Lessening Risk Perceived of a Fed Rate Hike in 2016

July 28, 2016

The FOMC statement was more ambivalent than many analysts had expected, even though labor market conditions were upgraded overall downside growth risks were said to have diminished.  The dollar in response shows overnight losses of 0.7% against the yen and Swiss franc, 0.5% against the Australian dollar and euro, 0.3% versus the kiwi, and 0.2% relative to the loonie and yuan.  Most emerging market currencies are firmer.

Japan’s Nikkei fell 1.1%.  Stocks also fell 0.8% in Singapore and by 0.2% in Hong Kong and South Korea. Losses in Europe so far amount to 2.2% in Greece, 1.7% in Spain, 1.6% in Italy, 1.1% in Switzerland but only 0.3% in France, 0.2% in the U.K. and 0.1% in Germany.  The DOW opened lower, too.

Last night’s DNC speeches from President Obama, VP nominee Kaine, and Michael Bloomberg were well received.

Ten-year sovereign debt yields are up three basis points in the United States, two basis points in Japan and a single basis point in Germany.  The Japanese JGB is steady.

Gold rose 1.1% to $1,348.50 per ounce.  WTI oil is a bit below $42/barrel and down 0.2% on balance.  Industrial metals were again well bid.

The National Bank of Ukraine cut its policy interest rate by a further full percentage point to 15.5%, bringing the cumulative reduction to 650 basis points so far this year and 14.5 percentage points since last August.

Euroland economic sentiment edged up 0.2 points in July to 104.6, matching May’s 4-month high and surpassing street expectations.  The impact of the Brexit vote has been less than feared.  Industrial sentiment hit a 6-month high, and sentiment improved in retail, services, and construction, too.  Consumer confidence was lower than in June but not more so than indicated by that component’s preliminary estimate.

Reflecting higher food costs for the most part, German CPI inflation accelerated 0.1 percentage point in July to a six-month high of 0.4% according to the preliminary estimate based on six reporting states.

German unemployment fell more sharply than expected in July, with a drop of 7K.  Employment posted on-year growth of 1.2% in both June and 2Q.

Spain’s 2.0% jobless rate in the second quarter was the lowest since 2011.

Belgian CPI inflation of 2.28% in July was the most 45 months.

Swedish joblessness in June stood at 6.8%.  Swedish retail sales fell 0.6% in June, trimming the 12-month increase to 3.2% from 5.0% posted the month before.

Irish retail sales between mid-2015 and mid-2016 advanced 3.4% in value and 5.3% on a volume basis.

The British Nationwide house price index recorded a 5.2% 12-month increase in July, most since 5.7% in March.

Austria’s manufacturing purchasing managers index slipped back to 53.4 in July following readings of 54.5 in June and 52.0 in May.

Italian wage earnings rose merely 0.7% in the year to June.  Cypriot industrial production was 5.5% greater in May than a year earlier.  Portuguese consumer confidence fell to -13.0 in July after readings of -11.9 in May and -12.6 in June.

Japanese stock and bond transactions generated an JPY 822 billion net outflow last week, down from an outflow of 1.843 trillion yen in the previous week.  Japan reports a slew of economic data tomorrow, and the central bank there is likely to announce an increase in its asset buying.

South African producer price inflation picked up to 6.8% in June from 6.5% in May, while that economy’s jobless rate slipped from 26.7% in 1Q to 26.6% in 2Q but still exceeded the year-earlier level of 25.0%.

New U.S. jobless insurance claims rose to 266K last week, but the 4-week average of 256.5K was below the 266.75K mean seen in the prior four weeks to June 25.  The KC monthly manufacturing survey gets released today.

Canadian average weekly earnings rose 0.9% in the year to May, up from just 0.2% in April.

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




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