Tough Session for Stocks and Dollar

July 28, 2017

Equities in the Pacific Rim dropped 1.7% in South Korea, 1.4% in Australia, 1.2% in New Zealand, 0.9% in Hong Kong, 0.8% in Singapore, 0.7% in Singapore and 0.6% in Japan.

Stocks in Europe thus far are down 1.3% in France, 1.1% in Italy, 0.9% in Spain, 0.8% in the U.K., and 0.4% in Germany.

The dollar depreciated overnight by 0.8% against the loonie, 0.6% relative to the euro, 0.4% vis-a-vis the Aussie dollar and sterling and 0.3% versus the yen.

At $49.55 per barrel, West Texas Intermediate oil is at its highest level in nearly two months and up 1.0% on the day. Gold climbed 0.5% overnight, and industrial metal prices firmed, too.

Ten-year German bund and British gilt yields rose two basis point, and Japanese JGB yield is a basis point higher, but their U.S. Treasury counterpart has edged marginally lower.

The Republican attempt to repeal Obamacare in the senate failed. Such has adverse implications for the prospect of passing other legislation.

U.S. real GDP strengthened 2.6% at a seasonally adjusted annualized rate last quarter, powered by consumption and non-residential investment. Net exports and government spending lend marginal support to the growth rate. GDP was 2.1% greater than a year earlier. The PCE price deflator and core personal consumption deflator recorded on-year increases of 1.6% and 1.5%.

The U.S. employee cost index rose 0.5% on quarter and 2.4% on year in the second quarter.

The University of Michigan U.S. consumer sentiment index printed 1.7 points lower at 93.4 in July than June and at its weakest level since just before the U.S. election.

Canadian real GDP in May rose 0.6%, its seventh straight monthly advance and the biggest rise since January. GDP and industrial production were 4.6% and 12.4% greater than in May 2016.

French GDP climbed 0.5% on quarter and 1.8% on year in 2Q. Positive contributions were made by both domestic demand and net exports, but inventories exerted a drag.

Spanish GDP went up 0.9% on quarter and 3.1% on year in the second quarter.

Swedish GDP rose 1.7% on quarter and 4.0% on year in the same period.

A slew of Japanese data releases showed

  1. A drop in the jobless rate to 2.8% in June, which matched April, from 3.1% in May.
  2. On-year job growth of 0.9%, and a higher 1.51 ratio of job offers to seekers.
  3. June-over-June growth in total retail sales of 2.1%. The monthly increase was only 0.2%.
  4. Unchanged core CPI inflation, which excludes fresh food, of 0.4% in June but zero if energy also is excluded.
  5. A 1.6% monthly jump in real personal consumption in June, consistent with on-year increases of 2.3% in spending but just 0.2% in real disposable income.

British consumer confidence dipped two points to a reading of minus 12 in July, lowest in 12 months.

Australian producer prices rose 0.5% on quarter for the third straight time in 2Q and were a subdued 1.7% higher than a year earlier.

German consumer prices according to preliminary reports went up more sharply than forecast in July, posting gains of 0.4% from June, 1.7% on year, and 1.5% on year in harmonized terms.

In the year to July, Spanish consumer prices climbed 1.5%, and French CPI inflation held at 0.7%.

Greek PPI inflation of 1.4% in June was only half as much as in May.

French consumer spending in June slumped 0.8% on month, which is more than had been assumed, and posted an on-year increase of just 0.5%.

The Swiss index of leading economic indicators climbed 1% to a reading of 106.8 in July.

Between mid-2016 and mid-2017, Portuguese industrial output and retail sales rose 0.6% and 5.2%, respectively. Likewise, South Korean industrial production and retail sales in the same span fell 0.4% and rose 1.0%.

Austria’s manufacturing purchasing managers index settled back to a still-robust reading of 60.0 in July from a 76-month high of 60.7 in June. Austrian GDP grew 0.8% last quarter and was 2.2% above a year earlier.

The Central Bank of the Republic of Colombia cut its key interest rate by 25 basis points to 5.5%. The rate had also been cut in February, March, April, May and June and is two percentage points lower than the end-2016 level of 7.5%. Colombian domestic demand has been disappointing, and supply-side shocks to inflation are ebbing.

The Bank of Russia retained a 9.0% key interest rate. Earlier reductions were made in March, April and June totaling 100 basis points. Officials anticipate more cuts later this year.

Economic sentiment in the euro area ticked up 0.1 to 111.2 in July on improved sentiment in construction and services. But the business climate index fell back to 1.05 from 1.16.

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

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