The Trump Factor Strengthens Dollar but Depresses Global Stocks This Monday

July 23, 2018

Today’s menu of market-moving factors has been short on data but long on Trump pot stirring. The U.S. president over the weekend

  • Questioned the Fed policy of rate normalization. Presidential criticisms of monetary policy are infrequent because such can often backfire, but precedents do exist. Bush41 criticized Fed tightening in 1989-90 and later blamed Greenspan for depriving him of a second term.
  • Continued to duke it out with the Mueller investigation into Russian interference in the 2016 election.
  • Engaged in tit-for-tat threats with Iran’s leaders. Trump has put pressure on other nations not to purchase oil from Iran.
  • A forecast by the Group of Twenty that protectionism threatens the global economic outlook is a veiled criticism of the Trump presidency, which welcomes a trade war and believes such will benefit the U.S..

The dollar so far today has climbed 0.6% against the Mexican peso, 0.5% relative to the Australian dollar, 0.4% versus the kiwi and Chinese yuan, and 0.2% vis-a-vis the loonie, euro and sterling. Dollar/Swiss is unchanged, and the U.S. currency fell 0.2% against the Japanese yen.

Share prices overnight dropped 1.3% in Japan, 1.2% in New Zealand, and 0.9% in South Korea and Australia. Losses so far in Europe amount to 0.9% in Italy, 0.4% in Switzerland, 0.5% in France, 0.3% in the U.K. and 0.2% in Germany. U.S. stocks, led by the technology sector, are not immune with losses of 0.1-0.3%.

Rumors of possible pending changes in the Bank of Japan’s asset-buying program sent the 10-year JGB yield up 5 basis points to a 6-month high 0.07%. The 10-year German bund, up 2 bps, hit a 0ne-month high. The 10-year Treasury yield also firmed 2 bps, and its British counterpart edged a basis point higher.

WTI crude oil advanced 1.1%. Comex gold dropped 0.3%.

U.S. existing home sales recorded a third consecutive monthly decline in June, a drop of 0.6%. Such was down 2.2% from the year-earlier level and 3.9% from the level this past March.

The Chicago Fed National Activity Index rebounded in June to a reading of 0.43, a two-month high after printing at a downwardly revised 0.45 in May.

The South Korean trade surplus amounted to $6.33 billion in June, bringing the first-half surplus to $32.8 billion compared to a surplus of $44.9 billion a year earlier.

In June, CPI inflation accelerated 0.2 percentage points (ppts) to 0.6% in Singapore and 0.3 ppts to 2.4% in Hong Kong. Global protectionism is lifting inflation.

Turkish consumer sentiment rose to a 21-month high in Turkey of 73.1 in July after scores of 70.3 in June and 69.9 in May. Danish consumer sentiment, in contrast, settled back to 9.7 following readings of 10.6 and 9.3 before that.

Greece posted its first current account surplus in eight months during May, albeit just 191 million euros, and the January-May deficit amounted to EUR 4.0 billion.

Swiss M3 money growth slowed 0.4 percentage points to 2.4% on year in June.

Canadian wholesale turnover rose 1.2% in May to a record high. This data series has followed a see-saw pattern lately, that included a solid gainĀ  in March as well but drops in April and February. The 12-month rate of increase was 4.7%, up from 4.3% in April but down from 6.4% in January.

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


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