Price of Oil Jumps and Dollar Falters

August 5, 2020

Overnight declines in the dollar amount to 1.0% against the Mexican peso, 0.9% versus the Australian dollar, 0.6% relative to the euro, Swiss franc and loonie, 0.5% vis-a-vis the kiwi, yuan and sterling and 0.2% against the yen.

The price of WTI oil leaped 3.2%, partly in response to an enormous explosion at the port of Beirut that sent a mushroom cloud high into the sky. Many deaths and injuries. The price of gold went up 1.3%.

Share prices lost 0.3% in Japan, 0.6% in Australia, and 0.1% in India but elsewhere climbed most places including gains of 1.4% in South Korea, 0.6% in Hong Kong and so far of 1.0% in the U.K., 0.8% in France, 0.7% in Italy and Spain and 0.6% in Germany.

Ten-year sovereign debt yields rose 4 basis points in the U.K. and Germany and by 3 bps in the United States overnight.

U.S. Covid-19 cases are closing in on the 5 million mark, and deaths just wen above 160k. The Congress is still haggling over a desperately needed fiscal relief package. There was some disappointing U.S. news from the monthly ADP estimate of private sector employment, which at only 167k in July was only a tenth as much as analysts were forecasting and down from over 4.3 million workers in June. Separately, U.S. mortgage applications last week fell another 5.1% in spite of a lower mortgage rate.

The U.S. goods and services trade deficit narrowed to $50.695 billion in June from $51.75 billion a year earlier. The first-half deficit of $274.3 billion was 7.8% smaller than a year earlier. Against Europe, however, the deficit in the first half increased 12.4% to $117.2 billion.

Canada recorded trade deficits of C$ 3.198 billion in June and C$ 17.8 billion in the first half of 2020. Exports rebounded 17.1% on month in June but were still 17.9% below their February level.

The volume of retail sales in Euroland climbed 5.7% in June but fell by 5.3% on average between the first and second quarters. June sales returned to positive on-year growth of 1.3% after three straight months of being lower than a year earlier.

Swedish real GDP recorded record on-quarter and on-year declines during 2Q of -8.6% and -8.2%. Industrial production in June was also 8.2% below its year earlier level.

Spain’s service sector and composite purchasing manager indices printed at respective 5- and 15-month highs in July of 51.9 and 52.8. However, a worrisome sign from that economy was a relapse in consumer confidence from a reading of 60.7 in June to a 2-month low of 53.1 in July.

Other PMI reports today revealed

  • Five-month highs in Japan’s services and composite purchasing manager indices of 45.4 and 45.6.
  • The non-manufacturing PMI for the United States compiled by the Institute of Supply Management climbed a full index point to a 17-month high of 58.1 in July.
  • 39-month highs in Australia’s services and composite PMIs of 58.2 and 57.8. Australia’s construction purchasing managers index jumped 7.2 points to 42.7 in July.
  • Euroland’s services and composite PMIs improved to 23- and 25-month highs of 54.7 and 54.9 in July.
  • Following 122-month and 117-month highs during June in China’s service sector and overall composite PMI readings, such fell back to 3- and 2-month respective lows in July of 54.1 and 54.5.
  • India’s July PMIs underperformed expectations. The services index, although at a 4-month high, remained very subdued at 34.2, and the composite index slipped 0.6 points to a 2-month low of 37.2.
  • Russia’s services PMI jumped 10.7 points to a 144-month high of 58.5 and was accompanied by a composite reading of 56.8, which represents a 42-month high.
  • The private sector South African PMI compiled by Standard Bank printed in July at 44.9 compared to 42.7 in June and a record low of 32.5 in May. July saw the slowest rate of contraction since February.
  • Non-oil purchasing manager indices improved in July to a 1-year high of 49.6 in Egypt, a 9-month high of 50.8 in the United Arab Emirates, and a 5-month high of 50.0 in Saudi Arabia.
  • While the demand and production components of most of the PMIs were higher last month than in June, labor markets lagged. Companies aren’t convinced that the rebound from the pandemic will be sustained unless a safe, effective, and readily available vaccine is developed soon.

Labor costs in New Zealand rose 0.2% on quarter in 2Q and decelerated 0.6 percentage points to a 1.8% year-on-year rise last quarter. There were 0.4% fewer workers than a year earlier, and the unemployment rate slipped to 4.0%.

Mortgage loans in Australia rose 5.5% in June, their first increase since January.

In June, Czech retail sales were unchanged from a year earlier, but Singapore retail sales were 27.8% lower on year despite a 51.1% monthly jump.

Indonesian real GDP declined for a third straight quarter. The 4.2% drop in 2Q left GDP 5.3% below its year-earlier level.

Officials at the Bank of Thailand unanimously agreed to keep their 1-day repo rate unchanged at a record low of 0.50%. The rate had been cut by 25 basis points each in February, March and May and by a total five times in the past 11 months. According to a released statement, inflation will be negative this year but back near target in 2021. Concern was expressed that excessive strength in the Thai baht could interfere with economic recovery.

The baht appreciated over the most recent two weeks due to the depreciation of the US dollar. The Committee viewed that if the baht were to appreciate rapidly, the economic recovery could be affected. Therefore, the Committee would closely monitor developments in foreign exchange markets as well as assess the necessity of implementing additional appropriate measures.

Tropical Storm Isaias hit the New York area with a lot more wind relative to rain than had been predicted, resulting in widespread power outages.

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


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