Much to Ponder This Friday

April 21, 2017

Many of the themes affecting markets of late had new developments this day.

The threat of trade wars is one of them. Preliminary purchasing manager survey results for April reported by Markit Economics reflect the beneficial impact in Europe of the euro’s softer tone. Euroland’s composite, manufacturing, and service-sector indices each climbed to a six-year high, with new export orders growing at their quickest pace since April 2011. The composite Ezone PMI reading was at a robust 56.7 versus 52.6 last September. The U.S. composite PMI, in contrast, slipped another 0.3 points to 52.7, a 7-month low. The U.S. services PMI, which had scored a 14-month high in January, also fell to a 7-month low in the most recent month.

There has been more evidence that the Brexit happening is finally exerting the predicted negative impact on the British economy. Retail sales volume in the U.K. slumped 1.4% in the first quarter of 2017, turning around a 0.8% increase in the final quarter of 2016, and this was the biggest quarterly drop since early 2010. In March alone, sales slumped 1.8%, which cut the on-year increase more than in half.

An already uncertain outcome in the first round of French Presidential elections this Sunday was made even more so after an Islamist radical shot and killed a policeman in France. U.S. President Trump didn’t let the opportunity pass, tweeting that it would have a big impact on voting. Both the terrorists and he seek an overhaul in the administrative structure of government of the western democracies.

As energy goes, so goes inflation. Canadian CPI inflation fell to 1.6% in March from 2.0% in February and 2.1% in January. For a second straight month, seasonally adjusted consumer prices fell from the prior month’s level. The energy component declined 0.9% in March, cutting the 12-month increase of that component to 8.5% from 12.3%.

Today begins the spring meetings of the IMF and World Bank in Washington, which will run through Sunday. These events usually generate potential market-moving rhetoric.

Japans manufacturing PMI rose 0.4 points to a 2-month high of 52.8. Japan’s tertiary index that measures service sector activity rose 0.2% in February, reversing January’s drop but leaving the average during the first two months of 2017 0.1% below the 4Q16 mean and down 0.4% on year.

Euroland’s EUR 37.9 billion current account surplus in February was the biggest monthly surplus ever recorded. The surplus over the past 12 reported months equaled a hefty 3.4% of GDP.

Consumer confidence in New Zealand fell 2.8% in April after a 1.7% slide in March. In Belgium, consumer sentiment was unchanged this month.

The dollar strengthened 0.3% against the currencies of America’s two neighbors, Mexico and Canada, but fell overnight by 0.2% against the euro and yen and by 0.1% relative to sterling, the Swiss franc, and the kiwi.

Japan’s Nikkei recovered 1.0%. Other stock markets are little changed today.

The 10-year British gilt yield fell 2 basis points, while its German and Japanese counterparts are unchanged.

WTI oil fell 0.5% overnight, and gold slid 0.1%. Copper also fell.

U.S. existing home sales more than reversed a 3.9% February decline by climbing 4.4% in March.

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


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