A Somewhat Corrective Wednesday in the Market

August 30, 2017

The dollar recovered, sovereign debt yields rose and so have European and Asian equities overnight.

  • The dollar climbed 0.4% against the euro, 0.3% versus the yen, 0.2% vis-a-vis the loonie, Swissy, and kiwi, and 0.1% relative to the Australian dollar.
  • The dollar has dipped 0.1% versus the yuan and peso and is unchanged against sterling.
  • 10-year sovereign debt yields are up two basis points in the U.K., Spain and Italy and by a single basis point in Germany and France.
  • Equities rebounded 0.9% in Hong Kong, 1.0% in India, 0.7% in Japan and 0.5% in Singapore. Stock market advances in the U.K., France, Germany, Greece, Switzerland, Spain and Italy currently range from 0.2% to 0.6%.
  • Gold remains firm but still slipped 0.2% to $1,315.70 per ounce. WTI oil gave up 0.7%, falling to $46.12 per barrel.

In the absence of severe rhetoric from either Trump or Kim Jong Un over the past 36 hours, fear of a Korean conflict is perceived to be a less immediate danger.

The flooding in coastal Texas is still cresting.

ADP’s estimate that private sector U.S. jobs rose by 237K in August was much greater than analysts were anticipating.

German inflation accelerated to 1.8% in August from 1.7% in July, 1.6% in June and 1.5% in May. The energy component in the CPI showed a 2.3% on-year rise in August, up from 0.9% in July and no change in the year to June.

Euroland’s economic sentiment index increased unexpectedly to a 121-month high of 111.9 in August from 111.3 in July and a reading of 108.0 in the first quarter of 2017. Sentiment improved in industry, services, and households but not in construction or among retail businesses.

Small business sentiment in Japan fell 1.0 to a 3-month low reading of 49.0 in August. Japanese retail sales rebounded strongly in July with a 1.1% seasonally adjusted rise above June’s level and were 1.9% greater than a year earlier.

Three Swiss indicators were reported today:

  1. The ZEW expectations index dropped back to a 2-month low of 25.0 in August from 34.7 in July.
  2. The UBS consumption indicator improved to a 4-month high of 1.38 in July from a revised score of 1.30 in June.
  3. And KOF’s index of leading economic indicators fell to a 3-month low in August of 104.1 versus 105.8 in June and 106.8 in July.

Data from the Bank of England showed slower on-year money growth in July but a 16-month high in the number of Ā mortgage approvals of 68,900. According to the British Retail Consortium, shop prices in the U.K. were 0.3% lower than a year earlier in August. That’s similar to results in the four prior months.

Italian producer price inflation decelerated for a third straight time, halving to 1.0% in July. Austrian PPI inflation that month of 1.3% also was less than in June, but Greek PPI inflation doubled to 3.0%.

In the year to August, Icelandic and Spanish consumer prices respectively rose by 1.7% and 1.6%.

Dutch producer confidence dropped 1.2 points to an 8-month low of 5.4 in August.

But Austria’s manufacturing purchasing managers index advanced 1.1 points to a 78-month high of 61.1 in August. Portuguese industrial production grew 6.4% on year in July, and Norwegian retail sales over that same 12-month span climbed by 3.5%.

Australian construction completions leaped 9.3% in the second quarter after posting quarterly declines in each of the previous four quarters. Building permits in Australia fell 1.7% on month and 13.9% on year in July, whereas New Zealand building permits that month dropped 0.7% on month but advanced 14.1% on year.

Just In: U.S. quarterly real GDP growth in the second quarter was revised upward to 3.0% from an estimate a month ago of 2.6% annualized. Stronger consumption accounted for the bulk of the revision. Non-residential business investment also got revised somewhat higher. The 3.0% rate of GDP growth from the first quarter is the fastest pace since the first quarter of 2015. On-year growth of 2.2% is the most since 3Q15 but still tepid. Of additional note, the personal consumption deflator, the Fed’s preferred measure of U.S. inflation, decelerated, posting only a 0.3% increase compared to 1Q and a 1.6% rise from a year earlier. Core PCE inflation fell to 1.5% from 1.8% in 1Q and 1.9% in the final quarter of 2016.

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


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