Nato and Opec Meetings Attracting Attention, as Does Weak British GDP Report

May 25, 2017

A row broke out over U.S. leaking of key intelligence from the Manchester bombing investigation between the May and Trump governments just prior to today’s Nato meeting in Brussels. Prime Minister May will speak to President Trump about U.S. leaks, and Britain reportedly has stopped sharing information with U.S. on the matter.

West Texas Intermediate crude oil fell 1.9% to $50.40 per barrel on concern that a reported likely extension of OPEC production cuts through March 2018 may not suffice to support prices. Oil ministers are meeting in Vienna today.

British first-quarter growth was revised down 0.1 percentage point. GDP last quarter only edged 0.2% higher compared to 4Q16 and by 2.0% from a year earlier. The quarterly growth rate was the weakest in four quarters and followed growth of 0.7% in the final quarter of 2016. Government spending and two-way trade flows were weaker than assumed.

The British Bankers Association estimate of 40,750 mortgage approvals in April was close to expectations a tad lower than March’s total.

There have been mixed remarks on the central banking front. Dallas Fed President Kaplan endorsed the need for two more rate hikes in 2017, while ECB President Draghi played down the damage caused by the European Central Bank’s unorthodox policies such as quantitative stimulus and a negative o.4% deposit rate. He asserted that adverse effects from such “limited” and sees no need to modify policy communication at the moment.

The Bank of Korea’s policy interest rate after the latest monetary policy review was left at 1.25% where such has been since a 25-basis point cut in June 2016.

New Zealand Finance Minister Steven Joyce presented a election budget, including higher tax thresholds for middle and low income earners and other family support. The budget, which calls for rising surpluses, is contingent on the government being reelected in September. There was a 9.0% of GDP deficit back in 2011 that’s been transformed into surplus that will rise progressively in the years ahead.

The dollar was mixed overnight, falling 0.4% against the peso, 0.3% relative to the yuan, and 0.1% vis-a-vis the Swiss franc, rising 0.5% against the Australian dollar, 0.4% relative to the kiwi, 0.3% versus the yen and 0.2% on balance against the loonie, and staying unchanged versus the euro and sterling.

Comex gold firmed 0.2%, but industrial metals like copper fell further.

Share prices in the Pacific Rim were well-bid overnight, gaining 1.6% in India, 1.4% in China, Hong Kong and South Korea, 0.4% in Australia and 0.2% in Japan. A few European stock markets mostly from Scandinavia did not open today because of Ascension Day observances. Share prices are up 0.1% in Britain and Germany but down 0.3% in Italy.

According to revised data, Spanish GDP led by business investment climbed 0.8% in the first quarter, up from 0.7% in 4Q16, and posted an on-year advance of 3.0%.

Industrial orders in Italy had risen 5.2% in February but then dropped 4.2% in March due to weak export demand.

Swedish manufacturing confidence fell more than assumed in May, but consumer sentiment improved.

Real GDP in Singapore fell back 1.3% on quarter and eased 0.2 percentage points to a 2.7% year-on-year advance in 1Q.

Hong Kong’s trade deficit narrowed to a smaller-than-forecast HKD 34.1 billion in April from HKD 42.3 billion in March but was 10% wider than a year earlier.

South African PPI inflation declined to 4.6% in April from 5.2% in May.

Still to come: The Kansas City Fed monthly manufacturing index gets released today as do weekly jobless insurance claims. Policymakers at the South African Reserve Bank are reviewing their stance today.

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

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