Reopening Fuels Optimism But Escalating U.S./Chinese Political Tensions Introduce Caution

May 27, 2020

Movements overnight in the dollar were mixed, with gains of 0.3% against the yuan, 0.4% relative to the Swiss franc, and 0.1% versus the yen but declines of 0.5% relative to the kiwi, 0.4% versus the euro, 0.3% against the loonie and Australian dollar and 0.1% relative to the peso.

European stock markets advanced in response to loosening stay-at-home restrictions, news of a large EU fiscal relief package, and data pointing to an economic inflection point. Share prices are up 2.4% in Spain, 1.9% in Germany and France, 1.5% in Great Britain and 1.4% in Italy.

Equities closed lower in China and Hong Kong but mostly up elsewhere in the Pacific Rim.

Ten-year U.S., German and Japanese sovereign debt yields are unchanged.

The prices of West Texas Intermediate crude oil and gold have dropped by 1.1% and 0.6%.

The Swiss Zew expectations index, a gauge of investor sentiment, rose to a 16-month high of 31.3 this month after printing at 12.7 in April and a record trough of -45.8 in March.

Austria’s manufacturing purchasing managers index rose from a record low in April of 31.6 to 40.4 in May, That’s still well below readings of 45.8 in March and 50.2 in February but indicates a slower rate of contraction.

Finnish consumer sentiment became less negative in May. With a reading of -9.0, such reversed more than half the slide from -7.1 in March to -13.9 in April.

Sentiment in French manufacturing rose 3.0 index points to 70.5 in May, but consumer confidence eroded further although not as sharply as such had done in April.

Corporate profits in China posted only a 4.3% on-year decline in April, which was a much smaller drop than than of 36.7% in the first quarter of 2020.

Norwegian retail sales rebounded 4.8% on month and 3.8% in April.

Swedish negative PPI inflation lessened in April. After dropping 1.2% on month and 3.6% on year in March, producer prices were flat on month and down 3.0% on year last month.

Business sentiment in South Korea continues to deteriorate, printing this month at 48 after readings of 52 in April, 56 in March, 65 in February, and 76 in January.

There wee 6.5% fewer construction completions in Australia last quarter than a year earlier.

Factory output in Thailand recorded the largest 12-month rate of decline in 8-1/2 years during April, a plunge of 17.2%.

In a tad less than two and a half months, the reported number of U.S. Covid-19 deaths in America has mushroomed from 61 on March 15th to 100,625. For a nation with just 4.3% of the world’s population, today’s level represents 28.5% of global cases. The true U.S. number is actually considerably higher than 100K because the U.S. has performed fewer per capita virus tests than other governments. At the rate since mid-March, over half a million Americans would die in a year’s time from Covid-19, yet Washington is speeding ahead with reopening without adequate infection tracing in place. Such complacency contrasts with the relentless fuss of congressional republicans over just four American deaths in far-off Benghazi in 2012. Where’s the sense of perspective? Government negligence was involved in each instance, but only one of them resulted in catastrophic consequences. Adding insult to injury, the biggest critic of the Obama Administration regarding Benghazi is now the Secretary of State.

Investors await the release later today of the Federal Reserve Beige Book, a report of recent regional economic conditions in the United States.

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


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