Continuing Reaction to the Fed’s Message from Jackson Hole

August 29, 2016

Investors are much more inclined to think a federal funds rate hike likely next month than before the slew of comments made at the Jackson Hole conference. In reaction, stocks and commodities are lower, and the dollar is mostly firmer.

Dollar overnight gains amount to 0.3% against the yen, 0.2% versus sterling and the yuan and 0.1% relative to the loonie and Aussie dollar. The U.S. currency is unchanged against the Swiss franc, 0.1% softer vis-a-vis the euro and down 0.2% against the kiwi.

Japan’s Nikkei rose 2.3% largely in response to Bank of Japan Governor Kuroda’s reiterated promise that stimulus will be augmented if necessary. His comment comes on the heel of CPI data showing deepening Japanese deflation.

Other stock markets around the Pacific Basin fell 1.3% in Indonesia, 1.0% in Singapore, 0.8% in Australia, 0.3% in South Korea, 0.2% in Taiwan, and 0.1% in Hong Kong.

British markets are closed for the late summer bank holiday. Elsewhere in Europe thus far today, share prices have dropped 1.3% in Italy, 1.2% in Greece, 0.9% in France, 0.8% in Spain, and 0.7% in Germany.

West Texas Intermediate crude oil slumped 1.5% to $46.93 per barrel. Gold is 0.3% softer at $1,321.80 per ounce.

The 10-year German bund and Japanese JGB yields are two and one basis points less negative than just before the weekend.

It’s been a typically light summer Monday from a data release point of view so far, but still to come are U.S. personal income and spending, the U.S. PCE price deflator, and the Dallas Fed manufacturing index.

Producer prices in Singapore recorded a larger on-year decline of 9.1% in July. Hong Kong retail sales were 7.7% lower in July than a year earlier and posted a 10.1% on-year decline in January-July.

Australian new home sales reversed June’s 8.2% increase by falling 9.7% a month later.

Italian consumer and business confidence weakened in August. Consumer sentiment dropped 2.0 points to a 13-month low of 109.2, while manufacturing sentiment sank 1.8 points to an 18-month low of 101.1.

Sweden’s SEK 0.5 billion trade surplus in July was very similar to the year-earlier surplus of SEK 0.4 billion, but that tiny change masks a 4.1% slide in exports. The year-to-July surplus of SEK 4.5 billion was significantly smaller than its year-earlier total of SEK 20.5 billion.

Swedish retail sales fell 0.9% in July after dropping 0.7% in June. Irish retail sales, in contrast, were 6.3% higher in July than a year before.

Greek GDP growth last quarter was revised downward to 0.2% from 1Q and negative 0.4% from a year earlier.

Icelandic CPI inflation of 0.9% in August represents an 18-month low.

The Bank of Israel will announce its monthly interest rate decision today.

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

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