Investors Less Anxious

July 7, 2016

Investor around the world have grown more accustomed to the prospect of the U.K. leaving the EU.

Share prices in the Pacific Rim rose 1.2% in Hong Kong, 1.1% in South Korea and 0.8% in Taiwan but slipped 0.7% in Japan.  In Europe, stocks have risen by 1.4% in Britain, 1.3% in France, 1.1% in Spain and 0.8% in Germany.  U.S. equities opened marginally higher, too.

Among 10 year sovereign debt instruments, yields have climbed today by four basis points in the U.S. and Canada, 3 bps in the U.K., and 2 bps in Germany and France.  The Japanese JGB slid a basis points to -0.29%, however.

A 1.2% increase in West Texas Intermediate crude oil to $48.02 per barrel is one cause of the more comfortable mood.  Comex gold is 0.5% softer at $1,360.00 per ounce.

A mixed dollar shows overnight losses of 0.5% against sterling and 0.3% relative to the yen but gains of 0.3% versus the loonie and 0.1% vis-a-vis the Swiss franc and Aussie dollar.

The biggest major currency move today involves the New Zealand dollar, which advanced 1.5% against its counterpart in response to remarks by RBNZ Deputy Governor Spencer suggesting that interest rates there are unlikely to be cut next month.

In other central banking news,

  • Bank of Japan Governor Kuroda, speaking ahead of the quarterly branch managers meeting, reaffirmed his confidence that Japanese growth remains on a moderate uptrend and that the current policy stance will in time help lift inflation to the central bank’s goal of 2%.
  • ECB President Draghi called Slovenia’s taking of some ECB documents unlawful.
  • The National Bank of Serbia’s policy interest rate was sliced to 4.0% from 4.25%.  A previous 25-bp reduction this year was engineered in February, and before that there had been seven 50-bp reductions spaced between March and October of last year.

German industrial production, which had been expected to be more or less flat in May, instead fell by 1.3%, resulting in a 12-month 0.4% rate of decline.  A 3.9% plunge in capital goods dominated the May figures and left the April-May average level 1.6% lower than the first-quarter mean.

British industrial production fell 0.5% in May but managed to rise 1.9% on average between December-February and March-May.  Output increased 1.4% between May 2015 and May 2016.

The Halifax measure of British house prices advanced 1.3% on month and 8.4% on year in June.  The on-year pace was down from 9.7% in the year to May and the lowest 12-month increase in at least 10 months.

France’s current account deficit narrowed sharply to 300 million euros in May from EUR 2.1 billion in April.

Swiss consumer price inflation held steady at negative 0.4% last month.

Norwegian industrial production in May was 0.6% weaker than a year earlier, while Danish industrial output recorded an 8.4% increase.

In the year to June, consumer prices fell 2.2% in Cyprus and were unchanged in The Netherlands.

Japan’s index of leading economic indicators was unchanged in May from April.  The trend in the index of coincident economic indicators has been described as “weakening” for the past year.  Japanese stock and bond transactions generated a 280 billion yen net capital outflow last week compared to a net inflow of JPY 1.753 trillion in the prior week.  Japanese international reserves rose $11.4 billion in June after dropping $8.5 billion in May.  The level at mid-2016 was $1,265 trillion.

Australia’s construction PMI jumped 6.5 points to a 10-month high of 53.2 in June.

Lebanon’s private PMI slipped 0.4 points to a 2-month low of 44.4.  The second quarter’s average level was the lowest for any quarter in the 3-year-long data series.

In U.S. data reported today,

  • ADP’s estimate of private jobs growth in June was 172K, which is a touch higher than street expectations but similar to the prior month.
  • Weekly new jobless insurance claims fell 16K to just 254K.  The 4-week average of 264-3/4K is very close to the previous five successive 4-week periods stretching back to February and strong evidence that the labor market continues to absorb slack.

Canadian building permits fell 1.9% on month and 0.3% on year in May.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.


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