Another Batch of Important U.S. Data Due Later Today

May 14, 2021

Thursday’s ebbing of inflation phobia in financial markets extended into overnight trading, and now investors await this morning’s release of U.S. import prices, retail sales, industrial production, and the U. Michigan index of consumer sentiment.

Equity markets in the Pacific Rim rebounded 2.3% in Japan, 1.8% in China, 1.1% in Hong Kong, kand 1.0% in Taiwan and South Korea. Indonesia is closed for Eid al-Fitr. Share prices in euro show gains at the moment of 0.5% to 0.9% in Germany, France, the U.K., Switzerland and Italy. U.S. futures point to a 0.5-1.0% advance at the open, pending any surprise from the aforementioned U.S. data releases due shortly.

Ten-year sovereign debt yields settled back 3 basis points in the U.K., 2 bps in the U.S., and a basis point each in Japan and Germany. Prices for WTI oil and gold are up 1.3% and 0.7%.

In the absence of the prior flight to safety, the dollar fell today so far by 0.8% against the Turkish lira, 0.6% versus the Mexican peso, 0.4% relative to the New Zealand dollar, 0.3% vis-a-vis the euro and Canadian dollar, 0.2% against sterling and the Australiand dollar and 0.1% versus the yen and Swiss franc.

Two news developments of note this Friday are the revelation that Colonial Pipeline paid ransom it the group that hacked its system, and the CDC has greatly relaxed its mask guidance for people who have been vaccinated.

Data reported overseas today was limited both in the number of reports and their potential influence.

Polish CPI inflation accelerated 0.9 percentage points to a 13-month high of 4.3% in April. Polish GDP advanced 0.9% on quarter in 1Q, which more than offset the prior quarter’s 0.3% slippage. Nonetheless, GDP was lower than a year earlier for a fourth straight quarter, this time by 1.2%. On-year growth had imploded from 2.0% in 1Q 2020 to -7.9% in the second quarter of last year.

In Finland, CPI inflation also accelerated in April by 0.9 percentage points and, at 2.1%, was its highest in 100 months.

GDP growth in Hong Kong last quarter was revised upward by 0.1 percentage point to 5.4% versus 4Q 2020 and 7.9% from a year earlier. The on-year advance was the most in 11 years and ended a six-quarter streak of negative changes.

Year-on-year Japanese M2 money growth slowed from 9.5% in the first quarter to 9.2% in April.

New Zealand’s manufacturing purchasing managers index had spiked to a record high of 63.6 in March. Other than that high, April’s reading of 58.4 represents the best score since July 2020.

Central bankers around the world have by and large not wavered from their assessment that the recent spike in pricing behavior will prove temporary and that the responsible reaction is not to flinch from their determination to maintain very accommodative stances through this period.

  • Officials at the Central Bank of Chile left their policy interest rate at a record low 0.5%. Two reductions in March 2020 by a total of 125 basis points were the last changes in the key rate. According to their statement, “the convergence of inflation to the target over the policy horizon still requires the monetary stimulus to be highly expansionary.”
  • The Board of Directors at the Central Reserve Bank of Peru likewise kept their interest rate benchmark steady at 0.25% after yesterday’s review. Such had been cut by a full percentage point in April 2020 to the current level.  Officials expect in-target inflation this year and next, and such slipped 0.2 percentage points to 2.4% last month.
  • The Governing Board at the Bank of Mexico is one of few monetary authorities to actually reduce its interest rate further since the start of 2021. Its overnight interbank interest rate target was sliced by 25 basis points to 4.0% in February following seven reductions totaling 300 basis points between February and September of 2020. All policymakers at the BOM agreed to yesterday’s decision to keep the benchmark at 4.0%. According to a released statement, inflation will likely trace a somewhat higher near-term path than predicted earlier this year, but such is still expected to settle near the middle of the 2-4% target by a year from now.

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

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