Pick-Up in Flow of Data Creates New Trading Incentives

August 18, 2016

Wednesday had seen a lull in statistical releases and a commensurate lackluster trading day. Thursday’s been a more interesting day from both vantage points. Released figures include Japanese trade and machine tool orders, Euroland consumer prices, current account and construction output, British retail sales, Australian labor statistics, and Chinese property prices. Investors also are reacting to yesterday’s FOMC minutes, which were not as hawkish as had been assumed in the wake of N.Y. Fed President Dudley’s remarks on Tuesday.

The U.S. dollar settled back 0.9% against sterling, 0.6% relative to the New Zealnad and Australian dollars, 0.4% versus the Swiss franc, 0.3% vis-a-vis the euro, and 0.2% against the Canadian dollar. The yuan and yen are unchanged against their U.S. counterpart.

Japan’s Nikkei closed 1.6% weaker. Share prices also fell 0.5% in Australia and 0.2% in Singapore but rose 1.7% in Indonesia, 0.9% in Hong Kong and 0.5% in New Zealand. Stocks have risen in Europe by 0.8% in Greece, 0.5% in Germany, 0.3% in Spain and Italy, 0.2% in France and 0.1% in Great Britain.

Commodity prices strengthened overnight. Gold has risen 0.5% to $1,355.30 per ounce, and oil is 0.3% firmer at $46.92 per barrel of WTI. Copper climbed more than 1.0%.

Ten-year German bund and British gilt yields are down two and one basis points.  The Japanese JGB edged a basis point higher.

The main data surprise involved British retail sales, which in the wake of the Brexit vote jumped 1.4% in July to post a 12-month increase of 5.9%. Excluding motor fuel, sales volume climbed 1.5% on month and 5.4% on year. This surprise lifted sterling.

Japan posted a JPY 318 billion seasonally adjusted trade surplus in July, similar to the surplus of JPY 337 billion the month before, as exports and imports fell 1.8% and 1.6% on month. The unadjusted trade balance was in surplus at JPY 514 billion, swinging from a JPY 261 billion deficit in July 2015 as imports plunged 24.7% and exports dropped 14.0%.

The on-year drop in Japanese machine tool orders in July was revised to 19.5% from 19.6% estimated initially. July saw the smallest on-year decrease in six months.

Harmonized consumer prices in the euro area fell 0.6% on month in July.  The 12-month increases of 0.2% overall and 0.9% in core items matched the flash estimates. Consumer prices had also risen 0.2% in the previous year to July 2015 and had been associated with core inflation of 1.0%.

Construction output in Euroland was unchanged for a second straight month in June and posted a 1.2% decline between the first and second quarters on average. In January, construction has been 5.2% greater than a year earlier, but the on-year rate of increase had fallen to 0.6% in June.  2Q output on average was 0.1% below its year-earlier level.

Euroland’s EUR 28.2 billion current account surplus in June was the smallest since February. In the twelve months through June, the non-adjusted surplus of EUR 354.4 billion was 18% wider than a year earlier and equaled 3.4% of Ezone GDP.

Fewer Chinese cities (51 of 70) experienced a higher rate of on-year property price inflation in July than in June (55) or May (65) even though property price inflation rose from 7.3% to 7.9% in the month.

Australian unemployment dipped back to 5.7% in July, the level seen in both April and May, after ticking up to 5.8% in June. Jobs growth accelerated to 26.2K last month on the strength of a 71.6K leap in part-time workers. Australia’s labor participation rate held steady at 64.9% for the third time in the past four months.

Filipino GDP growth of 7.0% in 2Q16 was the highest in three years.

French unemployment fell 0.3 percentage points last quarter to 9.6%, lowest since the third quarter of 2012.

Italy’s June current account surplus of EUR 7.19 billion was more than twice the size of May’s surplus.

Japanese stock and bond transactions last week generated a net JPY 869 billion capital outflow last week after an outflow of JPY 1.361 trillion in the prior week of August 5.

The U.S. releases the index of leading economic indicators and weekly jobless insurance claims today. ECB minutes known as the Account arrive too.  Fed Presidents Dudley of N.Y. and Williams of the San Francisco District speak publicly today.

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

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