Asian Stocks and Yuan Falter on Last Day of G7 Summit… Germany Gets Some Bad Economic News

August 26, 2019

The Chinese yuan slumped 0.7% against the dollar, touching a new intra-day low of 7.1527.

Stock markets around the Pacific Rim fell Monday by 2.2% in Japan, 1.9% in Hong Kong, 1.6% in South Korea, 1.7% in Taiwan, 1.5% in Singapore, 1.3% in Australia and New Zealand and 1.2% in China. U.S. President Trump, who escalated his trade war on Friday, now claims that Beijing requested renews trade talks. Chinese sources tell a different story.

Today is the third and last day of the G7 summit in France. Trump was a no show at a special meeting on climate change. Lots of tweets from the president instead. On most issues, the U.S. appears isolated from the other leaders. German Chancellor Merkel claimed progress in search for a peaceful resolution to Iran situation.

The monthly German business climate survey of the IFO Institute produced much weaker indices than anticipated, leading IFO officials to assert that recessionary signs are thickening. The overall index fell 1.5 points to 94.3, its weakest level since November 2012. Business expectations dropped 0.8 points, while current conditions slumped 2.3 points. All four major industrial sectors — manufacturing, services, trade and construction — had lower readings in August than July.

The dollar rose today by 0.4% against the yen and sterling, 0.5% vis-a-vis the Swiss franc and 0.2% versus the euro and Australian dollar, but it also slid 0.3% relative to the kiwi.

Among commodity prices, oil climbed 1.1%, and gold edged 0.1% higher.

Among 10-year sovereign debt yields, a 3-basis point rise in the Japanese JGB was the most meaningful movement.

Unlike share price declines in the Pacific Rim, European bourses have mostly strengthened, but a 0.5% slide in the British Ftse is a notable exception.

The final estimate of Japan’s June index of leading economic indicators was unrevised at a 112-month low of 93.3. The indices of coincident and lagging economic indicators were at their lowest points since January 2019 and October 2018, respectively.

New Zealand’s trade deficit of NZD 685 million in July was 3.4 times larger than a year earlier and 58% greater than the monthly mean over the previous eleven months.

But Hong Kong’s July trade deficit of HKD 32.2 billion in July was was 31.6% smaller than in July 2018 due to an 8.7% plunge in imports.

Producer prices in the twelve months through July fell 0.8% in both Spain and Finland. That’s down from PPI inflation last September of 5.3% in Spain and 5.9% in Finland.

Singaporean industrial production recorded a year-on-year decline in July for the fifth consecutive month, but the dip was only 0.4%.

Czech business sentiment improved to a 3-month high in August, whereas consumer confidence there slid back to a 2-month low. Polish unemployment of 5.2% in July was the lowest in nearly 29 years.

The monthly Chicago Fed National Activity Index printed lower at -0.36 in July, which was also the second weakest value in the last six months. Measures of production, employment , personal consumption and sales all shifted adversely. U.S. durable goods orders, +2.1%, rose twice as much in July as forecast but the year-to-date advance was still only 0.3% from a year earlier. Still ahead: Dallas Fed manufacturing index.

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

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