Holiday Closures Hit Pause Button

May 25, 2020

Markets on Monday lacked direction due to holiday observances in the United States for Memorial Day, Great Britain for its late Spring bank holiday, and many Islamic countries where Ramadan’s end is being celebrated.

The dollar is unchanged from Friday’s close against the euro, Swiss franc, loonie and kiwi, while changes versus the yen, sterling, Australian dollar and offshore yuan amount to less than 0.1%. Within China, the yuan was fixed at a 12-year low against the dollar as political tensions continue between U.S. and Chinese officials.

Share prices took their cue from Friday’s advance in the United States. Equities rose 2.2% in Australia and 1.7% in Japan, and markets in Europe thus far are up 2.0% in Germany, 1.8% in Spain, and 1.4% in France.

The 10-year German bund yield edged a basis point lower, while its Japanese counterpart is a basis point firmer.

Economic data released today featured revised German GDP from last quarter and the May IFO Institute’s May German business climate index.

  • German real GDP fell 2.2% on quarter (not annualized) and 2.3% on year when adjusted for seasonality and variations in the number of business days. It was the largest quarterly contraction since the first half of 2009. Quarterly declines happened in personal consumption of 3.2% and investment in machinery & equipment of 6.9%. Net foreign demand exerted a 0.8 percentage point drag on growth, ans exports (down 3.1%) fell twice as rapidly as imports. Government spending, construction, and inventory growth mitigated the overall drop in GDP. Productivity fell 1.1% on quarter and 0.6% on year.
  • Amid some hope as steps were taken to ease lockdown restrictions, the IFO business climate index rebounded from April’s record low of 74.2 to a two-month high of 79.5 in May even though the sub-index for current conditions slipped by a further half-point to 78.9. The expectations subindex rose to a 3-month high of 80.1 following readings of 69.4 in April and 79.5 in March. The manufacturing, services, construction, and trade sectors each improved somewhat.

Hong Kong’s trade deficit narrowed to a 15-month low in April as a 6.7% on-year drop in imports exceeded exports’ slide by three percentage points. Mexico’s trade deficit of $3.807 billion last month, in contrast, was at its widest point in 15 months. This oil exporter saw overall exports post a 40.9% on-year plunge.

Swiss industrial production rose 0.4% last quarter, but its 0.8% advance from a year earlier was the smallest in six quarters. Austrian industrial production tumbled 9.5% in March to post its greatest 12-month drop (12.1%) in almost 11 years.

Spanish producer price deflation swelled to 8.4% in April, its most negative on-year comparison in at least 44 years. Producer prices in Finland were 7.0% lower than a year earlier after a 5.6% 12-month rate of decline posted in the prior month of March.

Czech consumer confidence rebounded to a 2-month high in May, but business sentiment there fell further to a 253-month low.

Japan’s index of leading economic indicators in March was revised a tad higher but, at 84.7, was still the weakest such has been in 127 months. Moreover, the index of coincident economic indicators was revised lower to a 105-month low.

Israeli GDP fell 7.1% between 4Q19 and last quarter at an annualized rate, making such the weakest quarterly decline since at least 1995. Israeli monetary policy is being reviewed today. at a meeting in early April, the key interest rate had been cut 15 basis points back to 0.10%. The key rate had also been at 0.10% from January 2015 until November 2018.

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



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