Mixed Dollar, Higher Sovereign Debt Yields, and Big Jump in Price of Oil

May 9, 2018

In the wake of the U.S. pull-out from the multinational Iran nuclear deal, the dollar has fallen 0.7% against the loonie, 0.2% versus the kiwi and 0.1% relative to the peso, yuan and sterling. The greenback has risen 0.3% against the Swiss franc and 0.1% versus the euro, and it is unchanged relative to the yen and Australian dollar.

Ten-year U.S. Treasury and British gilt yields have firmed two and one basis points.

WTI oil shot up another 2.9% on the anticipated squeeze on Iranian and Venezuelan supplies. Gold is flat.

In the Pacific Rim, the Japanese Nikkei closed 0.4% weaker and the markets in China and South Korea edged marginally lower. But equities rose 0.5% in Hong Kong, 0.4% in New Zealand, and 0.3% in Australia. Markets in Europe strengthened by 0.5% in Spain and Italy, 1.3% in the U.K., 0.2% in Germany and France, and 0.4% in Switzerland. U.S. stocks at midday show a marginal uptick.

U.S. producer price inflation fell to 2.6% in April from 3.0%. The deceleration was a bit more than expected. Core PPI also dropped 0.4 percentage points to 2.3%.

Japanese international reserves continued a zig-zag pattern due to similar churning in dollar/yen. Such fell $12.3 billion last month after rising $6.5 billion in March, dropping $6.8 billion in February and climbing $4.3 billion in January.

Japanese real cash earnings rose 0.8% on year in May, swinging from a 0.8% on-year decline in April. Finally, the Japanese index of leading economic indicators fell 0.9 points to 105 in March.

Industrial production data for March were reported for France (down 0.4% in March and decelerating in year-on-year terms to 2.3%), Spain (rises of 1.2% from March and 5.1% from a year earlier), Finland (where the on-year pace doubled to 7.0%), and Hungary ( a monthly decline of 0.7% but a year-on-year increase of 1.9%).

Italian retail sales dipped 0.2% in March but were 2.9% greater than a year earlier.

In the year to April, consumer prices rose 1.9% in Sweden and by  2.4% in both Hungary and Norway.

British same-store sales in April were 4.2% lower than a year earlier.

South African business confidence weakened 1.6% to a reading of 96.0 in April.

The U.S. 30-year fixed rate mortgage rate dipped 2 basis points last week to 4.78%. Canadian building permits increased by 3.1% on month and 10.8% on year in March.

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



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