Good Trade News but Unsettling Covid Developments
June 19, 2020
Share prices got a boost from an overnight report that China will step up purchases of U.S. agricultural goods. This comes after Thursday’s revelation in the Bolton tell-all book that Trump had solicited a boost in Chinese purchases to voter reelection support from the mid-west.
Several populous U.S. states like California, Florida, and Texas continue to experience an alarming rise in new reported cases of Covid-19. The total U.S. number of reported cases is 29,000 greater than this time yesterday, and the death count has surpassed 120,000. Globally, 8.6 million cases have so far been identified. Even so, governments are moving forward to open up social gathering and business activity.
The dollar rose overnight by 0.5% against sterling and fell that amount against the Australian dollar. Other key dollar relationships are pretty stable.
Share prices rose 1.0% in China, 1.5% in India, 0.7% in Hong Kong and 0.6% in Japan. European markets show gains so far today of 1.3% in the U.K., 1.2% in France, 1.1% in Germany, 1.0% in Spain and 0.9% in Switzerland. U.S. stock futures are up, too.
WTI crude oil jumped 2.4% and is just shy of $40 per barrel. The price of gold firmed by a lesser 0.5%.
Ten-year British gilt and U.S. Treasury yields are 3 and 1 basis points higher, while their Japanese and German counterparts are steady.
EU political leaders are holding talks today on a recovery fund to aid member economies whose public finances have been especially compromised by the global pandemic.
The Central Bank of Russia lowered its one-week repo rate by a full percentage point to a record low of 4.5%, bringing the net drop this year to 175 basis points. The rate earlier was cut 25 bps in February and by 50 bps in April. More monetary relief is moreover still in play according to a released statement announcing today’s action: “If the situation develops in line with the baseline forecast, the Bank of Russia will consider the necessity of further key rate reduction at its upcoming meetings.” The next meeting is scheduled July 24th. Officials expect Russian real GDP to slide 4-6% in 2020 on average, and inflation has receded faster than assumed previously.
Minutes from the Bank of Japan Board’s meeting in April reflect concern about a possible return to deflation and considerable uncertainty regarding the future economic impact of the global pandemic.
Japanese consumer prices were unchanged on month in May both overall and excluding fresh food. Compared to May 2019, total consumer prices ticked up 0.1%, core consumer prices fell 0.2%, and the energy component dived 6.7%.
Euroland’s seasonally current account surplus in April of EUR 14.4 billion was roughly half the size of the March surplus and represents an 87-month low. The unadjusted EUR 10.21 billion surplus was 23% smaller than the May 2019 surplus, but the surplus over the last 12 reported months equaled a comfortable 2.8% of GDP, same as the ratio in the 12 months through April 2019.
In April, Italy posted only its second current account deficit (EUR 915 million) in over a year, and Greece experienced its seventh consecutive current account deficit (EUR 1.113 billion).
British retail sales volume rebounded 12.0% in May from an 18% slump in April. That’s a record increase and, as in several other economies, exceeds expectations. But investors are prudent to treat such resurgence with caution, as such may reflect only a dead cat bounce and in any case there’s plenty of uncertainty regarding the future evolution of the global pandemic.
British consumer confidence rose six index points in June to a 3-month high but, with a reading of -30, still signified very depressed sentiment.
Public sector borrowing in the U.K. last month produced a record GBP 54.499 billion deficit, bringing the April-May total to GBP 103.7 billion versus GBP 16.7 billion a year earlier.
German producer prices fell 0.4% on month and posted the largest on-year drop (2.2%) in four years. Energy plunged 7.9% on year, and all other producer prices collectively fell 0.3%.
In the 12 months through May, producer prices fell 6.7% in Portugal and 1.5% in Poland. Icelandic consumer price inflation, by contrast, accelerated half a percentage point to 2.7% in May.
A preliminary report on Australian retail sales shows a 16.3% rebound in May after a 17.7% dive in April.
The United States recorded a $104.2 billion current account deficit in the first quarter, almost identical to the prior quarter’s deficit of $104.3 billion and equal to a manageable 1.9% of nominal GDP.
Canadian retail sales in April plunged by a record 26.4% on month. This drop was considerably steeper than forecast, followed a 10% decline in March, and left sales 33.6% below February’s level prior to the pandemic lockdown.
Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Russia, British retail sales, Euroland current account, German PPI, Japanese consumer prices, U.S. current account
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