Share Prices Falling

June 12, 2017

There has been a large backlash against populist and extremist politics in both France and Italy over the weekend.

  • In the first round of French parliamentary elections, President Macron’s LREM Alliance appears likely to secure about three-fourths of the seats, the highest percentage for a ruling party in over fifty years. Turnout was marginally lower than 50%.
  • In Italian local elections, the far-right Five-Star movement was beaten back almost everywhere.

These results follow British Prime Minister May’s disastrous opportunist effort to strengthen her mandate ahead of Brexit talks with the European Union. Macron is pro-EU. In part, this European backlash against populist politics may be motivated by very negative perceptions over how Donald Trump is remaking America.

Led by technology companies, share prices fell 1.4% in South Korea, 1.3% in Hong Kong, 0.9% in Taiwan, 0.6% in China, and 0.5% in India and Japan. Equities in Europe have declined 1.2% in Spain so far, 1.0% in France and Germany, 0.8% in Italy, 0.6% in Switzerland and 0.3% in the U.K. and Greece.

In commodities trading, WTI crude oil recovered 0.6% to $46.09 per barrel, but industrial metals are down. Comex gold is unchanged at $1,271.80 per ounce.

The dollar shows narrow gains of 0.3% against the sterling, 0.2% relative to the kiwi and 0.1% versus the peso but similarly unconsequential losses of 0.2% against the loonie, euro, Swissie and Aussie dollar.

Ten-year sovereign debt yields are down four basis points in France, two bps in the U.K. and a single basis point in Germany but flat in Japan.

Among central bank meetings this week, those in the U.S., Japan, U.K. and Switzerland are drawing most interest. The FOMC is widely expected to raise interest rates another 25 basis points. This week’s Economist advises it not to do this because of the recent decline of inflation. The BOJ, BOE, and SNB are not expected to modify their policy stances.

Core domestic Japanese private machinery orders slumped 3.1% in April, more than reversing March’s 1.4% increase and augmenting a 1.4% quarterly decline in the first quarter of 2017. Government orders fell even more sharply, but foreign demand for machinery orders spiked higher.

Japanese machine tool orders in May were 24.4% greater than a year earlier. Finally, domestic corporate goods prices were unchanged in May and posted the same 2.1% 12-month rate of increase as in April. compared to May 2016, import prices shot up 13.5%, three times greater than export prices.

The Bank of France projects a 0.5% rise in French real GDP this quarter after growth of 0.4% in the first quarter. The central bank’s measures of business sentiment in services (101) and manufacturing (105) were each at the same level in May as in April, and that for construction rose a point to a score of 102.

Italian industrial production climbed 1.0% on year in April, down from 2.9% in the year to March. Output posted a monthly drop for the first time since January.

Turkish GDP growth accelerated to a 3-quarter high of 5.0% in 1Q17.

In the year to May, consumer prices rose 0.8% in Denmark and 1.5% in Portugal.

Ireland’s construction purchasing managers index rose 2.3 points to a 15-month high of 63.6 in May.

The monthly U.S. federal deficit will be reported today.

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


Tags: ,


Comments are closed.