Dollar Up and Equities Depressed by Worries Over Resurgence of Covid and Inflation

July 19, 2021

Friday’s equity market stumble extended into the new week, with losses Monday amounting to 1.8% in Hong, 1.4% in India, 1.3% in Japan and Singapore and 0.9% in Australia. In European tradeing, share prices so far today are down 3.5% in Greece, 3.0% in Italy, 2.1% in Germany and France, 2.0% in the U.K., and 1.9% in Spain.

U.S. futures imply a loss at the stock market open of around 1.0%.

Sovereign debt yields and commodity prices are also lower. The 10-year U.S. Treasury yield fell four basis points to 1.25%, which compares with 1.46% at midyear and 1.68% three months ago. Ten-year sovereign debt yields are down two basis points each today in Germany and the U.K. and by a basis point in Japan.

A 2.7% slump in today’s price of West Texas Intermediate crude also reflects an accord over the weekend by OPEC and Russia to increase production in the final five months of 2021. The price of gold has slipped 0.7%.

The weighted dollar DXY index is 0.3% firmer and at its highest level since the end of the first quarter of this year. Bilateral dollar relationships show dollar gains of 1.4% versus the loonie, 0.8% relative to the Turkish lira, 0.7% vis-a-vis the kiwi, 0.6% against the Australian dollar and Mexican peso, 0.4% versus sterling, 0.2% against the euro, and 0.1% versus the Swiss franc and Chinese yuan. The yen, by contrast, rose 0.2% to a one-month high. Japan is one of the rare economies still with very anemic inflation. Economic activity is fragile, and the Tokyo Olympics are about to start amid rising Covid.

Chinese state-sponsored hackers are being blamed by the major western governments for orchestrating the enormous cyber attack on Microsoft earlier this year. The accusation is aggravating already severely strained relations between Washington and Beijing.

Data releases have been sparse today even by typical Monday standards.

Turkish consumer confidence slipped back to a two month low in July of 79.5, 7.2 points below last March’s level.

Construction orders in the euro area rose 0.9% on month in May and 13.6% on year. The 12-month advance was down from 45.2% in AprilĀ  but above a 2.9% year-on-year rise in the first quarter.

New Zealand’s service sector purchasing managers index fell back from May’s record high of 61.3 to a June reading of 58.6. New Zealand had been one of the most insulated countries from the Covid pandemic, but cases are now rising there as well as in many other places.

The British Rightmove house price index rose 0.7% on month but posted a 2-month low year-on-year increase of 5.7% in June after 7.5% in May.

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

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