Dollar and Oil Price Down but Stock Markets Mostly Up

April 28, 2020

The dollar fell broadly overnight, with the biggest declines coming against the Mexican peso (1.5%), Norwegian krone (1.4%), and Swedish krona (1.2%). (The Swedish Riksbank released a dovish statement, but the Executive Board did not cut the zero percent repo rate as some had been expecting). The dollar also dropped by 0.6% relative to the yen, Australian dollar and sterling, 0.5% versus the euro and loonie, 0.3% vis-a-vis the kiwi, 0.2% against the Swiss franc and 0.1% relative to the yuan overnight.

Renewed selling pressure in oil depressed the price of West Texas Intermediate crude as low as $10.10 per barrel, and it remains down 8.5% on the day. Gold edged marginally downward.

In stock market action today, share prices jumped 3.7% in New Zealand following Monday’s holiday there and rose 1.2% in Hong Kong and India, 0.5% in Taiwan and Singapore, but also closed down 0.1% in China and 0.1% in Japan. Markets so far in Europe show share price advances of 2.4% in Italy, 1.6% in the U.K., Germany and Switzerland, 1.4% in France and 0.9% in Spain.

There’s been only scant net overnight change in 10-year sovereign debt yields amounting to a 1-basis point rise in Germany, a basis point dip in Japan and zero movement in the U.S. or U.K..

The British monthly distributive trades survey index plunged by a greater-than-forecast 52 index points to a 136-month low of -55 in April.

French consumer confidence dropped 8 index point, its biggest month-t0-month decline ever, and printed at a 14-month low of 95 in April.

Japanese unemployment only rose 0.1 percentage point in March to 2.5%. However, the widely followed job offers-to-seekers ratio slid 0.06 to a 42-month low of 1.39, and on-year growth in jobs of just 0.2% in March was down from 0.5% in February and 0.9% in January. The Bank of Japan’s measure of core CPI inflation slowed 0.1 percentage point to a mere 0.1%.

Austria’s manufacturing purchasing managers index sank 14.2 index points to a record low of 31.6 in April, shattering the previous all-time low of 33.1 at the start of 2009. Sub indices for production, orders, and manufacturers’ expectations were also at record lows, and inflationary pressure was the weakest in in 3-1/2 years.

A 1.7% monthly dive in Swedish retail sales trimmed the on-year rate of increase from 3.7% in the first two months of 2020 to only 0.6% in March. Sweden’s trade surplus contracted from SEK 11 billion in the first quarter of 2019 to SEK 4.1 billion in the first quarter of 2020 as exports fell faster than imports.

Norwegian retail sales fell 0.9% on month and rose just 1.3% on year in March.

First-quarter unemployment rose in both Spain and Hungary. Spain’s 14.41% was up from an 11-year low of 13.78% in the prior quarter but still less than 14.7% in the first quarter of 2019 and 16.7% in the initial quarter of 2018. Hungarian unemployment of 3.7% last quarter was up from 3.3% in the final quarter of 2019.

On the central banking front, the Swedish Riksbank’s repo rate was left unchanged at 0% at yesterday’s scheduled policy review, but the Executive Board’s released statement opined “this does not rule out the possibility of the interest rate being cut at a later date if this is deemed an effective measure to stimulate demand and support the development of inflation in the recovery phase.” Officials in March took a number of steps including a program of expanded bond buying “to facilitate credit supply in the economy and counteract a rise in interest rates to households and companies as uncertainty in the economy increases,” but they continue to feel that an interest rate cut back into negative territory would not be effective now against an imposed shutdown of activities to prevent further spread of the coronavirus. Revised macroeconomic forecasts depict two scenarios, one in which real GDP falls 6.9% this year with only 0.6% core inflation and the other envisioning a 9.7% drop in GDP but also accompanied by 0.6% core inflation. The Riksbank interest rate has not been cut in 2020. Sweden experienced a prolonged period with a negative interest rate. At the low point, it was at -0.5%. In January 2019 such was hiked to -0.25%, and a zero repo rate was restored this past December.

Minutes published today from the Bank of Korea’s monetary review on April 9 reveal a widespread belief among policymakers there that its repo rate may need to be cut further. It’s been 0.75% since a 25-basis point reduction last October.

Hungary’s central bank Monetary Council also left its base rate unchanged today. It’s been at 0.90% since a 15-basis point cut in May 2016. The overnight deposit rate has been -0.05% since March 2019.

Globally reported Covid-19 cases now top 3.08 million, and the death total is 212,336, 26.8% of which have occurred in the United States.

U.S. data releases scheduled today include a preliminary estimate of the trade deficit, the Case-Shiller monthly house price index, the Richmond Fed manufacturing survey, and the Conference Board’s consumer confidence index.

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

Tags: ,


Comments are closed.