More European Data, More Covid Cases, and FOMC Minutes

July 7, 2021

The dollar shows modest overnight gains of 0.2% against the euro and sterling and 0.1% relative to the yen and Swiss franc. Larger advances have occurred against the Australian and New Zealand currencies and the Mexican peso.

Equities closed down 1.0% in Japan, 1.5% in Singapore, 0.6% in South Korea, and 0.4% in Hong Kong but show advances so far today in Germany, the U.K., and Italy. Nasdaq futures are up, too, but S&P and Dow futures are little changed.

The ten-year German bund yield is two basis points lower and comparable U.S., British and Japanese sovereign debt yields are down a basis point.

WTI oil rebounded 1.6%. The price of gold has risen 0.8%.

Some things to know about the coronavirus pandemic are 1) a recent rise in the pace of U.S. cases, 2) evidence of strong vaccine protection against the Delta Variant, but 3) large pockets of rural America where vaccine phobia persists.

FOMC minutes will be released later today, and investors are looking for further clarification of the recent tweak to policy forward guidance. In spite of such, the 10-year Treasury yield is now 15 basis points lower than just before the FOMC June decision was broadcast in mid-June.

The ISM non-manufacturing purchasing managers index remained above 60 for a third straight month in June but was lower than its April and May readings.

Australia’s AI Group-compiled services PMI fell 3.4 points in June to a 4-month low of 57.8.

German industrial production fell 0.3% on month in May, matching April’s slide and marking the fourth decline in the first five months of 2021. Production remained 5% below its pre-pandemic February 2020 level but was 17.3% above its May 2020 level. Capital goods output sank 3.4% in the latest reported month.

Swedish and Danish industrial production in May rose on month by 0.1% and 0.8% and recorded year-on-year advances of 24.2% and 10.4%. Norwegian industrial output fell the third time in four months, a dip of 0.3%. But such was still 2.1% greater than a year earlier.

Irish industrial production fell 4.6% on month but rose 29.9% on year in May.

Czech and Hungarian industrial production exceeded May 2020 levels by 39.1% and 24.2%.

Italian retail sales rose only 0.2% in May following a 0.1% dip in April and a 0.3% rise in March. On-year sales growth of 13.5% was down from 30.4% in April and 23.5% in May.

Greek unemployment climbed to an 8-month high of 17.0% in April.

The EU Commission revised project Euroland GDP growth this year up half a percentage point to 4.8% and also bumped projected 2022 growth up marginally to 4.5%. CPI inflation is now expected to average 1.9% in 2021 but slip back to 1.4% next year.

The Halifax monthly index of British house prices fell 0.5% in June but still recorded a strong 8.8% year-on-year advance.

Japan’s index of leading economic indicators slid to a 2-month low in May. Although the index of coincident economic indicators fell also to a 3-month low, officials retained a trend designation of “improving.”

Taiwanese CPI inflation receded 0.6 percentage points in June to a 3-month low of 1.9%. WPI inflation declined 0.9 percentage points to 10.7%.

The National Bank of Romania‘s policy interest rate was left unchanged at 1.25%. Cuts had been engineered previously of 50 basis points in March 2020 followed by 25 bps each in May, August, and January 2021. At 1.25%, the interest rate is 2.5 percentage points below CPI inflation, but price pressures are forecast to abate in the future.

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

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