis the euro but fallen 0.3% relative to the Canadian and Australian currencies, 0.2% versus sterling, and 0.1% against the kiwi. The yuan is steady against the dollar.
West Texas Intermediate oil bounced up 0.9% to $52.50 per barrel. Comex gold slid 0.2% in $1,161.80 per ounce.
Minneapolis Federal Reserve President Kocherlakota made predictably dovish remarks.
The Bank of England as expected left its Bank Rate at 0.5% and Asset Purchase Program limit at GBP 375 billion.
The Bank of Korea as expected left its seven-day repo rate at 1.5%. There had been a 25-basis point rate cut at the prior June meeting, as well as in March and twice more in 2014.
Bank Negara Malaysia retained a 3.25% overnight policy interest rate as expected. The rate hasn’t been changed since a 25-basis point hike in July 2014.
Chinese consumer prices were unchanged on month in June and haven’t gone up since February. But the 12-month rate of increase picked up more than forecast to 1.4%, which compares with 1.2% in May, 1.5% in April, 1.4% in February and March, and a government target of 3.0%. For a fortieth straight month, producer prices in China fell on year during June, this time by 4.8%, which is the most since February.
Japanese core domestic machinery orders rose only 0.6% on month in May, least since February, but a 5.6% April-May versus 1Q average level advance is better than officials were expecting. Foreign orders, however, were 12.3% lower in April-May than in 1Q, causing total machinery orders in the latest two reported months to be 3% lower than their 1Q mean.
Quantitative stimulus is barely accelerating Japanese money growth. M2 rose 3.8% on year in June and 2Q, down from 4.1% in May but above 3.5% in 1Q and 3.4% in full-2014.
Machine tool orders in Japan only rose 6.6% in the year to June. This continues a decelerating trend from 33.9% last December through 15.0% in May.
Japanese stock and bond transactions last week generated a net JPY 398 billion capital outflow, down from an outflow of JPY 1.28 trillion in the prior week.
Australian labor market statistics for June showed
- A 6.0% jobless rate, the mid-point of May’s 5.9% and April’s 6.1% but below 6.4% registered last January.
- A 3-month high in the labor participation rate of 64.8% versus 64.7% in May and 64.6% in April.
- Overall jobs growth of 7.3K as full-time positions went up 23.5K but part-time workers contracted 17.2K. On average, employment rose 16.5K per month during the first half of 2015.
Eurozone house prices climbed 0.3% on quarter and 0.9% on year in the first quarter of 2015.
Germany’s EUR 11.1 billion current account surplus was 6.7% smaller in May than a year before, but the year-to-date EUR 87.7 billion surplus was larger than its year-earlier surplus of EUR 77.1 billion. The merchandise trade surplus in May of EUR 19.5 billion exceeded expectations as exports (+1.7% on month) exceeded import growth (0.4%) by a factor of four.
The Royal Institute of British Chartered Surveyors’ house price balance index improved further in June, rising to 40% from 34% in May and 32% in April.
Irish consumer prices in June were 0.1% lower than a year earlier. Dutch and Czech consumer prices in the same 12-month interval recorded increases of 1.0% and 0.1%.
Alcoa opened the U.S. corporate earnings season yesterday, reporting a somewhat lower-than-forecast profit in 2Q.
The cause of yesterday’s 3+ hour stoppage of trading on the New York stock exchange remains a mystery. Described as some kind of technical difficulty but not a case of cyber terrorism, that leaves a wide range of possible explanations. One thing is clear, cyber warfare could produce a similar and more protracted closure. The world is far too reliant on computers, and there benefit is questionable given sub-trend growth in U.S. jobs and labor productivity.
Weekly U.S. jobless insurance claims data are due momentarily. Canada releases housing starts, and Brainard and George of the Federal Reserve will be speaking. Peru’s central bank holds a policy meeting.
Copyright 2015, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Chinese CPI, German current account, Japanese machinery orders
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