Equities Retreat Additionally; Dollar Flattens

April 20, 2021

Monday’s drop in share prices has been extended amid concerns about the pandemic and higher inflation. Stocks closed down 2.0% in Japan, 0.7% in Australia and New Zealand, 0.6% in Singapore and 0.1% in China. Losses so far in Europe range between 0.8% and 2.0% in Switzerland, Germany, the U.K., France, Italy and Spain, and U.S. futures are down 0.3-0.4%.

The weighed dollar is only marginally softer than Monday’s close but near to its 7-week low. The dollar strengthened overnight by 0.3% relative to the Turkish lira and Mexican peso and 0.2% versus the yen but also weakened 0.3% vis-a-vis the Australian dollar and Chinese yuan, 0.2% against the euro and kiwi, and 0.1% versus the Swiss franc. Dollar values against sterling and the loonie are unchanged.

The 10-year U.S. Treasury yield (1.59%) is a basis point softer and closer to this month’s 1.55% low than last month’s high of 1.78%. The ten-year German bund and British gilt yields also dipped a basis point thus far today.

The prices of WTI oil and gold each edged up 0.2%.

As expected, officials at Bank Indonesia kept their 7-day repo rate at 3.50%, a record low. Six 25-basis point cuts had earlier been engineered from February 2020 through the most recent cut in February 2021, and officials reduced their forecast range of economic growth this year by 0.2 percentage points to 4.1-5.1%. In a statement released after today’s policy review, concern is expressed about “persistently elevated global financial uncertainty” caused by the Covid pandemic. Hasty easing could depress the rupiah, which thus far has not been routed.

The People’s Bank of China also left interest rate unchanged at today’s monthly fixing. The one-year and 5-year loan prime rates have been at 3.85% and 4.65% since the second of two reductions exactly one year ago.

The rise in German producer prices in March exceeded expectations for a fourth straight month. rising 0.9% on month after advances of 0.8% in December, 1.4% in January and 1.7% in February. The 12-month rate of change, which didn’t turn positive until December, roughly doubled in March to a 112-month high of 3.7%.

Czech producer price inflation accelerated from zero percent in January to 1.4% in February and a 22-month high of 3.3% in March.

This month’s batch of British labor statistics were somewhat disappointing. A drop in jobless insurance claims of 20.8k in January, which had been the fourth decline in five months, was followed by the biggest increase in nine months (86.6k) during February and another increase in March of 10.1k. The average level of jobs in December-February was 73k lower than in the prior three-month period and 813k below its pre-pandemic level. Average wage earnings posted a 4.5% 12-month rate of increase in December-February, which was the slowest rise since September-November. But one bright spot was a lower-than-forecast 4.9% jobless rate.

Japan’s monthly service sector activity gauge known as the tertiary index rose only 0.3% in February. That was the first advance in four months and left the index 5.0% below its year-earlier value. On average, the tertiary index fell 0.7% in 2020 including a year-on-year drop of 2.9% in the year’s final quarter.

Italy’s current account surplus rebounded to a 2-month high of EUR 3.737 billion in February, extending the streak of surpluses to ten consecutive months.

The United States identified over 70,000 new Covid cases yesterday but reported fewer than 500 deaths from the disease.

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

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