Exhausting Barrage of Data and Developments on Final Day of July

July 31, 2018

The dollar recovered 0.4% against the yen while sliding 0.3% relative to the euro and Australian dollar, 0.2% versus sterling and 0.1% vis-a-vis the loonie and Swiss franc.

The Bank of Japan changed the policy framework only marginally, which allowed the worried JGB market to settle down and the 10-year yield to slide back four basis points to 0.05%. The overall commitment continues for the BOJ to maintain an open-ended ultra-loose stance until core inflation of 2% is achieved.

A retreat continues in U.S. technology stocks, but equities overall were resilient in Asia and Europe overnight. Japan’s Nikkei closed unchanged. Share prices fell 0.5% in Hong Kong and 1.5% in Indonesia but advanced 0.4% in Singapore, 0.3% in India and China and 0.2% in Taiwan. European markets have risen 0.6% in the U.K. and Greece, 0.5% in Spain, 1.1% in Italy, and 0.2% in France. The German Dax shows a 0.1% downtick.

West Texas Intermediate crude oil slipped 0.6% and is back under $70 per barrel. Gold edged 0.2% lower.

Japan’s jobless rate backed up 0.2 percentage points to 2.4% in June, and on-year growth in jobs fell to 1.6%. Japanese housing starts and construction orders were 7.1% and 6.5% lower in June than a year earlier, and consumer confidence weakened to an 11-month low in July. A 2.1% drop of Japanese industrial production was a considerably worse result for June than had been expected, resulting in a 1.2% on-year slide and a smaller-than-forecast 1.2% 2Q-over-1Q increase. Production in June was 1.2% lower than a year earlier, but officials for a sixth straight time maintained the assessment that output is “picking up slowly.”

The government-compiled Chinese manufacturing and non-manufacturing purchasing managers indices printed disappointingly at 51.2 and 54.0 in July, which constitute respective 5- and 11-month lows. The composite PMI of 53.6 was 0.8 points lower than in June.

Euro area real GDP grew more slowly last quarter (0.3% versus 1Q and 2.1% on year) than forecast. The Ezone jobless rate did not drop further in June but rather remained at 8.3%. The flash estimate of CPI inflation in the euro area accelerated to 2.1% in July from 2.0% in June, 1.9% in May and 1.3% in both March and April as well as July 2017. Core CPI returned to May’s 1.1% from 0.9% posted in June. Energy prices were 9.4% higher than a year earlier compared to a 2.2% rise in the prior 12 months.

British consumer sentiment fell to five-month low in July.

German retail sales volume rebounded more sharply in June than expected, climbing 1.2% after a 1.5% monthly drop in May. Sales were 3.0% greater than in June 2017 and recorded a 1.4% average advance for the first half of 2018. German unemployment slid 6K in July, and job vacancies rose 7K. There was a 5.2% jobless rate for a third straight month.

The U.S. employee cost index went up 0.6% in the spring quarter, lifting the year-on-year increase to 2.8%, most since the summer of 2008. U.S. personal income and spending both rose by a decent 0.4% in June, when the savings rate was at 6.8%. The PCE and core PCE price deflators each held steady at 2.2% and 1.9% last month despite modest 0.1% monthly increases. U.S. house price inflation according to the Case Shiller index for 20 metropolitan areas edged down to 6.51% in May from 6.69% in April.

French CPI inflation accelerated 0.3 percentage points to 2.3% in July, most since March 2012. Portuguese CPI inflation of 1.6% was the most since April 2017.

Italy recorded its slowest quarter-0n-quarter growth in GDP (0.2%) since 3Q16, and the on-year advance also slowed to 1.1% from 1.4% in the prior quarter and 1.6% a year ago. Italian CPI inflation of 1.5% in June was at a 15-month high. The Italian jobless rate increased 0.2 percentage points to 10.9% in June.

Spanish GDP growth of 0.6% last quarter was the least in two years, but on-year growth still exceeded 2.5% at 2.7%. Austrian GDP grew 0.7% on quarter and 2.3% on year.

Australian building permits rose 1.6% on year in June. Private credit and M3 money in those 12 months advanced by 4.3% and 1.9%.

Canadian GDP growth accelerated to 0.5% in May and 2.6% on year. Industrial production also rose 0.5% on month and was 3.8% greater than in May 2017.

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

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