Share Prices Down as U.S. and China Exchange Mutually Destructive Tariff Threats

May 9, 2019

It’s crunch time in the U.S.-Sino trade negotiations, and investors are hedging against the worst.

  • The dollar climbed 0.6% against the yuan overnight.
  • The price of Comex gold firmed another 0.2%, while WTI oil slid 0.3% and under $62.
  • The 10-year U.S. Treasury yield popped higher after a poorly received Treasury auction yesterday but then settled back 3 basis points overnight to 2.45%. Ten-year German bund and British gilt yields meanwhile dipped a basis point.
  • ¬†Share prices in Asia slumped 3.0% in South Korea, 2.5% in Hong Kong, 1.7% in Taiwan, 1.1% in Indonesia, 1.5% in China and 0.9% in Japan.
  • Equities also have faltered in Europe, dropping so far by 1.1% in France, 0.7% in Spain and Germany, 0.8% in Italy, and 0.6% in Switzerland.

Dollar movements against currencies other than the yuan have been muted, with the euro, loonie, and kiwi holding unchanged on balance. The dollar is up 0.2% against the peso, Aussie dollar and sterling but down 0.2% relative to the yen and 0.1% versus the Swiss franc.

With almost a third of the election districts in South Africa counted, the ruling ANZ is holding onto power with 55%, twice the voter support for its main opponent.

Chinese CPI inflation accelerated 0.2 percentage points to a 6-month high of 2.5% in April. PPI inflation rose to 0.9% last month from 0.4% in March and 0.1% in the first two months of 2019.

New yuan lending in China totaled CNY 1.020 trillion in April, down from CNY 1690 billion in March and somewhat less than forecast. On-year M2 growth dipped marginally to 8.5%.

Japanese consumer confidence slid to an index reading of 40.4 in April, which is a 38-month low, from 40.5 in March and 42.6 in December. November 2017 was the last month to see a rise in that index.

Officials at Bangko Sentral ng Pilipinas cut the Filipino overnight reverse repo rate by 25 basis points to 4.5%. This was the first reduction since May 2016. The rate had been hiked by 175 basis points in a series of five moves between May and November of last year.

The Executive Board of the Bank of Norway left its policy interest rate at 1.0%, having raised such by 25 basis points in both September 2018 and March 2019. Moreover, a released statement from officials indicated that a third tightening is probable in June. Previously, the key policy rate had been reduced 175 basis points from February 2011 to March 2016.

Copom, the policy committee at the Central Bank of Brazil, left the Selic interest rate at a record low of 6.5% following the latest monetary policy review. Between October 2016 and March of last year, such had been progressively lowered by a total of 725 basis points. Although higher in March than February, Brazilian inflation remains within the 3-6% target range and, according to a released statement, is likely to stay so. The strength of the economic recovery, meanwhile remains very tepid. First-quarter GDP was only 1.1% higher than a year earlier.

Filipino GDP grew by a lessening 1.0% last quarter, slicing the year-on-year growth rate to a four-year low of 5.6% from 6.3% in the final quarter of 2018.

The downtrend in Greek unemployment has stalled at a still-lofty 18.5-18.6%, where such has been since October.

Irish CPI inflation accelerated in April to an 80-month high of 1.7%. CPI inflation also moved higher last month in Hungary to 3.9% versus 3.7% in March and 2.7% at end-2018.

The on-year rise in South African industrial production rose to 1.2% but fell in the Czech Republic to a mere 0.1%. Spain, too, saw industrial production in March drop 1.2% on month and 3.1% from a year earlier.

Britain’s Royal Institute of Chartered Surveyors housing index edged up to -23% in April from -24% in March and -27% in February but remained considerably weaker than the reading of -7% in April 2018.

Denmark’s current account deficit in March was 9% smaller than a year earlier.

U.S. producer prices, monthly trade deficit and weekly jobless insurance claims will be released shortly as will Canadian new home prices and trade balance.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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