Escalation of U.S.-Sino Tensions Weighs on Dollar and Equities but Lifts Price of Gold

July 22, 2020

Gold climbed another 0.8% to within 3.1% of its all time peak of $1,917.90 per ounce, hit during the summer of 2011.

The dollar slipped 0.4% against the euro, kiwi and Australian dollar and by 0.1% versus the Swiss franc and loonie.

Equity markets in the Pacific Rim lost 2.3% in Hong Kong, 1.3% in Singapore and Australia, 0.3% in India, and 0.6% in Japan. The Paris Cac, Spanish Ibex, German Dax,and British Ftse show declines so far today of 1.3%, 1.4%, 0.4% and 0.9%.

Ten-year U.S. Treasury and British gilt yields dipped one and two basis points. The price of West Texas Intermediate crude oil fell by 1.2%.

There are three big stories today, none of which involves released economic data.

  • China was given three days notice by the Trump Administration to close down its consulate in Houston, Texas, and Beijing officials promise to retaliate in kind.
  • Having deployed federal agents to Portland, Oregon for the purpose of riot control, President Trump is promising to follow up with similar actions in other U.S. cities such as Chicago.
  • Covid-19 cases and deaths have taken a turn for the worse. The cumulative number of cases worldwide and in the United States moved above 15 and 4 million, respectively. Global deaths in the last 24 hours exceed 6.3k, and the U.S. experienced 1.1k deaths, the first daily total of more than one thousand in 52 days.
  • There’s also been a 7.8 earthquake in Alaska‘s Aleutian Islands.

What little data were reported this Wednesday support the growing gloom that recovery from pandemic-related business lockdowns will likely be slower and more uneven than assumed previously.

Consumer confidence in The Netherlands remained weak in July, rising just a single point to a reading of -26. That’s just 5 points better than May’s low of -31 and 24 points below the reading in March. Dutch consumer spending was below its year-earlier level for a third straight time in May, dropping by 12.8% that month after slides of 17.3% in April and 6.4% in March.

A 43.9 preliminary estimate of Japan’s composite purchasing managers index in July was for the sixth straight month below the 50 level demarcating expansion from contraction. Manufacturing rose 2.5 points to a 4-month high of 42.6 (its 15th straight sub-50 score), while the service sector PMI edged only 0.2 points higher to 45.2.

Taiwan’s jobless rate slid just 0.19 percentage points in June below May’s 6-year high of 4.16%.

A preliminary estimate of monthly growth in Australian retail sales during June revealed a smaller 2.4% advance. A 16.9% leap in May had followed a 17.7% plunge in April. Separately, the Westpac index of Australian leading economic indicators went up 0.2% in May and 0.4% in June but previously had sunk 0.46% in February, 0.69% in March and 1.73% in April.

Deflationary price trends were reported in Ireland and Malaysia. Irish wholesale prices posted an 8.2% on-year drop in June, their biggest drop in sixteen months. Malaysian consumer prices in June were 1.9% lower than a year earlier, their fourth straight negative changed.

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

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