Some Sizable Financial Market Moves Overnight
August 11, 2020
The dollar lost 0.4% against the euro, Swiss franc, Australian dollar and Mexican peso. The U.S. currency also fell 0.5% versus the Canadian dollar, 0.3% relative to sterling, 0.2% vis-a-vis the Chinese yuan, and 0.1% against the kiwi but ticked 0.1% higher versus the yen.
This time, dollar depreciation wasn’t correlated with a strengthening price of gold, which dropped 2.2% overnight and moved back under $2,000 per troy ounce. In other commodity action, the price of WTI oil gained 1.6% to within a dollar of last week’s five-month high.
Ten-year sovereign debt yields advanced by four basis points in Great Britain, three bps in Germany, and two basis points each in the United States and Japan.
Stock markets in Asia closed up 2.1% in Hong Kong, 1.9% in Japan, 1.4% in South Korea, and 1.2% in China. Italian share prices are up 3.0%, and those in the U.K., Germany, France, and Spain show gains so far of more than 2.5% but below 3% this Tuesday.
Investor tolerance for risk got a boost from President Trump floating out the idea of a further capital gains tax and in spite of surveys suggesting lessening business confidence in the United States and elsewhere.
U.S. small business investment, which had risen from an April reading of 90.9 to one of 100.6 in June, slipped back to 98.8 in July. Before the pandemic and lockdown, there had been a reading of 104.5 in February.
The forward-looking Japanese Economy Watchers Outlook index unexpectedly fell back 8 index points to 36 in July, a three-month low. The Economy Watchers Current index rose just 2.3 points to 41.1, some 5.5 points lower than analyst expectations.
The National Australia Bank monthly business confidence index slumped 15 points in July to a 2-month low of -14 and was more than ten points weaker than forecast.
The latest batch of British labor statistics were disappointing. New jobless claims in the United Kingdom, which had dropped 28.1k in June after a combined 1.423 million leap in April-May, unexpectedly climbed back 94.4 thousand during July.British employment fell 220k in the latest three-month period, and average weekly wage earnings in the second quarter were 1.2% lower than a year earlier. That was the biggest on-year drop since February-April of 2009 and accompanied by the first on-year decline of regular pay (i.e., excluding bonuses) since 2001.
The British Retail Consortium reported a fourth straight on-year increase in same-store sales, but the gain in July of 4.3% was down from 10.9% in June and the smallest advance during the streak.
Second-quarter growth in Singapore has been revised downward. Real GDP sank 42.9% on quarter and 13.2% on year. Each of the drops was the largest ever recorded.
Despite the highest readings in the ZEW investor expectations indices for Germany and the whole euro area since January 2004 and April 2015, respectively, the ZEW current situation measures fell more deeply into negative territory, reaching -81.3 in Germany and -89.8 in Euroland.
New yuan bank loans in China fell sharply in July to CNY 992.7 billion, a 3-year low after CNY 1.81 trillion yuan in June. M2 money growth slowed 0.4 percentage poiints to a 4-month low of 10.7% on year. On a brighter note, Chinese motor vehicle sales recorded a fourth straight on-year increase in July. The rise of 16.4% was the largest in this streak but much smaller than the on-year drop of 43.3% back in March.
Indonesian retail sales tumbled in June by 2.4% on month and 17.1% on year.
Japan’s unadjusted current account surplus of JPY 168 billion was its smallest in 65 months. Merchandise exports were 15.6% fewer than a year earlier in the first half of 2020 and down by an even greater 25.7% in June.
Factory output in South Africa was 16.3% lower in June 2020 than in June 2019 and on average recorded an on-year decline of 32.3% in the second quarter.
U.S. producer price deflation was cut in half to -0.4% in July. That’s the fourth straight month with a negative 12-month PPI change. Six month earlier back in January, PPI inflation stood at +2.1%. Core PPI inflation, which started this year at 1.7% last January, rose less than forecast in July to 0.3%.
Coronavirus news has been discouraging, too. The count of identified worldwide cases moved above 20-1/4 million cases, and deaths are fast approaching 740 thousand. America accounts for 22.5% of those deaths even though it has only 4% of the world’s population. Also by 85%, the U.S. Covid-19 death toll also exceeds the combined number of American combat deaths in the Korean War, Vietnam War, Gulf War, Iraq War, Afghanistan War, plus those people killed on 9-11 in that day’s various terrorist attacks.
Joe Biden reportedly will reveal his VP running mate choice very soon.
Copyright 2020, Larry Greenberg. All rights reserved. no secondary distribution without express permission.
Tags: German ZEW expectations index, Japanese current account, U.S. PPI