Stocks Up… Dollar and Yen Down

March 26, 2018

Equities recouped some of last week’s heavy losses in early trading. Share prices closed higher by 0.7% in Japan, 1.4% in India, and 0.8% in Hong Kong and South Korea. Equities in Europe so far show gains of 1.0% in Switzerland, 0.7% in Germany, 0.6% in Spain, 0.5% in the U.K. and 0.4% in France. U.S. futures suggest a higher opening, too. However, there were exceptions to this theme, notably drops of 1.2% in New Zealand and 0.6% in China, and no net change in the Italian bourse.

The dollar traded lower overnight, losing 0.6% against the kiwi and yuan, 0.5% relative to the peso and sterling, 0.4% vis-a-vis the Australian dollar and 0.3% against the euro. from a 3-year high of 104.63 per dollar, the yen has slipped back through the 105.0 per dollar threshold.

10-year U.S. Treasury, British gilt, and German bund yields have risen by 3, 2, and 1 basis points, respectively.

The big story in commodities is that China finally introduced yuan-backed crude oil futures, giving global investors a first chance to engage in a Chinese commodity market. The timing of this unveiling may reflect a subtle response to the U.S. tariffs against Chinese imports. West Texas Intermediate crude oil initially climbed but now shows a minuscule net dip. Comex gold is also marginally lower, and copper has dropped over 1%.

The quarterly growth rate of French GDP got revised upward 0.1 percentage point (ppt) to 0.7%. Net foreign demand accounted for the entire quarterly increase, as a 0.4 ppt negative contribution in inventories offset the support from final domestic demand. Personal consumption growth was very low. Real GDP ended 2017 2.5% above the level in the final quarter of 2016. GDP grew 2.0% in 2017 after a rise of 1.1% in 2016.

France’s fiscal deficit to GDP ratio fell to 2.8% last year from 3.4% in 2016. At the end of 2017, debt equaled 97% of GDP.

Dutch real GDP grew twice as fast in 4Q17 (0.8%) as in the third quarter. GDP recorded a 2.9% increase between 4Q16 and 4Q17 and climbed 3.2% in 2017 as a whole. A slightly larger EUR 20.9 billion current account surplus was posted last quarter after one of EUR 18.6 billion in 3Q.

Icelandic CPI inflation accelerated from 2.3% in February to 2.8% this month.

The British Bankers Association estimate of U.K. mortgage approvals in February of 38,120 was less than expected and also down from EUR 40K the month before.

New Zealand’s trade balance swung from a NZD 655 million deficit in January to a NZD surplus in February, causing the 12-month cumulative deficit to narrow 8% to NZD 3.02 billion.

Czech business sentiment weakened in March but the overall slide in economic sentiment was mitigated in part by improved consumer confidence.

A 0.5% monthly drop in Singapore industrial production last month halved the on-year advance to 8.9%.

Finnish PPI inflation dipped 0.2 percentage points to a 14-month low of 2.2% in February.

U.S. data releases scheduled today include the Chicago Fed National Activity index and the Dallas Fed manufacturing index. Dudley and Mester, Fed District Presidents in N.Y. and Cleveland, respectively, speak publicly today, and Mexico reports on retail sales and wholesale turnover.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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