Stocks, Bond Yields and Dollar Down But Gold Strengthens Further

February 24, 2017

Investors turned cautious as the third full week of February wound down.

  • The dollar has lost 0.4% against the Aussie dollar, 0.3% relative to the yen and euro and 0.2% vis-a-vis the Swiss franc. The yuan, loonie and sterling are unchanged against the greenback.
  • Share prices fell 1.0% in Hong Kong, 0.7% in Singapore, 0.6% in South Korea, and 0.4% in Australia and Japan. Heavier selling has been seen in Europe where equities have declined 1.4% in France and Germany, 1.2% in Italy, 1.1% in Greece, 0.7% in the U.K. and 0.6% in Spain.
  • Ten-year sovereign debt yields have continued their retreat, dropping four basis points to 1.11% in the U.K., 3 bps to 0.94% in France, 2 bps to 0.21% in Germany and a basis point to 0.06% in Japan.
  • Gold (up 0.5% to $1,257.5 per ounce) and industrial metal prices rose.
  • But West Texas Intermediate crude oil relapsed 0.7% to $54.07, reversing Thursday’s uptick.

The market’s focus is next Tuesday’s scheduled prime time speech by President Trump to the joint houses of Congress. It’s not being characterized as a state of the union address, although he’s already said he inherited a “mess.” What would he have said if elected eight years ago? Nor is the speech a formal federal budget presentation, although it is expected to enumerate executive actions already taken and list his expectations of what Congress should pass to solidify the new direction he seeks. Investors are hoping for details to justify the Trump market rally.

Friday’s been a light day from a data standpoint.

Italian business sentiment printed at a 14-month high of 104.0 in February, up from 103.3 in January and 100.5 in December. Consumer confidence fell 2 points, however, to a 5-month low, while manufacturing sentiment climbed 1.3 points.

French consumer confidence stayed level at a reading of 100 in February. The last two months of 2016 saw readings of 99.

Sweden’s economic tendency index slipped 0.3 points in February, as consumer confidence, manufacturing and services all dipped.

Czech economic sentiment fell 1.4 points to a score of 13.3. Both consumer confidence and business sentiment had lower readings than in January.

The British Bankers Association reported a 1-year high in mortgage approvals of 44,657 in January, up from 43,581 in December. Consumer credit was 6.7% greater than a year earlier.

Spanish PPI inflation accelerated sharply to 7.5% in January, highest since July 2011. Energy was 26.6% higher than a year earlier. Other producer prices showed a benign collective increase of 1.8%.

Greck producer price inflation likewise jumped to 9.7% last month from 5.1% in December.

Between December 2015 and December 2016, industrial production rose 2.1% in Austria and 8.3% in Cyprus. Singaporean industrial output, down 6% on month and up 2.2% on year in January, performed more weakly than forecast.

South Korean consumer sentiment improved 1.1 points to a reading of 94.4 this month. Taiwan’s January jobless rate was 3.84%.

Reserve Bank of Australia Governor Lowe in parliamentary testimony predicted scant change in the central bank interest rate for the time being and a 3% rate of economic growth.

U.S. Treasury Secretary Mnuchin also foresees continuing low U.S. interest rates.

U.S. new home sales and the U. Michigan/Reuters consumer sentiment index will be released today. Canadian consumer prices arrive, too.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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