Last Day of May Chocked Full of News

May 31, 2017

There’s an official report today that President Trump has decided to pull the United States out of the Paris climate change accord. White House advisers had been split on this issue.

With Britain’s election set for a week from tomorrow, polls reflect a continuing narrowing of the Conservative Party’s lead.

A 2.8% overnight plunge in West Texas Intermediate crude oil to $48.27 per barrel and and globally low sovereign debt yields highlight the day’s market action.

The dollar rose 0.3% against China’s yuan amid higher Chinese short-term rates and rumors that Beijing officials may be supporting the currency in reaction to Moody’s downgrade of China’s credit rating.

The dollar otherwise is trading heavily, with losses of 0.6% against the peso, 0.4% relative to the euro, 0.5% vis-a-vis the Swiss franc, and 0.1% against the pound and yen.

Asian stocks were mixed with increases of 0.8% in Indonesia and 0.2% in China, Singapore and South Korea but drops of 0.6% in Taiwan, 0.4% in Hong Kong and 0.1% in Japan. European equities have strengthened, but the Dow slipped marginally further.

Euroland inflation sank more than analysts were anticipating. An on-year pace of 1.4% in May was the lowest since December and down from 1.9% in April. Core inflation dropped 0.3 percentage points to 0.9%. Service-sector consumer price inflation fell back to 1.3% from 1.8%.

Eurozone unemployment was also lower than forecast at 9.3% in April compared to 10.2% a year earlier.

China’s government-compiled purchasing manager indices for May were published. The manufacturing index stayed at April’s 7-month low of 51.2. The non-manufacturing PMI rebounded 0.5 points to a 2-month high of 54.5.

German retail sales data disappointed, dipping 0.2% in April and posting a January-April on-year advance of only 0.5%. Paradoxically, German unemployment fell another 9K in May and 93K since the start of this year; as a percent of the labor force, joblessness eased to a new low of 5.7%, while employment posted the same robust on-year 1.5% increase as in the first quarter.

Italian CPI inflation dropped a half percentage point to 1.4% in May, while French CPI inflation eased to 0.8% from 1.2% the month before.

Several countries released first-quarter GDP statistics. Portuguese GDP expanded 1.0% on quarter and 2.8% on year; both comparisons showed some acceleration. Polish GDP went up 1.1% on quarter and 4.2% on year. Danish GDP climbed 0.6% on quarter and 2.2% on year, while Belgian GDP increased 0.6% from 4Q and 1.6% from a year earlier. Indian GDP was 7.1% higher than in the first quarter of 2016.

Canadian GDP went up 0.9%, 3.7% at an annualized rate. That was faster than the calendar year growth rates in any of the years from 2011 through 2016. Monthly GDP increased 0.5% in March and was 3.2% greater than in March 2016. Industrial production rose 1.1% on month and 5.3% on year.

British consumer sentiment had a negative reading for a thirteenth straight month, but the minus 5 score was at a 4-month high. In other released U.K. data, shop prices in May were 0.4% lower than a year earlier in May, mortgage approvals dropped to a 7-month low in April.

The UBS-compiled Swiss consumption indicator of 1.48 in April was 0.04 higher and the best reading so far this year, while the ZEW expectations index of financial market sentiment toward that economy rebounded to 30.8 in May after dropping 7.4 points to 22.2 in April. Sentiment was relieved that the far-right had not won the French election.

Released Japanese data showed

  • A robust increase in April industrial production of 4.0% on month and 5.7% on year.
  • Solid on-year growth in motor vehicle output of 16.3% in April.
  • A 0.3-point rise in small business sentiment to a 2-month high of 48.9.
  • A small 1.9% on-year rise in housing starts and a 0.2% downtick in construction orders during April.

New Zealand business confidence improved in May. Australian M3 money and private sector credit increased 7.4% and 4.9% in the year to April.

South Korean retail sales and industrial output in April were 2.8% and 1.7% higher than a year earlier, and the latest reading of business sentiment there was the best since March 2014.

U.S. pending home sales fell 1.3% in April and were 3.3% fewer than a year earlier. The Chicago regional purchasing managers index fell 3.1 points to a 5-month low in May of 55.2.

On the central banking front, investors await the Federal Reserve’s Beige Book of regional trends and the latest monetary policy decision of the Central Bank of Brazil, which is widely expected to cut its interest rate yet again.

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

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