A Day Potentially Fraught with Major Developments

June 8, 2017

First up is ECB President Mario Draghi’s press conference. The Governing Council didn’t change interest rates. No surprise there. But new macro-forecasts will be unveiled, and there are risks that the growth outlook will be made brighter but also that projected inflation may be lowered.

Next comes former FBI Director Comey’s testimony before the Senate Intelligence Committee that begins at 14:00 GMT (10:00 EDT). Comey’s been a man of many surprises and a penchant for dramatic timing, so here’s his chance to reveal all.

Finally, Britain is holding parliamentary elections today. Polls close at 22:00 local time (21:00 GMT and 17:00 EDT). Prime Minister May called a snap election just two years after the last one with the intent to strengthen her mandate for the hard Brexit negotiations ahead. She’s proven a weak campaigner, running away from engaging her opponent in a debate, and the Conservatives initial status as a prohibitive favorite has seen the lead badly depleted in successive opinion polls. It now seems possible that the party may have to rule in coalition with others.

Ahead of this trio of events, markets have marked time with movements relatively muted.

  • The dollar rose overnight by 0.2% against the euro, yen, Swiss franc and Aussie dollar, and it’s edged 0.1% higher relaitve to the loonie and sterling. The kiwi is up 0.2%, and the yuan and peso are steady against the U.S. currency.
  • Ten-year sovereign debt yields rose 3 basis points in the U.K., 2 bps in Japan and a basis point in German. A rise in the 10-year Treasury futures yield has also occurred.
  • Gold and oil prices are down by 0.5% and 0.3%, but industrial metals rose.
  • Stocks in the Pacific Rim are mostly up modestly, with gains of 0.4% in Hong Kong, 0.3% in China, and 0.2% in Australia, Taiwan and South Korea. However, Japan’s Nikkei fell 0.4% after news that estimated first-quarter Japanese GDP growth has been halved to 1.0% at an annualized rate.
  • Stocks in Europe have so far risen 1.0% in Spain, 1.6% in Italy, 0.5% in Germany and Greece and 0.4% in France but are down 0.1% in Britain as voters there continue to cast their ballots.

Revised Euroland GDP growth was also reported and now shows a quarterly non-annualized advance of 0.6% instead of 0.5% as indicated a month ago. On-year growth was revised up 0.2 percentage points to 1.9%.

China’s trade surplus in May turned out to be smaller than forecast but still hefty at $40.81. On-year growth in exports of 8.7% and especially imports of 14.8% were both greater than expected.

Besides the aforementioned revised Japanese GDP figures, other data from that country were released. Six-tenths of the 1.0% rise in GDP was ascribed to personal consumption. Net Exports enhanced GDP by 0.6 percentage points as well, but that impact was neutralized by an equal drag from inventories. Non-residential investment growth was revised sharply lower.

  • The economy watchers index increased 0.5 points to a 3-month high of 48.6, and prospects in this gauge of the service sector brightened as well.
  • Japan’s current account surplus widened. The unadjusted total, a surplus of JPY 1.952 trillion was 7.5% greater in April than a year earlier, and the seasonally adjusted surplus rose to JPY 1.807 trillion from JPY 1.731 trillion in the prior month.
  • Japanese bankruptcies, which had posted a 2.2% on-year dip in April, were 19.5% greater in May than a year before.
  • On-year growth in bank lending accelerated to 3.2% from 3.0% in March, 2.8% in the first quarter and 2.5% in the final quarter of 2016.
  • Stock and bond transactions last week generated a net capital inflow of 934 billion yen versus an outflow of 816 billion yen the week before.

German industrial production rose 0.8% in April and was 2.9% greater than a year earlier. The rise was paced by energy and intermediate manufactured goods.

Australia’s trade surplus narrowed sharply to A$ 555 million in April from A$ 3.17 billion in March and A$ 3.74 billion in February.

The British Royal Institute of Chartered Surveyors housing price index fell back to a reading of 17% in May after three months at 22% in a row.

Swiss unemployment remained at 3.2% in seasonally adjusted terms. Greek unemployment slipped to 22.5% in March.

After reporting a lower-than-expected French manufacturing business sentiment score of 97 in May from 99 in April, officials at the Bank of France lowered their projected second-quarter growth rate by 0.1 percentage point to 0.2%. France had a EUR 3.1 billion current account deficit in April versus shortfalls of EUR 2.1 billion in March and EUR 2.4 billion in April 2016.

The National Bank of Serbia’s policy interest rate was kept at 4.0%. It’s last change came in July 2016, a cut of 25 basis points.

U.S. weekly jobless insurance claims and Canadian housing starts will be reported later.

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




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