Dollar Up, Stocks Listless, and Sovereign Debt Yields Lower as Week Draws to an End

July 13, 2018

The dollar rose overnight by 0.4% against the kiwi and yuan and by 0.2% relative to the euro, loonie, Swiss franc, Aussie dollar and sterling. The dollar dipped 0.2% versus the peso and 0.1% against the yen.

The main pieces of economic news out today show

  • A 67% widening of the Chinese global trade surplus to $41.61 billion last month, which is a 6-month high and includes a record $29.0 billion surplus in commerce with the United States. This is more fuel for a trade war. The Chinese surplus versus the U.S. in the first half of 2018 was $133.8 billion compared to $117.5 billion a year earlier.
  • German wholesale price inflation accelerated to a 9-month high of 3.4% in June. Solid fuel and mineral oil products last month were 14.5% higher than a year earlier.
  • U.S. import prices fell back 0.4% on month in June, resulting in a slightly lower 4.3% 12-month rate of increase. The fuel component soared 33.8% on year, while the rest of the import price index collectively went up just 1.5%.
  • The Swiss PPI/import price index rose 3.5% on year, with imports advancing 6.8% to a 1.9% increase in domestic producer prices.
  • India’s trade deficit of $16.60 billion last month was the largest shortfall since May 2013. Imports were 21.3% greater than in June 2017.

U.S. equities are little changed on balance. The big overnight equity market move was a 1.9% rise of Japan’s Nikkei-225 index. Stocks also closed up 1.2% in Taiwan and 1.1% in South Korea but down by 0.2% in India and China and unchanged in Australia. European share prices are are up 0.3% in Germany and France but down 0.4% in Spain.

Ten-year sovereign debt yields dipped two basis points in Germany and the U.K. and a basis point in the U.S..

WTI crude oil advanced 0.7%, but gold is 0.4% softer.

The European Union revised down projected GDP growth in the euro area to 2.1% this year and sees the economy expanding by 2.0% in 2019. Inflation for both years got revised a bit higher to 1.7%.

Minutes from the ECB’s mid-June policy review revealed greater concern over the risks of protectionism and financial market volatility and a continuing belief that an accommodative stance needs to be maintained to ensure than inflation climbs back to target.

The Central Reserve Bank of Peru retained a 2.75% policy interest rate. In six moves from May 2017 to March 2018, the rate was reduced by 150 basis points. CPI inflation rose from 0.93% in May to 1.43% in June and seems on track to return to target of 2% by the end of this year. Growth appears more dynamic in Peru but still lies below its potential trendline. Moreover, global trade tensions pose a risk.

Revised Japanese industrial production data show a 0.2% on-month dip in output last month, same as the flash estimate. Production was 4.2% greater than in June 2017. Capacity dipped 0.1% on year, while capacity usage increased by 2.0%.

Germany’s index of leading economic indicators stagnated in May.

Spanish CPI inflation rose 0.2 percentage points to 2.3% in June. Finnish CPI inflation rose to 1.2% from 1.0%.

New Zealand’ manufacturing purchasing managers index fell to a 6-month low of 52.8 in June from 54.4 in May.

Dutch retail sales fell 0.8% in May and were only 2.9% higher than a year earlier.

The Norwegian trade surplus printed in June at NOK 22.0 billion and widened from NOK 101.3 billion in the first half of 2017 to NOK 118.8 billion in the first half of this year.

Real GDP in Singapore climbed 1.0% last quarter, but on-year growth eased to 3.8% from 4.3% in the first quarter.

Chinese bank lending jumped more than forecast to 1.84 trillion yuan in June from CNY 1.15 trillion in May, but M2 money growth unexpectedly slowed 0.3 percentage points to 8.0%, which is the weakest result so far this year.

Fed Chairman Powell delivers semi-annual Humphrey Hawkins testimony next week to the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday.

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


Tags: , , ,


Comments are closed.