Dollar Buoyed by Strong U.S. Durable Goods Orders

August 26, 2015

U.S. durable goods orders, which had been projected flat or slightly lower, instead rose 2.0% in July on top of a 4.1% June advance.  Demand for non-defense, non-aircraft durables climbed 2.2% last month after a 1.4% increase in June.  A separate report revealed a 0.2% uptick last week in U.S. mortgage applications but a 3-basis point dip in the 30-year fixed mortgage rate to 4.08%.

The dollar recovered 1.2% against the euro overnight while also gaining 0.8% relative to the yen and Swiss franc and 0.7% versus sterling.  The yuan, Aussie dollar, and kiwi are unchanged against the dollar, and the loonie is 0.3% firmer.

Like Tuesday, the DOW opened significantly higher.  Tuesday’s early rally fizzled, and U.S. stocks closed substantially lower on the day amid continuing worries about China.

Japan’s Nikkei closed 3.2% higher today, and the South Korean market also gained more than 2.5%.  But other equity bourses in the Pacific Rim closed down 1.3% in China, 1.1% in Hong Kong, 1.2% in India, 0.8% in New Zealand, and 0.5% in Singapore.  Stocks in Europe are down 0.5% in Switzerland and 0.1% in both Spain and Britain but up by 0.8% in Greece, 0.5% in Italy and 0.1% in France.  The German Dax is steady.

Ten-year sovereign debt yields have risen 8 basis points in the U.S., 3 bps in Canada, and 4 bps in the U.K., but the German bund is a basis point lower.

Comex gold is 1.3% weaker at $1,125.92 per troy ounce.  The price of West Texas Intermediate crude oil recovered 0.7% to $39.59 per barrel.

Real GDP in the OECD group of advanced economies climbed 0.4% last quarter, down from a 0.5% first-quarter rise. Year-over-year growth of 2.3% in the United States was less than the 2.6% pace in the prior year to the second quarter of 2014 (2Q14).  On-year British growth slowed to 2.6% in 2Q15 from 3.0% in 2Q14, but there was an acceleration of growth in the eurozone from 0.8% in the year to 2Q14 to 1.2% last quarter and, likewise, in Japan from -0.5% in 2Q14 to +0.7% in 2Q15.

Construction in Australia advanced 1.6% last quarter but was still 3.3% lower than a year earlier.  Reserve Bank of Australia Governor Stevens delivered a speech extolling needed labor market and tax reforms as the way to increase potential GDP growth, rather than tinkering with fiscal policy or monetary policy.  The Westpac consumer sentiment index for Australia improved to a reading of 116.3 this month from 114.5 in July.

New Zealand posted a larger NZD 649 million trade deficit in July versus NZD 194 million in June.  Over the twelve months through July, the deficit was NZD 2.69 billion compared to a surplus of NZD 1.034 billion a year earlier.

The Confederation of British Industries’ monthly distributive trades index rose 3 points to +24 in August instead of dipping around 3 points as analysts were forecasting.  The British Bankers Association estimates new mortgage borrowing in July at 46.03K, a 17-month high, and mortgage refinancing at a 47-month peak of 24.4K.

Sweden’s economic tendency index climbed 1.4 points to 104.6 in August, which was higher than forecast.  Industrial sentiment and consumer confidence both improved.  Sweden also released trade data, showing a smaller SEK 0.3 billion surplus in July versus SEK 7.7 billion in June and SEK 1.3 billion in July 2014.  The SEK 24.3 billion year-to-date surplus was 55% wider than a year earlier.

The UBS Swiss consumption indicator climbed to a three-month high of 1.64 in July from 1.61 in June.

Norway’s seasonally adjusted jobless rate of 4.5% in May-July was 1.2 percentage points greater than a year earlier. Finnish retail sales slid 0.3% in the year to July despite a 0.9% volume increase.

Japanese corporate service prices rose 0.2% on month and 0.6% on year in July, accelerating form a 0.4% 12-month increase in June.

Industrial output in Singapore sank 6.1% in the year to July.  South Korean consumer confidence rose 3 points to a score of 102 in August after readings of 99 in both June and July.

Brazilian PPI inflation accelerated marginally to 7.62% last month.

New York Fed President Dudley in a prepared speech on the New York regional economy spoke of improving trends and did not address matters of monetary policy or recent financial market volatility.  A question-and-answer period is to follow, however.

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


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