Investors Upbeat In Spite of Worrisome Covid Trends

August 2, 2021

Share prices on the first business day of August in the Pacific Rim closed up 2.0% in China, 1.8% in Japan, 1.5% in Taiwan, 1.3% in Australia, 1.2% in New Zealand, 1.1% in Hong  Kong, and 0.7% in South Korea. Gains so far in Europe amount to 0.9% in France, 0.8% in Spain, 0.6% in the U.K. and 0.3-0.4% in U.S. futures, but the German Dax has dipped 0.2%.

Second quarter corporate earnings have gone well, and July factory purchasing manager surveys revealed continuing solid rates of growth early in the current quarter.

The dollar slipped 0.2% overnight against its weighted DXY index, the euro, and the Australian dollar. The dollar dropped 1.1% against the Turkish lira and 0.1% relative to the Japanese yen but is unchanged versus sterling.

Ten-year U.S. Treasury and German bund yields edged a basis point higher, while commodity prices of WTI oil and Comex gold are down 1.3% and 0.3%.

Along with strong demand in most cases, the purchasing manager surveys released today reveal continuing strains on capacity, which have produced unwieldy order backlogs and fueled higher inflation.

Although at a four-month low, Euroland’s manufacturing PMI in July was revised upward and, at 62.8, was not far beneath June’s all-time high of 63.4. Among economies using the euro and reporting individual PMI results, the readings surpassed 60.0 in the cases of Germany, the Netherlands, Austria and Italy, while the other scores ranging from 57.4 in Greece to 59.0 in Spain were also far above the 50 level that divides improving from weakening conditions.

The British manufacturing PMI reading of 60.4  was also above 60.0 for a fourth straight month.

Japan’s manufacturing PMI rose 0.6 points to a 2-month high of 53.0, and a separate Japanese data release today put consumer confidence at a 17-month high in July.

Australia’s AIG-compiled and CBA-compiled manufacturing purchasing manager indices slipped to 4-month lows but remained high historically at 60.8 and 56.9, respectively.

Among Asian manufacturing PMI releases, India’s reading climbed by a sharp 7.2 points to a 3-month high of 55.3. Taiwan’s PMI improved 2.1 points to a 2-month high of 59.7, and Vietnam’s rebounded one point from June’s 13-month low of 44.1. Two-month lows of 40.1 and 50.4 were reported for Malaysia and the Philippines. South Korea’s PMI fell 0.9 points to a 7-month low of 53.0. Thailand’s 48.7 reading was below 50 for a third straight month, and China did not do well, either. The government-compiled NBS manufacturing and nonmanufacturing PMI readings fell to 17- and 5-month lows of 50.4 and 53.9, while the privately compiled Caixin manufacturing score dropped to a 15-month low of 50.3.

Among economies in Eastern Europe, the Russian manufacturing PMI was below 50 for a second straight month and more deeply so at an 8-month low of 47.5. But following record highs in June in both Poland and the Czech Republic, their PMIs dipped just slightly to 2-month lows of 57.6 and 62.0. Moreover, Hungary’s PMI reading of 55.6 was the best in 25 months.

Turkey‘s manufacturing PMI rose 2.7 points to a half-year high of 54.0.

Switzerland’s manufacturing PMI soared to an all-time peak of 71.1.

In Nordic Europe, Sweden’s PMI settled back half a point to a 4-month low but still quite lofty 65.3 reading. Denmark did even better with a 71-month PMI high of 69.8, and Norway’s 63.3 reading constituted a 44-month high.

In other data news this Monday,

  • Spanish consumer confidence slipped to a 2-month low in July from June’s 23-month high.
  • Business confidence in Mexico edged down 0.2 points from June’s 25-month high.
  • German retail sales volume leaped 4.2% on month in June after rebounding 4.6% in the previous month. That put sales 6.2% above their year-earlier level and around 9% higher than just before the onset of the pandemic earlier in 2020.
  • However in Hong Kong, retail sales dropped in June for the fourth time in five months, and the 2.8% 12-month rate of increase was down from 31.6% in February.
  • Portuguese industrial production posted the third monthly decline in four months during June but still exceeded its year-earlier level by 10.4%.
  • Austria’s jobless rate of 6.7% in July was down from 11.4% six months earlier.
  • Swiss CPI inflation accelerated by 0.1 percentage point to a 27-month high but remained under target at 0.7% in July.
  • Indonesian consumer prices rose 0.1% on month and 1.5% on year in July, which was marginally more than anticipated.
  • Producer price inflation in Hungary climbed another 0.3 percentage points to 11.6%.

Later today: U.S. manufacturing PMI and construction spending.

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

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