Paused Rise of Dollar and Sovereign Debt Yields but Commodity Rally Continued Overnight

April 24, 2018

The dollar slipped overnight by 0.2% against the Aussie dollar and sterling and 0.1% versus the euro. The kiwi and yen fell 0.3%, while the loonie is flat.

The ten-year Treasury yield eased back a basis point and, at 2.97%, remains below the key 3.0% threshold. Ten-year German bund, British gilt and Japanese JGB yields also slid a basis point.

West Texas Intermediate crude oil and Comex gold advanced by a further 0.6% and 0.2%. Copper touched an 8-week high.

In the Pacific Rim, share prices rose 2.0% in China, 0.9% in Japan, 0.6% in Australia and 0.5% in Hong Kong but dropped 1.2% in Indonesia, 1.1% in Taiwan, and 0.4% in South Korea. European equities are narrowly mixed, with rises of 0.3% in the U.K. and 0.2% in Germany and Italy but declines of 0.3% in Greece and Spain and 0.1% in France.

The German IFO business climate index declined more than anticipated, printing at 102.1 in April after 103.3 in March, 104.0 in February, 104.8 in January, 105.0 in December and 105.2 last November. Ifo Institute officials declared “the German economic is slowing down.” A softer tone was experienced in manufacturing, services, wholesale activity, and retail trade, but construction improved to a new record high.

Australian consumer prices rose 0.4% last quarter above the 4Q17 level, keeping the on-year inflation rate at 1.9% for the third time in the past four quarters. Measures of core CPI inflation were at 1.9% and 2.0%.

Japanese corporate service prices posted a 0.5% increase in March both month-on-month and year-on-year. The 12-month rate of increase was the lowest in over a year.

Japan’s index of leading economic indicators was revised up by 0.2 points to 106.0 in February. That’s a two-month high. The index of coincident economic indicators was also revised upward.

Japanese machine tool orders posted the smallest on-year increase in March (28.1%) since last July. Machine tool orders in the first quarter were 37.7% greater than a year earlier. Supermarket sales in Japan were 0.1% below their year-earlier level in March, the weakest 12-month comparison since December.

The Confederation of British Industry released its April monthly survey of industrial trends. The measure for incoming orders printed at +4, the same level as in March and April 2017 but otherwise the weakest in a half year.

British public sector net borrowing in fiscal 2017/18 ending last month was at the smallest level (GBP 42.6 billion) in eleven fiscal years. Public debt equaed 86.3% of GDP.

Euroland’s collective budget deficit to GDP ratio narrowed to 0.9% in 2017 from 1.5% in 2016, 2.0% in 2015 and 2.5% in 2014. Euro area government debt equaled 86.7% of GDP in the final quarter of last year, down from 88.1% in the third quarter and 89.0% in the final quarter of 2016.

Italian consumer confidence fell back to a 2-month low of 117.1 in April from 117.5 in March but exceeded February’s 115.6 value. Manufacturing business confidence in April dropped 1.2 points to 107.7, the weakest so far this year.

Switzerland recorded a CHF 2.321 billion trade surplus in March and a surplus of CHF 6.5 billion in the first quarter. The first quarter 2017 surplus had been larger at CHF 9.9 billion.

Australia’s index of leading economic indicators recovered 0.3% in February, and South Africa’s LEI went up 1.4% that month.

In the year to March, producer prices rose 3.1% in Finland, while consumer prices climbed 2.6% in Hong Kong but just 0.2% in Singapore.

Scheduled U.S. data releases today include consumer confidence, the FHFA house price index, new home sales, the Case Schiller home price index in major metropolitan areas, and the Richmond Fed manufacturing index.

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

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