Reduced Fear of Korean War

August 15, 2017

Today is the 72nd anniversary of Korea’s liberation from Japan, and markets there are closed. Reported remarks by the leaders of both Korean nations dispelled fear of an imminent resumption of war.

Markets were also closed today in India for a holiday commemorating the 70th anniversary if independence and Italy for Assumption Day.

The dollar rose today by 0.9% against sterling, 0.7% relative to the yen and Australian dollar and 0.4% versus the euro.

U.S. stocks at mid-day are little changed on balance. Equities are up 0.4% in France and the U.K. but down 0.3% in Hong Kong.

Reduced haven demand for gold depressed its price by 0.9% to $1,279.1 per ounce. WTI oil also has decline, sliding 0.5% to $47.36 per barrel.

10-year U.S. Treasury and German bund yields climbed back another three basis points.

Slower-than-forecast British inflation accounted for sterling’s drop of nearly 1%. CPI inflation held steady at 2.6% with a 0.1% on-month dip. PPI inflation also decelerated in July. House price inflation of 4.9% was 0.1 percentage point lower in June than May. The U.K. index of leading economic indicators slipped 0.1% in both May and June.

U.S. retail sales advanced 0.6% last month, twice expectations and raising the 12-month rate of increase to 4.2% (3.8% excluding motor vehicles).

U.S. import prices edged up 0.1% in July after dipping 0.1% in May and 0.2% in June. Import prices remained just 1.5% higher than a year earlier despite an 8.9% leap in fuel. Export prices were 0.8% above their year-earlier level.

The NY Fed’s Empire State manufacturing index jumped from 9.8 in July to an August reading of 25.2, best since September 2014. The U.S. National Association of Home Builders housing market index rose four points to a 3-month high of 68 in August.

German real GDP climbed 0.6% on a quarterly and calendar-adjusted basis last quarter and was 2.1% greater than a year earlier. That’s stronger than the 1.9% growth in full-2016 and the 2.0% on-year pace in 1Q17.

Japan’s growth in industrial production during June was revised up 0.6 percentage points to 2.2%. The revised 12-month rate of increase, 5.5%, compares to 4.9% reported initially. Output advanced 2.1% in 2Q and by 5.8% from 2Q16. Capacity usage in June was 5.5% greater than a year earlier.

Minutes from the Reserve Bank of Australia’s Board meeting earlier this month revealed rising concern about domestic housing and excessive household debt, less concern about wage growth, and confidence the inflation will remain low. Macroeconomic forecasts for next year and 2019 were not changed. Officials seem less likely to modify policy because of a firm Aussie dollar.

Chinese bank lending growth fell in July to the smallest monthly total thus far in 2017 as was expected. M2 money growth of 9.2% was lower than expected and the slowest so far in 2017.

Australian  motor vehicle sales fell 2.0% in July but were 1.8% above their year-earlier level.

The Swiss producer price/import price index was flat in July and 0.1% below its year-earlier level. Danish producer prices in the the same 12 months rose 1.5%. Swedish consumer price inflation accelerated to 2.2% in June.

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

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