A Corrective Day in the Marketplace

August 22, 2017

The dollar rebounded, and so did most stock markets in Asia and Europe. Bond yields and gold eased back. These changes partly reverse trends in recent days but have no obvious reason for doing so other than it was time for a correction, however brief.

After heavily criticizing the never-ending war in Afghanistan, President Trump has been convinced by his generals not to walk away from this conflict.

No major data were reported. In the U.S., the Richmond Fed manufacturing index, weekly redbook sales, and the FHFA house price index will be released later. The Jackson Hole central banking symposium doesn’t start for another two days. The North American eclipse has come and gone.

The dollar rose by 0.6% overnight against sterling and the kiwi, 0.5% versus the Australian dollar, 0.4% relative to the yen, euro and Swiss franc, and 0.1% against the loonie. The peso and yuan are steady.

Equities in the Pacific Basin closed up 1.2% in Hong Kong, 0.6% in Taiwan, 0.4% in Australia and South Korea, 0.5% in Singapore and 0.1% in India and China but dipped 0.1% in Japan. In Europe, markets have thus far climbed 0.8% in Germany, 0.6% in Switzerland, 0.7% in the U.K., 0.5% in France and 0.4% in Spain.

Ten-year sovereign debt yields edged up a basis point in Japan, the U.K. and Germany, and a higher yield is also indicated in U.S. Treasury futures.

Gold fell 0.5% to $1,290.30 per ounce, once again failing to establish a beachhead above $1,300. West Texas Intermediate crude oil at $47.39 per barrel is essentially unchanged.

The ZEW index of investor expectations about Germany dropped abruptly to a 10-month low of 10.0 in August from 17.5 in July amid greater concern about future growth and special uneasiness about a scandal in the auto industry. The ZEW index for current conditions still managed to rebound 0.3 points to a 2-month high of 86.7.

The ZEW index of investor expectations regarding the whole euro area printed considerably lower at a 4-month low of 29.3 in August versus a recent high in June of 37.7. Current conditions improved sharply to a reading of 38.4 from 28.7 the month before.

The CBI reported a 3-point rise in its monthly British industrial trends index to a two-month high of 13. Britain’s core public sector borrowing posted a July surplus for the first time in many years. Outstanding public debt at the end of the month equaled 87.5% of GDP.

Dutch consumer sentiment rose a point to a reading of 26 in August, and June consumer spending was 2.2% higher than a year earlier.

Switzerland registered a larger CHF 3.51 billion trade surplus in July after surpluses of CHF 2.76 billion in June and CHF 3.39 billion in May.

Spain’s trade deficit narrowed 7% on month to EUR 1.3 billion in July.

Danish retail sales volume posted a second straight 0.1% monthly dip in July and was 0.4% lower than a year earlier.

Norwegian consumer sentiment rose 3.6 points to a third quarter reading of 16.2, best since the summer of 2014. The Finnish 7.5% jobless rate in July was 0.3 percentage points lower than a year earlier.

Japanese supermarket sales were unchanged from a year earlier in July. Such haven’t posted an on-year increase since April.

The South African Reserve Bank’s index of South African leading economic indicators dipped 0.1% in June, marking the fourth consecutive month in which such didn’t increase.

Aside from the aforementioned U.S. data releases later today, Canada will be reporting retail sales, and Mexican GDP arrives. Central banks in Indonesia and Hungary are conducting pre-scheduled monetary policy reviews.

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

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