Intensifying Fear of a Trade War Generating Stampede from Risky Assets
June 19, 2018
Today’s story lies in market movement, not fresh economic news.
The DOW, German Dax and Paris Cac have dropped over 1.0%. Chinese share prices plunged 3.8%. The Hang Seng lost 2.8%. Japan’s Nikkei closed down 1.8%, and the South Korean Kospi fell by 1.5%.
The 10-year Treasury yield slid another 3 basis points and is under 2.90%. The 10-year British gilt and German bund yields have fallen by 4 and 3 basis points. The 10-year Japanese JGB yield remains to 0.02%.
The dollar fell 0.5% against the yen overnight but has appreciated 0.7% against the Chinese yuan, over 1% relative to the Turkish lira, 0.6% versus the kiwi and Aussie dollar, 0.4% vis-a-vis the loonie, and 0.5% against sterling and euro.
Gold is 0.3% weaker. WTI oil is down 0.9%.
Hungary’s central bank left its base rate at 0.90% and overnight deposit rate at negative 0.15%. Those levels have prevailed respectively since May 2016 and September 2017. A released statement defended the continuing need for maintaining loose monetary conditions. Inflation is not projected to rise to its target in a sustainable manner for another year.
Minutes from the June meeting of the Reserve Bank of Australia’s Policy Board express more ambiguity about the direction of the next interest rate change and foresee only gradual progress toward lowering unemployment and raising inflation toward target.
Australian home prices fell 0.7% last quarter and posted on-year growth of just 2.0% versus 5.0% in the final quarter of 2017. Australia’s index of leading economic indicators only edged 0.1% higher in April.
A speech by ECB President Draghi calls for patience in deciding when to begin raising the European Central Bank’s interest rate structure.
Federal Reserve Bank of Atlanta President Bostic supports the policy of gradually lifting interest rates back at least to a neutral level but has become more concerned about the adverse effect of trade barriers on economic confidence in the United States. Trade war concerns are indeed the dominant drive of investor activity today.
Construction output in the euro area recorded their first monthly increase of 2018 in April, a rebound of 1.8%. The on-year increase also of 1.8% was down from 3.0% in the first quarter and 2.7% in the final quarter of 2017.
Euroland’s seasonally adjusted current account surplus narrowed to EUR 28.4 billion in April from EUR 32.8 billion in March, EUR 36.6 billion in February, and EUR 39.6 billion in January. But the unadjusted EUR 410 billion surplus accrued over the past dozen reported months equaled a robust 3.6% of GDP versus 3.3% of GDP a year earlier.
U.S. housing starts jumped 5.0% in May and 20.3% from a year earlier, but building permits last month were at their lowest level in eight months.
In the year through May, producer prices increased by 3.1% in Portugal and 2.8% in Poland.
Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland construction output, Euroland current account, trade war
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