Dollar, Bond Yields, and Japanese Nikkei Slip

December 29, 2016

The dollar fell overnight by a further 0.5% against the yen, 0.4% relative to the euro, Aussie dollar and kiwi, 0.3% versus the loonie, peso and Swiss franc, 0.2% against sterling and 0.1% relative to the yuan.

The Japanese Nikkei dropped 237 points (1.3%). Equities in Europe are down 0.3% in Spain and the U.K., 0.2% in Germany, and 0.1% in France and Greece.

Aside from the Nikkei’s sharp drop, other markets in the Pacific Rim went up 1.8% in Indonesia and 0.9% in India but fell 0.5% in Taiwan and 0.2% in China.

Among 10-year sovereign debt instruments, yields fell five basis points in the U.K, 2 bps in Japan and a basis point in Germany. Futures trading indicates a 3-basis point fall in the 10-year Treasury yield, which has moved under 2.50% compared to 2.60% at mid-December.

In commodities, gold at $1147 per ounce continued this week’s firming trend, bringing the cumulative bounce from a 10-month low to 1.4%. Oil dipped 0.2%, extending its losing streak, but copper advanced.

The released summary of the Bank of Japan’s December Board meeting, which pre-dates the formal minutes, was more bullish than anticipated, suggesting a lessening readiness to ease additionally and perhaps some regrets over setting the 10-year JGB target yield as low as zero. It’s been trading above that level. This report helped boost the yen to a 2-week high against the dollar.

Britain’s Nationwide house price index jumped 0.8% in December, most in over 10 months and was 4.5% higher than a year earlier, the same 12-month advance as in December 2015.

An acceleration of on-year Euroland M1 money growth from 8.0% in October to 8.7% in November was responsible for a pickup in M3 to 4.8% from 4.4%. But growth in private loans stayed at October’s low 2.2%.

With yearend holiday closures approaching, the Russian and Austrian December manufacturing purchasing manager surveys were releases, and each showed the fastest expansion of activity in at least 5.5 years.

  • Russia’s PMI reading of 53.7 after 55.4 and 52.0 back in May was the highest since March 2011.
  • Austria’s PMI rose 1.9 points to 56.3, best since April 2011.

Sweden’s recorded a SEK 0.4 billion seasonally adjusted trade surplus in November, but the year-to-date unadjusted balance, a deficit of SEK 7.4 billion compared unfavorably with a surplus of SEK 13.7 billion accrued in January-November of 2015.

Hong Kong’s trade deficit narrowed slightly to HKD 34.05 billion in November from HKD 37.22 billion the month before. Exports and imports both recovered.

Between November 2015 and last month, industrial production and retail sales in South Korea increased by 4.8% and 3.2%, respectively, but the latest reading for that economy’s business sentiment dipped a tad.

Producer prices in Singapore fell 2.3% on year in November, which was somewhat less than the on-year drop in October.

Brazilian unemployment rose a tenth of a percentage point to 11.9% last month.

Norwegian retail sales rose 0.2% on month but just 0.4% on year in November.

Weekly U.S. jobless claims will be reported on this penultimate trading day of 2016.

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


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