Dollar Grinds Lower and European Equities Fall Sharply

July 21, 2017

The dollar lost another 0.6% against the yen, 0.5% versus the kiwi, 0.4% relative to the Swiss franc, 0.3% vis-a-vis the loonie, 0.2% against the euro and 0.1% versus sterling. The dollar made gains of 0.5% against the Aussie dollar, o.3% versus the Mexican peso and 0.1% relative to the yuan.

  • Investors are reacting to reports that the Mueller investigation into President Trump’s affairs has broadened into his business dealings with Russians prior to becoming a candidate for president.
  • Draghi’s dovish remarks that the ECB meeting yesterday did not address the timing for winding down quantitative stimulus have not persuaded market players that it will be done soon.

European stocks tumbled amid concern that the euro’s appreciation will dent regional competitiveness. Equities lost 1.9% in Germany, 1.7% in France, 1.4% in Spain overnight, 1.2% in Italy, 0.9% in Switzerland, 1.1% in Greece and 0.5% in Britain. This rout has had coattails. Stocks in the Pacific Rim are down 1.1% in Indonesia, 0.9% in India, 0.7% in Australia 0.4% in Hong Kong, 0.6% in Taiwan and 0.2% in Japan and China. North American markets also opened lower.

Ten-year sovereign debt yields dropped 3 basis points in the U.K. and France, 2 bps in the United States, Germany, Italy and Switzerland, and a basis pint in Japan.

A nascent rally in West Texas Intermediate crude oil hit a bump, as the price fell back 1.8% to $46.08 per barrel. Gold rose 0.3% to $1,256.20 per ounce. Industrial metal prices climbed as well.

The latest evidence of disinflation comes from Canada where consumer prices fell by 0.1% on month and to a 12-month increase of 1.0% in June from 1.3% in May and 1.6% in April. Energy slid 1.3% on year, and other consumer prices posted a 1.2% advance.

Canadian retail sales rose in May for a third consecutive time, climbing 0.6% on month and 7.3% on year.

The French leading and coincident economic indicators rose in May by 0.4% and 0.3%, respectively.

Icelandic producer prices dived 10.2% in the year between June 2016 and last month. Ireland’s PPI dipped 0.4% in the same period.

Japanese department store sales, which had been unchanged in the year through May, recorded a 1.1% on-year rise in June. Japanese stock and bond transactions last week generated a JPY 632 billion net outflow, more than half as much smaller than the net outflow of 1.58 trillion yen in the week of July 7.

Britain’s public sector borrowing last month totaled GBP 6.28 billion, which was marginally less than in May.

Dovish remarks by a senior official of the Reserve Bank of Australia depressed the Aussie dollar, which was one of the few currencies to perform more weakly than the greenback today.

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

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