Little Change in Dollar or Share Prices; More PMIs Attest to Rising Inflationary Pressure

April 7, 2021

The dollar advanced overnight by 0.6% against the Turkish lira as well as 0.4%, 0.3% and 0.2% against the Australian, New Zealand and Canadian dollars. But the greenback otherwise held steady against the yen and fell 0.1% versus the euro and on a weighted basis.

Share prices in the Pacific Rim closed up 0.9% in India, 0.6% in Australia and Indonesia, and 0.1% in Japan but down 0.9% in Hong Kong, 0.4% in Singapore and 0.1% in China. The British Ftse is up 0.6%, but markets in Germany, France, and Italy show only marginal net change. U.S. futures are flat and close to historical highs.

Ten-year Japanese JGB, British gilt and German bund yields have slipped two, one, and one basis points. The 10-year U.S. treasury yield, in contrast, has firmed a basis point.

West Texas Intermediate crude oil recovered 0.9%, while gold has slipped 0.5% from Tuesday’s closing level.

Today’s main event will be the publication of the minutes of the last FOMC meeting. Optimism persists about a very strong U.S. economic recovery. In spite of uncomfortably high levels of U.S. Covid cases and hospitalizations, the daily death rate has fluctuated below the 1000 threshold. Deaths from Covid on a global basis surpassed 13k over the past 24 hours and will reach three million people pretty soon.

Indian monetary officials voted unanimously to leave the key repo rate unchanged at 4.0%. That’s lower than the current pace of CPI inflation. In March-May of 2020, the Reserve Bank of India’s interest rate benchmark was cut three times by a total of 140 basis points to its present level. Without abandoning their commitment to price stability and although economic growth seems to be normalizing, RBI officials continue to prioritize Covid relief and overall growth:

he recent surge in infections has imparted greater uncertainty to the outlook and needs to be closely watched, especially as localized and regional lockdowns could dampen the recent improvement in demand conditions and delay the return of normalcy. Against this backdrop, the MPC judged that monetary policy should remain accommodative to support and nurture the recovery. In other words, the stance of monetary policy will remain accommodative till the prospects of sustained recovery are well secured while closely monitoring the evolving outlook for inflation.

Japan’s index of leading economic indicators improved to a 27-month high in February. The customs trade balance swung to a JPY 264 billion surplus in the first twenty days of March from a JPY 37 billion deficit a year earlier, thanks to an 11.8% rise in exports.

South Korea’s $8.034 billion current account surplus in February was 25% larger than its surplus a year earlier.

South African business sentiment slipped 0.3% to a 4-month low in March.

Another large batch of purchasing manager surveys were published.

  • Euroland’s composite PMI printed at a 30-month high of 53.2 in March, thanks to a record high manufacturing reading. Service sector activity, which is more sensitive to the waxing and waning of the Covid pandemic, remained below the 50 threshold that separates growth from contraction. But at 49.5, that level in March was 3.9 index points above February’s level and represents a 7-month high.
  • Within the euro area, Spain, France and Italy had sub-50 service sector PMI’s. In all countries, inflationary pressure was elevated.
  • Britain’s services PMI score of 56.3 signified the fastest rate of improvement in seven months and helped lift the composite PMI to a 6-month high of 56.4. Like the euro area, the final March PMI readings in the U.K. were higher than preliminary estimates.
  • The Commonweath Bank of Australia’s composite and services PMI readings each printed above 50 and at 2-month highs. The AIG-compiled Australian construction PMI jumped sharply to a record high of 61.8.
  • Sweden‘s composite and service sector purchasing manager indices remained very robust at 62.0 and 61.3 in March but were a tad below February’s levels.
  • India‘s composite PMI (56.0) and services PMI score of 54.6 also slid to 2-month lows.
  • The Standard Bank South African PMI ticked 0.1 point higher to a 2-month high of 50.3 in March. Cost pressures intensified to a 29-month high.
  • Lebanon’s private-sector PMI was again below the 50 threshold, but the 46.4 level last month indicated the slowest rate of contraction since October 2019.

The U.S. goods and services trade deficit rose to a record high of $71.07 billion in February, bringing the January-February total to $138.9 billion, 68.6% wider than a year earlier. In goods trade, exports fell 3.0% on year in those two months, while import growth was 9.4%.

Canada’s balance of trade improved to a surplus of C$ 1.039 billion in February from a deficit of C$ 2.362 billion a year earlier, as exports increased 4.6%, while imports shrunk 2.8%.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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