Investors Continue to Mark Time Ahead of Jackson Hole Symposium

August 24, 2016

Overnight the dollar rose 0.2% against the euro and 0.1% versus the Swiss franc but slipped 0.3% against the kiwi and 0.2% relative to sterling. There’s been no net change vis-a-vis the yen or Aussie dollar.

Share prices rose 0.7% in Singapore, 0.3% in India and 0.6% in Japan but fell 0.7% in Hong Kong and New Zealand, 0.3% in South Korea, 0.2% in Taiwan and 0.1% in China. In Europe, stocks are up 0.8% in Italy, 0.7% in Spain, 0.5% in France, and 0.3% in Germany but 0.2% lower in Britain where the BBA reported the lowest number of mortgage approvals last month since January 2015.

Ten-year Japanese JGB, British gilt and German bund yields are 3, 2, and 1 basis points higher than yesterday.

West Texas Intermediate crude oil slumped 1.7% to $47.27 per barrel. Gold is 0.4% softer at $1,340.90 per ounce.

Revised German GDP data for the second quarter confirm the preliminary estimates that the economy grew 0.4% from 1Q and 1.8% from a year earlier when adjusted for variation in the number of working days. Growth in the second quarter was powered by net exports, which augmented real GDP by 0.6 percentage points. Business investment exerted the main drag in the quarter, and personal consumption grew more slowly than in the three previous quarters.

Japan’s index of leading economic indicators rose to a 7-month high in June according to the revised estimate. The index of coincident economic indicators was revised upward, but still elicited a trend designation of “weakening” from officials.

In the year to July, consumer prices rose 1.6% in Malaysia and 6.0% in South Africa. Those inflation rates in June had been 6.3% and 1.6%. Finnish producer prices fell by a deeper 3.8% in the year to July.

Construction work completed in Australia fell 3.7% last quarter.

Czech consumer confidence and business sentiment each improved during August, lifting overall economic sentiment to a 6-month high.

Iceland’s seven-day central bank deposit rate was lowered by 50 basis points to 5.25%. Such is the first change this year and represents a directional reversal. Central bank rates in Iceland had been increased in 2015 in June, August and November. Officials justified today’s rate drop by an improved inflation outlook and evidence that monetary policy has becoming more effective, thus requiring a lower interest rate level to achieve the desired inflation rate. Officials were non-committal on the likely direction of their next policy change, however.

Markets remain focused on the upcoming central bank symposium in Wyoming at the end of this week. Janet Yellen’s speech on Friday is getting the most attention.

Two U.S. housing indicators will be released today, existing home sales and the FHFA house price index. Weekly oil inventories arrive, too.

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



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