Weather Extremes, Covid, and Sino-U.S. Government Talks on Investors’ Minds

July 26, 2021

The starting round of high level talks between China and the United States has not gone well. Much of the world including both those countries are experiencing extreme weather conditions this summer. Talk of emerging from the Covid pandemic is looking premature as reported infections rise in many places. In the United States, such reached almost 52k on Sunday and reflected a 170% leap compared to two weeks earlier. An antitrust campaign in China has been yet another concern for investors, depressing shares today by 4.1% in Hong Kong, 2.3% in China, and 1.0% in Taiwan.

Elsewhere in stock market action, share prices fell 0.9% in South Korea and 0.6% in New Zealand but recovered 1.0% in Japan. There have been dips so far today in Europe of 0.4% in Germany, 0.6% in Switzerland, and 0.2% in Spain, Italy, and Great Britain. U.S. stocks opened a tad softer.

The dollar has slipped 0.3% against sterling, 0.2% versus the yen and its DXY weighted index, and 0.1% vis-a-vis the euro, Swissie, and peso. Gold is steady, but the price of WTI oil has dropped 0.4%. Ten-year sovereign debt yields are flat in Japan and the U.K., up a basis point in Germany and down a basis point in the United States.

Japan’s composite purchasing managers index dropped 1.2 additional points below 50 to a six-month low of 47.7 in July, according to the preliminary estimate. A reading of 46.4 in services out-weighed a score of 52.2 in manufacturing, and each result was weaker than June results. This was the third straight sub-50 reading in the composite Japanese PMI.

Germany’s IFO business climate index in July dropped 0.9 points below June’s 31-month high, prompting institute officials to say that “sentiment in the German economy has clouded over” with Covid cases and supply side bottlenecks up and amid localized flooding. Business expectations of the future fell to a 3-month low, while current business conditions continued to crest higher.

Consumer confidence and business sentiment in the Czech Republic settled back from multyear highs in June to 3-month lows in July.

Belgian business sentiment improved to another record high in July for this 40-year-old data series.

Turkish business confidence improved to a 111-month high  in July.

The National Bank of Kazakhstan raised its policy interest rate by 25 basis points to 9.25%, citing intensifying inflationary pressure caused by both demand-side and supply-side factors. The June CPI was 7.9% above a year earlier, and above-target inflation is projected later this year. Today’s rate change reverses a cut undertaken in July 2020. Earlier in 2020, the rate had been raised 275 basis points in March but then slashed 250 bps in May. Kazakhstan is again experiencing on-year real economic growth.

Despite a 3.0% month-on-month decline, Singapore industrial production in June was 27.5% higher than a year earlier, marking the largest 12-month increase in 127 months.

Brazilian consumer confidence improved to a 9-month high in July, and Mexican unemployment of 4.0% in June was down from 5.5% in mid-2020 and 4.5% in February.

Spanish producer price inflation of 15.4% in June was up from 15.2% in May and 0.6% as recently as February. 15.4% constitutes the fastest PPI inflation since October 1983.

Finnish producer price inflation slowed 0.2 percentage points in June but remained in double-digit territory at 11.0%. That’s a swing from minus 5.4% in October 2020.

Just In: U.S. new home sales fell 6.6% to an annualized 676k in June, which represents a 14-month low and was down from 724k in May, 785k in April and 873k in March.

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

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