Less Risk Aversion than Yesterday

June 12, 2020

Friday has seen another wide reversal in share price direction. The stock markets in France, Spain, Italy, Germany and Britain so far show daily advances of 2.0%, 1.6%, 1.5%, 1.4% and 1.3%. The shift following Thursday’s big declines occurred after overnight trading in the Pacific Rim where equities fell by 2.2% in New Zealand, 1.9% in Australia, 2.0% in South Korea, 0.8% in Japan and 0.7% in Hong Kong.

The ten-year U.S. Treasury and British gilt yields recovered four basis points and two bps, while their Japanese and German counterparts held steady.

The price of WTI oil advanced 0.6%, and gold edged up just 0.1%.

The dollar rose overnight by 0.6% against the yen and 0.2% versus the yuan but settled back 0.6% relative to the loonie, 0.7% versus the Aussie dollar, 0.3% vis-a-vis sterling and 0.2% against the euro.

Industrial production in April recorded on-month declines of 20.3% in Great Britain, 17.1% in Euroland, 9.8% in Japan, and 30.4% in Turkey. Year-on-year drops in those economies amounted to once-unthinkable 24.4%, 28.0%, 15.0%, and 31.4%.

Turkey also reported April retail sales, which plunged 21% on month and 19.3% on year.

British construction output in April dived 40.1% on month and 44.0% on year, while a monthly measure of GDP in April slumped 20.4% on month and 24.5% on year. A 10.4% on-year decline of GDP in February-April represents the biggest three-month drop from a year earlier.

The British goods and services trade balance swung into surplus by GBP 318 million as imports plunged 26.2% on month in April. The deficit on goods trade only narrowed 37% as import (down 21.9%) fell 7 percentage points faster than exports.

Japanese capacity utilization in April sank 13.3% on month and 21.5% on year. Also, Japan’s ratio of inventories to industrial shipments spiked 13.6% on month in April to 29.2% above its year-earlier level.

Factory output in Hong Kong was 4.6% lower than its year earlier level, the worst such comparison since the fourth quarter of 2009.

New Zealand’s manufacturing purchasing managers index revived to a 3-month high of 39.7 in May, implying a slower but still rapid rate of deterioration. The index had dived to a record low of 25.9 in the prior month.

Consumer price data for May released today revised French and Spanish inflation up slightly to 0.4% and minus 0.9%, respectively. Romanian inflation slowed 0.4 percentage points last month to a 31-month low of 2.3%.

The Central Reserve Bank of Peru left its policy interest rate at an effective floor of 0.25%. There had been cuts of a full percentage point each in March and April, and a statement released today by the bank observed that activity continues to be badly affected by the pandemic and that one-year expected CPI inflation has fallen since end-2019 by 0.7 percentage points to 1.5%.

U.S. import and export price data get reported later this morning.

In overnight geopolitical news, North Korean officials now seek scant chance of denuclearization.

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

Tags: , ,


Comments are closed.