Concerns from Several Places
May 30, 2017
Markets in China and Hong Kong remain shut for the Dragon Boat Festival, but British and U.S. markets reopened following 3-day holiday weekends.
European political uncertainty is one theme in early Tuesday trading. The outcome of the British election on June 8 is not assured, since opinion polls show a narrowing lead for Prime Minister May’s Conservative Party. There’s been talk in Italy about holding it’s election in the early autumn, which would be sooner than assumed up to now. Unfinished Greek debt talks constitute a political and economic uncertainty, and investors keep wondering if European politicians will show the cohesion to unite for their common good against a provocative U.S. President Trump.
European data released today highlight subdued inflation and some second thoughts about the economic outlook there.
- None of the six reporting German states experienced a monthly rise in consumer prices during May, according to preliminary data, ensuring a decline in the overall economy’s on-year rate of inflation.
- German import prices dipped 0.1% in April on top of a 0.5% monthly decline in March. The 6.1% rise is down from a 7.4% on-year advance in February.
- Euroland economic sentiment settled back 0.5 points to a two-month low of 109.2 in May. The setback was concentrated in retail and services.
- Swedish GDP expanded at a three-quarter low of 0.4% last quarter due to a drag from net foreign demand mostly.
- Spanish CPI inflation fell to 1.9% in May from 2.6% in April.
- Switzerland’s index of leading economic indicators sank 4.3 points to a reading of 101.6 this month from 106.3 in April and 107.2 in March.
- The 1.2% on-year drop in Portuguese industrial production in April was the weakest 12-month rate of change in a half year. Consumer confidence rebounded from April’s -1.8 reading but remain low at 0.1 in May.
- ECB President Draghi gave a dovish testimony before the EU Parliament, defending the continuing need for a very accommodative monetary policy stance.
- Dutch producer confidence in May was 2.2 points below April’s 110-month high of 8.3.
Share prices in Europe have fallen thus far today by 0.8% in France, 0.5% in the U.K., 0.4% in Switzerland and Spain, 0.3% in Italy and 0.2% in Germany. Japan’s Nikkei closed unchanged, and equities lost some modest ground in South Korea, Indonesia and Singapore.
Commodity prices weakened. WTI crude oil is 0.7% lower at $49.43 per barrel, and gold and copper have dropped 0.4%.
The 10-year Japanese JGB yield of 0.03% and German bund of 0.30% remain low, and their U.S. Treasury counterpart in futures trading dipped a basis point to 2.23%.
The dollar had depreciated 0.3% against the yen and 0.1% relative to the euro, Aussie currency, kiwi and sterling.
In reported Japanese statistics,
- The unemployment rate was at 2.8% for a third straight month in April.
- Employment growth accelerated to 1.2% from 1.1% the month before and 0.5% in February, and the job offers to applicants ratio advanced by 0.03 points to 1.48.
- Japanese real household spending stayed depressed, rising just 0.5% on month and falling 1.4% on year. The monthly rebound from a 2% decline in March was less than half market expectations. Workers’ real disposable income posted a 1.5% on-year decline in April.
- Retail sales did better, climbing 1.4% on month and 3.2% on year.
Building permits in the year to April sank 17.2% in Australia but rose 8.3% in New Zealand, which was a 13-year high.
French real GDP grew 0.4% on quarter and 1.0% on year last quarter. Net exports exerted a 0.7 percentage point drag on the quarterly French growth rate. Previously, GDP had increased 1.0% in 2015 and 1.1% in 2016.
After setting a 6-year high in April of 58.1, Austria’s manufacturing purchasing managers index dipped only 0.1 to 58.0 in May.
Italian PPI inflation accelerated 0.7 percentage points to 3.7% in April in spite of only a 0.1% month-on-month rise in producer prices.
French consumer confidence increased 2 points to 102 in May following three readings of 100 in a row. This west the best score since August 2007. French consumer spending rose 0.5% in April versus street expectations of a 0.8% increase.
In South Africa, M3 money growth slowed to a 12-month increase of 5.33% in April. Such began 2017 with a 7.9% advance reported in January. Private sector credit expansion accelerated to 5.9% from 5.0%. The rand fell almost 1% overnight after a failed in-party effort to replace the corrupt President Zuma.
The U.S. monthly personal income and spending results in April were near expectations. Both posted monthly advances of 0.4%. The on-year PCE price deflator and core PCE deflator rates decelerated to 1.7% and 1.5% in April from 1.9% and 1.6% in March.
The Case Shiller house price index in 20 U.S. metropolitan areas went up 0.9% on month in March, maintaining a 5.9% on-year rate of increase.
Canada’s current account deficit widened 19.3% on quarter to C$ 14.05 billion in 1Q17. Canadian PPI inflation accelerated to 6.3% in April from 5.1% in March.
Still to come: Dallas Fed manufacturing index and the Conference Board’s measure of U.S. consumer confidence.
Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Canadian current account, Ezone economic sentiment, French GDP, Japanese unemployment and real household spending