Volatile Market Session on Final Business Day of the Quarter and Amid Many Data Reports

June 29, 2018

Share prices climbed 2.8% in Hong Kong, 2.3% in Indonesia, 2.2% in China, 1.7% in Taiwan, but just 0.2% in Japan. In Europe, equities have risen 1.3% in Germany and France, 1.6% in Switzerland, 1.0% in Italy and 0.6% in the U.K.. The DOW shows a gain of slightly over 1.0% so far today.

Another month-on-month decline in the dollar seems assured, as the greenback today has lost 1.3% against the euro, 0.9% relative to sterling and the loonie, 0.5% versus the Swissie and Aussie dollar, 0.4% vis-a-vis the peso, 0.3% against the kiwi, and o.1% versus the yuan. The maverick yen has eased slightly, however.

Ten-year Treasury and British gilt yields are a basis point firmer.

WTI oil has soared another 1.0% to $74.15 per barrel. Gold is little changed at $1,252.20 per ounce. Crypto currencies continue to be hammered.

Japanese industrial production unexpectedly dipped 0.2% in May, warranting a trend designation of “picking up slowly.” But Japan’s jobless rate contracted to a new low of 2.2% that month from 2.5% in both March and April. On-year employment growth exceeded 2.0% for a third straight month. Housing starts were 1.3% greater than in May 2017, but construction orders recorded an on-year slump of 18.7%, most in at least a year. Japanese consumer confidence slid 0.1 point to a 2-month low of 43.7, thus remaining well below the 50 neutral level.

CPI inflation in the euro area ticked up 0.1 percentage point (ppt) to 2.0% in June because of 1.9 ppt and 0.3 ppt increases in the energy and food components. However, core consumer price inflation eased 0.1 ppt to 1.0% and was also 0.1 ppt less than in June 2017.

German import price inflation accelerated to 3.2% in May, thanks to a hefty 27.2% surge in energy. Non-energy import prices were just 0.4% greater than in May 2017. German retail sales volume sunk 2.1% on month in May, most in over a year and resulting in the first year-on-year drop (1.6%) since October 2017. Finally, German labor statistics remained strong — there were 15K fewer jobless workers this month, 4K more job vacancies than in May, and 1.3% more employed people than a year earlier.

British GDP growth in 1Q got revised up 0.1 percentage point to 0.2%, but the 1.2% trend from a year earlier was the lowest since the spring of 2012. The U.K. current account deficit narrowed to GBP 17.72 billion in 1Q from GBP 19.54 bln in 4Q17 and GBP 19.62 billion in the first quarter of 2017. As a percent of GDP, Britain ran a 4.1% deficit last year.

In the year to May, producer prices climbed by 2.9% in France, 7.0% in Greece, 4.2% in Singapore, 3.1% in Canada, 2.4% in Austria, 1.0% in The Philippines, but just 0.1% in Cyprus. And Malaysia’s PPI fell 2.2%.

Bank Indonesia engineered its third interest rate hike since May 17, and the 50-basis point hike of the key 7-day reverse repo rate to 5.25% was twice market expectations. Today’s move also brought the cumulative tightening to a full percentage point, thus fully reversing four previous 25-bp cuts between June 2016 and September 2017. The tightening has been a response to rupiah depreciation and further Fed tightening.

Canadian monthly GDP edged up 0.1% April, the smallest gain in 3 months. GDP was 2.5% higher than in April 2017, but industrial production posted a 5.1% on-year rise.

U.S. data reported today showed

  • A weaker than expected 0.2% rise of personal consumption spending in May with no volume change.
  • Higher inflation according to the PCE price deflator of 2.3% and the core PCE price index of 2.0%.
  • A five-month high in the Chicago regional purchasing managers index, which printed 1.4 points higher in June (64.1) than the month before.
  • A two-month high in the Reuters/U. Michigan consumer sentiment index in June. However, the final measure of 98.2 was revised 1.1 points below the preliminary estimate and was just 0.2 points better than May’s outcome. The index had posted its best reading this year of 101.4 in March.

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


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