Bond Yields, Oil and Dollar Down, Equities and Gold Up

July 13, 2017

The dollar depreciated 0.7% against the Australian dollar, 0.3% relative to sterling, and 0.1% vis-a-vis the yen, yuan, peso, kiwi and loonie. Exceptions to this downtrend were daily dollar rises of 0.3% against the euro and 0.1% relative to the Swiss franc.

West Texas Intermediate crude oil fell 0.7% to $45.19 per barrel.

Ten-year German bund and British gilt yields are 3 and 2 basis points softer.

Equities in the Pacific Basin advanced 1.5% in Hong Kong, 1.1% in Australia, 0.8% in Singapore, 0.7% in India and South Korea, and 0.6% in China but remained unchanged in Japan. Stocks in Europe have climbed 1.0% in Spain, 0.8% in Greece, 0.7% in France, 0.3% in Italy, 0.2% in Germany and 0.1% in Great Britain.

Gold rose 0.2% to $1,222 per ounce.

Janet Yellen, Chair of the Fed, reprises yesterday’s testimony today, this time before the Senate Financial Services Committee. In Humphrey Hawkins testimony before the House on Wednesday, she laid out a picture of modest to moderate continuing growth, a tighter labor market, but subdued inflation. This picture was later confirmed by the Fed’s Beige Book of regional economic trends.

Two central banks left monetary policy stances unchanged. The Bank of Korea retained a 1.25% interest rate and revised projected 2017 growth somewhat higher to 2.8% despite weak personal spending. Inflation has been manageable, with headline CPI this year hovering just under the 2% target and core CPI a tad less. Bank Negara Malaysia kept its interest rate at 3.0%. Policy there continues to have a neutral bias. Inflation had exceeded target but is now easing. The last central bank rate change in South Korea was a cut of 25 basis points in June 2016. The last two changes in the Malaysian rate, each cuts of 25 basis points, each occurred in July, first in 2014 and then in 2016.

June CPI data were released by Germany, France, Spain, Ireland and Sweden.

  • The German CPI went up 0.2% on month and edged up 0.1 percentage point to 1.6% in the 12-month comparison. Energy was flat on ¬†year, but food price growth accelerated to 2.8%. Core inflation matched the total CPI on-year pace of 1.6%.
  • French consumer prices posted no month-on-month in June for a second straight month. On-year French inflation dipped to 0.7% from 0.8%.
  • Spain’s CPI also was flat on month, and the 12-month rate of increase fell by 0.4 percentage points to 1.5%.
  • Irish consumer price inflation swung from +0.2% in May to -0.4% in June.
  • Swedish CPI inflation of 1.7% was at the same level as in May.

Switzerland’s PPI/import price index edged 0.1% lower in June from both May and the June 2016 level.

China’s trade surplus widened $2 billion to a 5-month high of $42.80 billion in June. Export growth of 11.3% and on-year import expansion of 17.2% were each the most since March. An on-year 2.3% rise in Chinese foreign direct investment was also reported.

In New Zealand, food prices edged 0.2% higher on month in June. House prices last month were 5.8% greater than a year earlier, and consumer confidence fell 1.8%. Australian inflation expectations moved higher in July.

The Turkish current account deficit widened by a sharp 19% on month to $5.24 billion in May.

Aside from Yellen’s testimony, Governor Brainard, K.C. Fed President George and Chicago Fed President Evans have public speaking dates today. U.S. producer prices and weekly jobless insurance claims will be reported. The monthly federal government deficit is also due today.

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


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