Trump Fuels Public Angst Again

August 23, 2017

In vintage style, the U.S. president’s comments at a political rally in Phoenix was full of threats and accusations on a range of topics: a possible government shutdown if Congress doesn’t fund his “wall” proposal; blaming a few Republicans for the vote against repealing Obamacare; accusing the media for distorting his response to Charlottesville and defending that response; asserting a predisposition to pardon the controversial local sheriff Joe Arpaio, and suggesting no Nafta would be better than a bad Nafta.

Tuesday’s U.S. equity market rebound did not extend into overnight trading elsewhere. Some market analysts are warning that the technical underpinnings of the market are starting to unravel.

Hong Kong was closed today because of Typhoon Hato, the strongest storm in five years. Elsewhere in the Pacific Rim, stocks recovered 0.9% in India, 0.6% in Indonesia and 0.3% in Japan but fell 0.2% in Australia and 0.1% in Singapore and China. European equities, in spite of solid preliminary purchasing manager results, are down 0.4% in Italy and Spain, 0.3% in Switzerland, and flat in Germany and  Great Britain.

West Texas Intermediate crude oil slipped 0.3% to $47.71 per barrel. Weekly U.S. inventory data gets reported later today. Gold rose 0.2% on risk aversion to $1,293 per ounce.

Ten-year German bund and Japanese JGB yields are unchanged.

The dollar is narrowly mixed, showing gains of 0.3% against the Swiss franc, 0.2% relative to the loonie and 0.1% versus the euro and Aussie dollar along with 0.1% downticks against the yen, peso and sterling. The kiwi and yuan are unchanged.

In spite of a 7-month low in Euroland’s preliminary service-sector purchasing managers score in August, the composite and manufacturing PMI readings of 55.8 and 57.4 were at 2-month highs and beat analyst expectations. The data suggest that euro area GDP this quarter is likely to expand nearly as quickly as the 0.6% quarterly pace seen in the second quarter. Preliminary PMI data represent about 85% of the information that goes into the final results due early in September.

The German composite PMI of 55.7 in August was at a 2-month high, while France’s composite PMI of 55.6 matched July’s reading. French manufacturing grew at the fastest pace since April 2011.

Japan’s manufacturing PMI based on preliminary figures rose 0.7 points to 52.8 in August, best since May. Japanese machine tool orders in July were revised upward to show a 28% on-year advance versus 26.3% estimated initially.

ECB President Draghi claimed that unconventional monetary policy measures had been constructive but warned that much still needs to be learned about the full effects of such actions. He urged vigorous research into the matter. The ECB’s September meeting is expected to unveil future plans regarding asset purchases. The current stances runs only through end-2017. Both Draghi and Fed Chair Yellen have scheduled speeches on Friday at the Jackson Hole central banking symposium. The conference begins tomorrow.

The Bank of Iceland retained a 4.5% 7-day deposit rate. Such had been cut in both May and June by 25 basis points each. Those were the only changes made so far in 2017. In the current cycle of cuts, there was also a 50-bp reduction a year ago.

In the year to July, consumer prices rose 4.6% in South Africa, 3.2% in Malaysia and 0.6% in Singapore.

Consumer sentiment fell in July in both Turkey and Denmark. Euroland’s preliminary consumer confidence figure will be reported later today.

U.S. mortgage applications dropped 0.5% last week, and the 30-year fixed mortgage rate remained unchanged at 4.12%. U.S. new home sales data will be reported by the Commerce Dept later today. Mexican retail sales are also due.

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


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