Several Big Developments

April 21, 2020

Although well above Monday’s lows, the price of WTI oil (-$4.00 per barrel) remains negative. This development continues to ripple well beyond other commodity markets, including the exertion of a drag commodity-sensitive currencies. The dollar overnight advanced 2.5% against the Russian ruble, 1.3% relative to the New Zealand dollar and Mexican peso, 1.5% versus the Norwegian krone, 1.0% vis-a-vis the Australian dollar, 0.9% against the South Korean won, 0.8% versus the loonie, 0.7% against the South African rand, 0.6% relative to the Turkish lira and 0.5% vis-a-vis the Indian rupee.

A rumor is circulating that the North Korean leader, Kim Jong Un, whose age is only in the mid-30s, may be gravely ill after undergoing heart surgery around April 12th. The rumor has been denied, but that would have been the case even if it were true.

U.S. President Trump is attempting to use an executive order to ban all legal as well as illegal immigration indefinitely in order to quarantine the nation from importing new cases of Covid-19 but also to safeguard U.S. workers’ jobs during the recovery. Meanwhile, the latest political issue dividing America concerns stay-at-home policies that have shuttered businesses and social activities.

The official count of reported Covid-19 cases just went above 2.5 million worldwide to 2,501,907 with 171,735 deaths, with about a quarter of those occurring in the United States.

In market activity,

  • Equities fell sharply for a second straight day, closing down 3.2% in India, 2.8% in Taiwan, 2.5% in Australia, 2.2% in Hong Kong, 2.1% in New Zealand, and 2.0% in Japan. Market declines so far in Europe amount to 2.8% in Germany, 2.5% in France, 2.0% in Switzerland, 1.9% in the U.K., and 1.8% in Italy and Spain.
  • Wild swings continue in ten-year sovereign debt yields, which fell overnight by four basis points in the U.S., Germany, Great Britain and the Netherlands and by 5 bps in France, but  rose 7 bps in Greece and 5 bps in Italy.
  • Safe-haven demand lifted the dollar by 1.0% against sterling, 0.3% versus the yuan, and 0.2% relative to the euro and Swiss franc. The yen slipped 0.3%.

The monthly investor sentiment surveys conducted by the ZEW institute in Germany produced a surprising diversity between the situations faced now and future expectations. Germany’s expectations index improved from an 8-year low of -49.5 to a 66-month high of +28.2 in April, which defies forecasts of minus 42. However, Germany’s index for current conditions, which had deteriorated from -15.7 in February to -43.1 in March, accelerated that trend in April with a reading of -91.5. Regarding the whole euro area, expectations recovered from a 7-1/3 year low of -49.1 in March to a 3-month high of +25.3, while the current situation deteriorated to a score of -93.9 from -48.5 in the prior month.

British monthly labor market statistics for March revealed a considerably smaller-than-forecast 12.1K rise in jobless insurance claims and only a 0.1 percentage point uptick in ILO-basis unemployment to 4.0%. But on-year average weekly wage earnings growth slowed 0.3 percentage points to 2.8%.

The year-on-year plunge in Japanese tool orders was revised marginally upward for March but at 40.7% still constituted the greatest decrease in 125 months. A separate Japanese data report showed a smaller on-year 0.8% increase in supermarket sales after an advance of 4.1% between February 2019 and February 2020.

Minutes from the Reserve Bank of Australia’s early April Board meeting reveal confidence that the two reductions of the Official Cash Rate during March to a record low of 0.25% may be sufficient. The rate was changed further at the April meeting, and the central bank has throttled back its daily purchases of bonds to a smaller level.

Polish producer prices fell 0.5% on year in March, their biggest 12-month rate of decline in 45 months. Czech PPI inflation decelerated a whole percentage point for a second straight month in March to 0.4%.

The year-on-year drop in Polish industrial production in March of 2.3% was the largest 12-month decline in nine months.

Switzerland ran a CHF 8 billion trade surplus in the first quarter. Spain’s EUR 2.117 billion trade deficit in February was 19% narrower than a year earlier. February current account deficits in Greece of EUR 1.14 billion and Portugal of EUR 278 million were in the red for the fifth and fourth straight month, respectfully.

Canadian retail sales in February rose 0.3% on month but decelerated 0.7 percentage points to a 3.0% 12-month rate of increase.

Just ahead: U.S. existing home sales.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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