North Korea Observes America’s Birthday with a Successful ICBM Test

July 4, 2017

Today is the 241st anniversary of the signing of the U.S. Declaration of Independence.

We, therefore, the Representatives of the united States of America, in General Congress, Assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the Name, and by Authority of the good People of these Colonies, solemnly publish and declare, That these united Colonies are, and of Right ought to be Free and Independent States, that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do. — And for the support of this Declaration, with a firm reliance on the protection of Divine Providence, we mutually pledge to each other our Lives, our Fortunes, and our sacred Honor.

North Korea claims it successfully tested a missile capable of delivering a nuclear strike to other continents. Independent sources confirm that North Korea has made a significant further step in the development of such a technology. All this comes a few days before a summit of Group of Twenty leaders in Germany and amid rising strained U.S. relations with a slew of other governments.

There were two central bank policy meetings today, each deciding not to change any monetary settings.

  • The Swedish Riksbank’s Executive Board retained a negative 0.50% repo rate and reiterated that another SEK 15 billion of asset purchases in the second half of 2017 will lift the total size of that program to SEK 290 billion by endyear. However, authorities dropped the easing near-term bias, saying that a rate hike is unlikely until around the middle of next year but that the possible need to cut rates further in the near term has diminished. The repo rate has been negative since February 2015 and at -0.50% since February 2016.
  • The Board of the Reserve Bank of Australia left its Official Cash Rate unchanged at 1.5%, a record low that’s been in place since a 25-basis point cut in August 2016. A statement from the Board is sanguine about Australian economic trends and prospects but fails to signal any urgency to begin reversing the stimulative stance.
  • Fed Chair Janet Yellen visiting in London had to be briefly hospitalized and treated for a urinary tract infection but has now returned to the United States.

U.S. markets are closed today. The dollar rose overnight by 0.6% against the Australian dollar, 0.2% versus the Swiss franc and kiwi and 0.1% relative to the euro, yuan, peso and sterling. The dollar slipped 0.2% against the loonie and yen.

Stocks in Asia climbed 1.8% in Australia and 0.4% in New Zealand but fell 1.4% in Hong Kong; Xi’s visit there to commemorate the 20th anniversary of the former British colony’s return to China didn’t go well. Stocks also fell overnight by 0.8% in Indonesia, 0.6% in South Korea and Taiwan, 0.4% in China and Singapore and 0.1% in Japan.

Equities in Europe are 0.3% lower in Germany, France, Switzerland, Spain, Italy and Greece. The British Ftse has dipped 0.1%.

After an extended streak of up days, West Texas Intermediate crude oil has fallen 0.4% to $46.90 per barrel. Industrial metals like copper are also down, but Comex gold is 0.4% firmer at $1,224.00 per ounce.

The ten-year German bund and British gilt yields have eased two and one basis point. Their Japanese counterpart is unchanged.

Australian retail sales climbed 0.6% in May on top of a 1.0% advance in April. The 3.2% 12-month rate of increase is the most since January. A weekly measure of Australian consumer sentiment rose strongly to a 3-month high in early July. New Zealand business sentiment edged a tad higher last quarter despite lower capacity usage.

The Bank of Japan’s balance sheet of JPY 502.1 trillion as of mid-2017 is almost as large as GDP and 16% greater than it was a year earlier. Growth in Japan’s monetary base decelerated to 17.0% in June from 19.4% in May, 18.7% in the first quarter, 25.0% in 2016 and 34% in 2015.

Producer price inflation in Euroland slowed to 3.3% in May from 4.3% in April. The PPI dipped 0.4% on month due to a 1.3% slide in energy and no change in the collective price of all other items in the index. Romania’s PPI also was 3.3% higher than a year earlier in May.

The British construction purchasing managers index printed at a 2-month low of 54.8 in June after a 17-month high of 56.0 in May.

Non-oil PMI indices were reported for several middle eastern economies. Egypt’s index fell 0.1 point to 47.2, a 3-month low. The Saudi Arabian PMI of 54.3, an 8-month trough, was down from 56.5 and well below the first-half average score of 56.0. But the U.A.E. PMI bounced above May’s 6-month low of 54.3 to 55.8, a 2-month high.

South Africa’s factory purchasing managers index fell by a sharp 4.8 points to a 2-month low of 46.7.

Spanish unemployment fell by 98.3K last month (21.7K seasonally adjusted) and was 11% lower than a year earlier. Ireland’s jobless rate dipped 0.1 percentage point to 6.3% in June, lowest in nine years.

South Korean consumer prices in June were 1.9% higher than a year earlier. Thailand’s CPI was unchanged on year.

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


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