More Evidence of a Global Slowdown

July 2, 2019

The dollar fell 0.4% against the Australian currency and 0.3% vis-a-vis the Japanese yen but is little changed otherwise.

Equity markets in the pacific Rim slid 0.4% in South Korea and 0.3% in Taiwan but advanced 1.1% in China. In Europe, the British Ftse is up 0.5%, but the German Dax is unchanged. The U.S. S&P 500 also is flat.

WTI crude oil dropped 1.1%, while Comex gold rose 0.4%.

The 10-year British gilt yield slumped another five basis  points, and its U.S. and German counterparts are down by two and one basis points, respectively.

As was expected, the Board of the Reserve Bank of Australia engineered a second consecutive 25-basis point reduction of its Official Cash Rate, which now drops to a record low 1.0%. A released statement asserts a readiness to act further if deemed necessary: “The Board will continue to monitor developments in the labor market closely and adjust monetary policy if needed to support sustainable growth in the economy and the achievement of the inflation target over time.”¬† Australia has not been immune from the global slowdown and continues to face external risks in spite of the temporary Chinese-U.S. trade war truce. Inflation has hovered below target for some time, and officials are concerned that a prolonged undershoot could jeopardize the credibility of its price target, especially since unemployment has moved further above their desired level. Today’s rate cut was the twelfth of the present easing cycle and the first reduction at consecutive policy meetings since 2012. Prior to last month, the OCR had been at 1.5% since a 25-basis point cut in August 2016.

The global purchasing managers index for manufacturing, which is compiled by JP Morgan, fell 0.4 points to 49.4 in June, indicating the fastest rate of contraction in that sector since October 2012.

Depressed by Brexit concerns, the British construction PMI dropped 5.5 points last month to 43.1, its weakest reading since March 2009. A score of 50 separates expanding activity from a contractionary trend.

The Canadian manufacturing PMI of IHS edged up 0.1 point to 49.2 but was the third straight sub-50 reading.

The ABSA manufacturing PMI of South Africa climbed 0.8 points in June but, at 46.2, indicating a contractionary trend for a sixth consecutive month and the 8th time in the past nine months.

Producer prices in the euro area dipped 0.1% on month, marking their third straight on-month decline and resulting in a reduced 1.6% 12-month rate of increase in May after on-year gains of 2.6% in April, and 2.9-3.0% during the previous four months.

The volume of German retail sales defied expectations of a 0.5% increase in May, instead dropping 0.6% after a 1.0% slump in April and only a 0.1% uptick in March.

Retail sales in Hong Kong recorded a fourth straight 12-month rate of decline in May. Such were 1.7% fewer than in May of 2018.

Business confidence in New Zealand according to the NZIER index dropped to the lowest level since March 2009. Building permits in New Zealand rebounded 13.2% in May following back-to-back month-on-month drops of 7.4% in March and 7.9% in April.

Brazilian industrial production dipped 0.2% on month in May. That was the third drop in five months. Brazil’s trade surplus last month was 14.6% smaller than a year earlier.

The British Nationwide house price index edged up only 0.1% on month, resulting in a 4-month low of just 0.5% in the year-on-year comparison of this measure.

Producer price inflation slowed to a 4-month low in Romania of 4.8% May and a 5-month low of 2.7% in the Philippines in May. Producer prices in Thailand dropped 0.9% on month in June and were 1.1% lower than a year earlier. Thailand consumer price inflation slowed to a 4-month low last month of 0.9% (0.5% on an underlying core basis). South Korean CPI inflation stayed at 0.7% in June, matching May’s 4-month high.

The New York regional PMI, known as the NAPM index, barely rebounded in June following a huge decline from 77.3 in April to 48.6 in May. June’s reading of 50 signified neither expansion nor contraction.

The U.S. IBD/TIPP measure of investor optimism slid from 58.6 in May to a 4-month low of 53.2 in June.

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





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