Market Churning and in Search of New Direction

July 27, 2017

A mixed day for the dollar this Thursday with a rebound of 1.1% against the Swiss franc and 0.3% relative to the euro and loonie. The dollar also edged up 0.1% versus the peso, yen and kiwi but has lost 0.2% against the yuan and 0.1% versus sterling.

Stocks advanced 0.9% in Taiwan, 0.8% in Hong Kong, 0.5% in Singapore, 0.4% in South Korea and 0.3% in Japan but are down 0.9% in Greece, 0.7% in Germany, and 0.2% in Great Britain. U.S. stocks opened a bit higher.

The Fed’s statement on Wednesday expressed a bit more concern about low inflation. Today’s 10-year sovereign debt yields around the world are down 4 basis points in Spain, 3 bps in Germany and Italy, 2 bps in France and the U.K., and one basis point in Spain. But the 10-year U.S. Treasury yield recovered one basis point.

Gold climbed 1.0% to $1,268.10 per ounce. West Texas Intermediate crude oil is flat at $48.77 per barrel.

Released U.S. data show

  • A 10K rise in new U.S. jobless insurance claims last week to 244K. The 4-week average also was 244K, similar to 242.25K in the prior four-week period.
  • A 6.5% leap in durable goods orders in June, almost twice as much as the expected increase but accompanied by a 0.1% dip in non-defense capital goods (excluding aircraft).
  • A smaller-than-expected flash estimate of the U.S. trade deficit in July amounting to $63.9 billion.
  • A 0.43-point improvement in the Chicago Fed National Activity Index, which printed at +0.13 in June, a 2-month high.

More signs of disinflation around the world emerged today:

  • South African producer prices fell 0.3% in June, depressing the 12-month rate of increase by 0.8 percentage points to 4.0%, which is the lowest since September 2015.
  • Brazilian PPI inflation slowed to 1.5% in June from 2.2% in May.
  • Australian export and import prices recorded second-quarter declines of 5.7% and 0.1%, respectively.

Consumer confidence in Germany increased 0.2 points in August to a reading of 10.8, highest so far this year.

M3 money in the euro area posted on-year increases of 5.0% in June and 4.9% in the second quarter. Faster M1 growth of 9.7% in June accounted for the slight acceleration last month. Bank lending to firms slowed, however, to a 2.1% 12-month rise.

The CBI’s British distributive trades ┬áindex improved unexpectedly in July to a reading of 22 from 12 in June and 2 in May.

Spanish unemployment slid to 17.22% last quarter form 18-3/4% in 1Q.

Norwegian unemployment averaged 4.3% in March-May, down from 4.6% in the prior 3 months. Swedish joblessness climbed to 7.4% in June from 6.7% the month before. Hungary’s unemployment rate of 4.3% in the three months to June was at a 5-month low.

Swedish consumer confidence dipped to 0.4 to 102.2 in June, but Sweden’s economic tendency index strengthened because of better sentiment in the manufacturing sector. Sentiment in Finland slipped among households, manufacturers, and in construction.

Turkey’s central bank left its interest rates unchanged, asserting that a tight stance will be needed until more compelling signs of falling inflation are apparent.

Japanese stock and bond transactions last week generated a net 1.249 trillion yen capital outflow, which was considerably greater than the prior week’s outflow of JPY 131 billion.

Chinese corporate profits grew more rapidly in the year to June, posting a 19.1% gain after a 16.7% on-year rise in May.

South Korean real GDP grew 0.6% last quarter and 2.7% compared to the second quarter of 2016.

Still to come: Kansas City Fed manufacturing index.

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

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