A Focus on Italy, Korea, Turkey & Oil Prices as U.S. and Britain Observing Holidays

May 28, 2018

Italian President Mattarella rejected the League/5-Star choice for economy/finance minister, whereupon that coalition withdrew its bid to lead Italy’s government and called for Mattarella’s impeachment and immediate election. Mattarella then asked former IMF Director of Fiscal Policy Cottarelli to form a provisional governing coalition. Elections likely no later than the autumn.

Italian share prices dived 1.3%, and the 10-year Italian sovereign debt yield jumped 15 basis points in response to this new political uncertainty, pulling up Portuguese and Spanish yields by 10 and 5 basis points. The 10-year German bund yield fell 3 basis points, in contrast.

The U.S. and British markets are closed for the Memorial Day and last spring bank holidays, respectively.

Oil prices dropped by an additional 1.8% to $66.63 (down from $72.24 per barrel a week ago) as Saudi Arabia and Russia moved close to a deal to increase their production levels. Gold (-0.5%) and industrial metal prices are lower, too.

A summit meeting between President Trump and North Korean Kim Jung-Un is apparently back on for June 12th in Singapore. Share prices rose 0.7% in South Korea and India, 1.6% in Indonesia, 0.6% in Hong Kong, but down 0.5% in Australia and 0.2% in China.

Without U.S. or British leadership, stock market movement in Germany, Switzerland, France and even Greece has been pretty limited.

The dollar has risen 1.4% against sterling and 0.8% relative to the loonie but has also declined 1.3% against the kiwi and 1.2% relative to the Australian dollar. Smaller dollar changes today are gains of 0.2% relative to the euro and Swiss franc and a 0.1% dip against the yen.

A 0.1% monthly rise in Japanese corporate service prices last month lifted their 12-month rate of increase to a 7-month high of 0.9%.

Chinese corporate profits, whose on-year increase had been dampened in March reflecting the Lunar New Year holiday, rebounded to a 21.9% 12-month rate of increase in April, most in six months. The January-April on-year advance of 15.0% still remained less than a 24.4% increase in the first third of 2017.

The Turkish lira rose above its recent low late last week following a 3-percentage point increase of the central bank late liquidity window lending rate to 16.5%. The currency rose by over 3% today when the central bank followed up the earlier supportive action with announcement that the 8% one-week repo rate will henceforth also be at 16.5%.

PPI inflation in Singapore increased sharply to 2.5% in April.

Italian PPI inflation, by contrast, fell a half percentage point last month to just 1.3%.

Swedish retail sales recorded increases in April of 0.6% from March and 3.6% from a year earlier. Sweden experienced a trade deficit in April of SEK 6.5 billion, which was more than twice the year-earlier deficit of SEK 3.0 billion.

Consumer confidence in Finland strengthened almost 7% this month to a 3-month high.

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


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