Dollar Down Even as Stocks Continue to Rise

July 31, 2017

Lots of economic data were reported today.

The dollar and U.S. share prices diverged in direction on the final day of July as they had done much of this month.

The dollar lost 0.3% against the euro, Swissy and sterling, and it fell 0.2% against the yuan and 0.1% relative to the yen. The never-ceasing melodrama surrounding the Trump presidency is being cited as a dollar depressant, but a slower-than-hoped tightening of Fed policy also is reflected in the currency’s eroded value against the euro. The dollar strengthened overnight against commodity-sensitive currencies like the loonie, kiwi and Aussie dollar.

The Dow climbed 0.4% thus far and is above 21.9K. In other stock markets, share prices rose 0.9% in Hong Kong, 0.8% in New Zealand, 0.6% in China and India but fell 0.2% in Japan. Stocks in Europe are down 1.0% in Greece, 0.7% in France, 0.4% in Germany and 0.3% in Spain.

West Texas Intermediate crude oil penetrated the $50 per barrel level but failed to hold that initial overnight gain and is down 0.7% at $49.37. Copper surpassed a 2-year high. Gold dipped 0.1% to $1,274.70 per ounce.

10-year sovereign debt yields are unchanged in the U.S., Japan and Germany but up a basis point in the U.K. and down 2 bps in Italy.

Japanese industrial production rebounded 1.6% in June from a 3.6% decline in May. Output posted a 1.9% 2Q-over-1Q advance and is expected by officials to rise in both July and August. Motor vehicle output recorded a bigger 6.9% on-year increase in June following May’s 5.5% rise. April saw a 16.5% increase.

Japanese housing starts and construction orders in June were 1.7% and 2.3% greater than year-earlier levels after recording marginal dips in May.

China’s government reported purchasing manager survey results for July. Both the manufacturing PMI and the non-manufacturing index slid to 2-month lows, but at 51.4 and 54.5, respectively, each remained above 50 as they had been in each month of the first half of 2017. A reading above 50 implies improving conditions.

Euroland CPI inflation remained steady at 1.3% in July, but core inflation ticked 0.1 percentage point higher to 1.2%. Euroland’s jobless rate slipped 0.1 percentage point to 9.1% in June, its lowest level in 100 months and down from 10.1% in mid-2016.

The volume of German retail sales leaped 1.1% in June, marking the largest on-month increase in eight months. Sales in the first half of the year were 1.7% above their year-earlier average level. The German jobless rate stayed at 5.7% in June but the number of unemployed workers increased 7K. Employment in the first half of 2017 surpassed the year-earlier level by a robust 1.5%.

Italian consumer prices rose 1.1% in the twelve months to July, while PPI inflation as of June was at 2.6%. Italy’s 11.1% rate of unemployment in June was down from 11.7% a year earlier.

British M4 money growth slowed to 5.3% in June from 6.7% in May. Net mortgage lending and net consumer credit grew by 4.1 billion pounds and 1.5 billion pounds in the month.

Belgian GDP grew 0.4% last quarter, a slower rate than seen in the previous two quarters, and was 1.4% higher than in the second quarter of 2016.

U.S. pending home sales in June rose by a faster-than-forecast 1.5%. The Chicago regional purchasing managers index fell to a 3-month low but still implied respectable growth with a reading of 58.9. The Dallas manufacturing index rebounded to a 2-month high of 16.8 in July. Its best reading thus far in 2017 was 24.5 in February.

Canadian producer prices dropped 1.0% on month in June, trimming the 12-month rate of increase to 3.3% from 5.2%. A 4.1% plunge in energy was the main disinflationary factor. On-year growth in raw material prices plunged to 2.2% in June from 8.4% in May and recorded the biggest monthly decline since end-2015.

Mexican GDP rose 0.6% on quarter in 2Q16 but recorded the smallest on-year increase (1.8%) in three years.

New home sales in Australia dived 6.9% in June. M3 and private credit in that economy recorded on-year growth in July of 7.7% and 5.4%. The ANZ activity index for New Zealand slipped 2.5 points to a reading in July of 40.3. New Zealand housing permits dropped 1.0% in June.

South African M3 money and private domestic credit grew 5.96% and 6.16% in the year to June, and that economy’s trade surplus widened 12.4% to 10.7 billion rand in June. Turkey posted a $6.0 billion trade deficit in June.

Manufacturing purchasing manager surveys for many countries will be reported on Tuesday.

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


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