U.S./North Korean Tensions Lift the Swiss franc, Yen, Yuan and Gold

August 9, 2017

President Trump’s warning to North Korea of fire and fury has captured market attention. The dollar fell 0.8% against the franc, 0.5% versus the Chinese yuan, 0.3% relative to the yen, and 1.2% against gold. Sovereign debt is in demand, meanwhile, with 10-year yields down 4 basis points in the United States and France, six bps in Britain, 5 bps in Switzerland and Germany, and a basis point in Japan.

Equities are falling, with declines of 1.1% in South Korea, 1.0% in Japan, 1.5% in France and Switzerland, 1.2% in Spain, 0.9% in Taiwan, 0.7% in India and Italy, 0.5% in Hong Kong but just 0.3% in the U.S. S&P so far.

WTI oil recovered 0.6% to $49.48 per barrel.

Chinese CPI inflation slowed to a 3-month low of 1.4% in July. PPI inflation printed at 5.5% for a third straight month. That’s 2.3 percentage points below February’s 8-1/2 year high of 7.8%.

Estimated quarter-on-quarter U.S. productivity growth in the second quarter was revised upward to an annualized 0.9% but posted the same 1.2% 4-quarter increase as registered between 1Q16 and 1Q17. Nonfarm productivity had dipped 0.1% in 2016. Unit labor costs increased less than assumed last quarter, a 0.6% rise from 1Q and a 0.2% slide from a year earlier. U.S. mortgage applications rose 3.0% last week, reversing the prior week’s drop.

Japanese machine tool orders in July posted on-year growth of 26.3%. That’s the fourth straight large advance after increases of 31.1% in June, 24.5% in May, and 34.7% in April. Japanese M2 money growth accelerated to 4.0% in July from 3.9% in the second quarter and 3.4% in 2016.

Canadian housing starts climbed to a 5-month annualized high of 222.3K in June from 212.9K in May and 195.0K in April. Building permits rose 2.5% on month and 22.5% on year.

The Bank of France’s measure of manufacturing sector sentiment printed at a 2017 high of 105 in July, up two points from June, but sentiment in services and construction each dipped a point to 99 and 102, respectively.

Industrial production in Italy advanced 1.1% on month and 5.3% on year in June.

Spain’s index of leading economic indicators was unchanged in June, but the index of coincident Spanish economic indicators, as in May, went up by 0.3%.

On-year consumer price growth rose in July to 6.4% in Mexico but fell to 2.7% in Brazil.

Czech and Greek consumer prices were 2.5% and 1.0% above their year-earlier level last month.

Denmark recorded a DKK 18.9 billion current account surplus in June, 12.5% wider than in May.

Consumer confidence in Australia fell 1.2% in August according to the Wespac index. Home loans in that economy rose 0.5% on month in June after a 1.1% increase in May.

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



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