Market Focused on Russia, China and Hungary

April 9, 2018

Amid concern over the impact of economic sanctions against Russia, the dollar has appreciated 3% against the ruble, and Russian equities plunged some 11% today. Facebook CEO Mark Zuckerberg will be testifying before Congress tomorrow and Wednesday.

Expectations about how trade tensions between the United States and China get resolved continue to see-saw day-by-day, if not hour-by-hour. The U.S. market fell sharply on Friday, but today stocks closed up 1.2% in Hong Kong and Indonesia, 0.7% in Taiwan, 0.9% in New Zealand, 0.5% in Japan and India, 0.3% in Australia, and 0.2% in China and Singapore. Share prices in Europe so far show advances of 0.8% in Spain, 0.5% in Germany, 0.4% in Italy, and 0.2% in France and Switzerland. U.S. futures suggest a higher open, but the British Ftse has edged 0.1% lower.

The dollar has slipped today by 0.4% against the kiwi, 0.3% relative to sterling, and 0.2% versus the euro and Swiss franc. The dollar has risen 0.5% against the peso, 0.2% versus the Aussie dollar and 0.1% vis-a-vis the yuan. The loonie and yen are unchanged today against the dollar.

Ten-year U.S. Treasury and British gilt yields are up two and one basis points. There is some market evidence of upwardly creeping expectations that the Fed’s intent to continue to lift its targeted short-term interest rate may prove to be an ill-advised strategy. The danger of a trade war isn’t being taken seriously enough.

West Texas Intermediate crude oil has risen 1.0% to $62.69 per barrel. Gold is 0.2% softer.

Hungarian Prime Minister Orban’s right-wing government in elections yesterday captured two-thirds of the parliamentary seats. This not only keeps Orban in power for a fourth consecutive term but also potentially will enable the government to modify the constitution. The government opposes immigration and is hostile toward the EU.

Japanese and German current account data for February were reported.

  • Japan posted a JPY 2.076 trillion current account surplus, but the merchandise trade surplus of JPY 189 billion in February was smaller than forecast. The February 2017 current account surplus had been JPY 2.911 trillion. In seasonally adjusted terms, the trade balance swung from a 515 billion yen surplus in January to a 285 billion yen deficit, and the JPY 1.024 trillion current account surplus fell short of expectations.
  • Germany’s current account print at a surplus of EUR 20.7 billion in February, 11.6% narrower than a year earlier. The seasonally adjusted trade surplus dropped EUR 19.2 billion from EUR 20.5 billion in January, a monthly average of EUR 21.4 billion in the final quarter of 2017. German seasonally adjusted exports slumped 3.2% on month, which was more than twice the monthly decline of imports.

In other released Japanese data today, consumer confidence in March was unchanged from February’s 5-month low. Bankruptcies were 0.4% higher in March than a year earlier, versus a 10.3% drop seen in February. And the current economy watchers index for March rebounded marginally from a 9-month low in February but at 48.9 stayed below the key 50 level for a third consecutive time.

Chinese international reserves climbed $8.34 billion last month to $3.143 trillion.

Britain’s Halifax house price index rose 1.5% on month in March and recorded a 2.7% increase from March 2017, which was the higher on-year pace since December but below 4.5% last October and 3.8% in the year to March 2017.

Australia’s Performance of Construction index improved 1.2 points to a 4-month high of 57.2 in March.

The Swiss unemployment rate fell more than expected to 2.9% in March, but the decrease merely reflected seasonal bias.

Norwegian industrial production advanced 1.8% between February 2017 and February of this year.

Denmark and Hungary recorded larger trade surpluses in February than in January. Portugal’s trade deficit narrowed in February, but Finland’s deficit widened.

North American data releases later today will include Mexican consumer and producer prices, Canadian housing starts, and the Federal Reserves employment trends index.

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

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