Investors Not Sure What to Think

March 28, 2018

Although stocks traded mostly lower overnight, U.S. futures point to a rise around the open. However, a pattern seems to be forming of early resilience giving way to sell-offs in the final part of each session. This is reminiscent of 2008-09, when much of the markets steep decline occurred in the final 30 minutes of each day, so stay tuned.

The U.S. and South Korea reached a deal modifying their bilateral trade relationship. Trump’s preference is to renegotiate bilateral trade arrangements.

China claims that North Korea is willing to talk about modifying its nuclear weapons program. The dollar rose 0.6% against the Japanese yen in response. Another perceived improvement of the geopolitical landscape has been the solidarity of Western governments in expelling Russian diplomats from their countries.

Share prices lost 2.8% in Hong Kong, 1.6% in Singapore, 1.5% in New Zealand, 1.4% in China, 1.3% in Japan and South Korea, 1.1% in Taiwan and Indonesia, and 0.7% in Australia. European losses have been smaller than Asia’s, amounting so far to 0.8% in France and Greece, 0.7% in Germany, and 0.3% in Switzerland, Spain and Italy. The British Ftse edged just 0.1% lower.

The dollar rose overnight by 0.5% against the Swiss franc and 0.1% versus the yuan and kiwi. The dollar is down 0.2% relative to the loonie and peso and unchanged versus the euro, Aussie dollar and sterling.

The 10-year British gilt yield fell four basis points. Britain’s distributive trades index unexpectedly dropped 16 points to a reading in March of -8, lowest since last October. The German 10-year bund yield slid a basis point.

Commodities weakened broadly. WTI oil and Comex gold, for instance, are 0.7% and 0.5% below yesterday’s closing levels.

German consumer confidence rebounded 0.1 point to a 2-month high in April of 10.9. French consumer confidence in March, on the other hand, was only unchanged in March after dropping back 4 points to a score of 100 in February.

Austria’s manufacturing purchasing managers index dropped 1.2 points to a 10-month low in March, but at 58.0 such still conveyed fairly brisk growth.

Several European countries reported sluggish retail sales:

  • The volume of sales in Norway unexpectedly fell in February for a second straight time, and the 0.6% drop was twice the size of January’s, leaving real sales just 0.1% above the year-earlier level.
  • Swedish retail sales grew only 0.3% in February. The 12-month rate of increase, 1.5%, was faster than January’s 8-month low but just half as much as back in December.
  • Likewise, Irish retail sales dipped 0.2% on month, and the 1.8% on-year increase in the first two months of 2018 was down from 5.2% in the final quarter of 2017.
  • Spanish on-year retail sales growth slowed to 1.9% in February from 2.2% in January.

Investor sentiment toward Switzerland continued to go south in March, with a reading of 16.7 after ZEW expectation scores of 25.8 in February, 34.5 in January and 52.0 at the end of 2017.

Italian industrial orders and sales respectively posted monthly declines of 4.5% and 2.8% in January, but 12-month changes were solidly in the black.

Revised South Korean GDP figures show an unchanged quarterly dip of 0.2% in 4Q17 and a lower on-year pace of 2.8% than estimated earlier. Real GDP hadn’t posted a quarterly contraction since the Great Recession.

The ANZ business climate index for New Zealand dropped another point to print at negative 20 in March.

Policymakers at the Bank of Thailand voted 6-1 to keep their main interest rate at 1.50%, its level since a 25-basis point cut three years ago. Officials project a slower rise in inflation than imagined earlier. Hence, very accommodative monetary policy is still required to promote growth and a return of inflation to target. There are external risks, however.

U.S. revised 4Q GDP data are due shortly. Pending home sales and the advance trade deficit estimate get released today as well.

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


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