Week of Bad News Limping to a Close

August 20, 2021

Equity markets experienced another difficult day in Asia but have showed scant net change so far in Europe or the United States. Share prices closed down 1.8% in Hong Kong, 1.2% in South Korea, 1.1% in China and 1.0% in Japan.

The weighted DXY dollar index touched a 9-month high of 93.73 overnight but is currently unchanged. A 0.9% overnight advance against the Mexican peso is the most notable move. The U.S. currency has risen 0.2% against the yen and 0.1% versus the Aussie dollar and Swiss franc, while dipping 0.2% relative to sterling and 0.1% against the euro and loonie.

The price of West Texas Intermediate oil sank 1.4% overnight and trails its week-earlier level by 9.1%. Gold has barely moved.

Ten-year British gilt and Japanese JGB yields are a basis point lower, while their U.S. and German counterparts remain steady.

In Afghanistan, Taliban militants are rounding up people who aided the former government. In America, western fires persist, while the Northeast is under a hurricane watch in yet another reminder that climate change was neglected for too long. Altogether there have been over 211 million Covid infections and 4.4 million deaths worldwide. More that 140 thousand cases were reported in the United States just yesterday, and many hospital ICUs are again overwhelmed.

On today’s data release front, Japanese core CPI inflation rate of -0.3% in July was negative for a ninth straight month even though a 5.3% on-year advance in energy was the most since December 2018.

British retail sales fell 2.5% on month in June under the weight of Covid’s resurgence. Compared to a year earlier, sales growth dropped to 2.4% from 9.2% in the prior month, 24.1% in May and 42.1% in April. British consumer confidence dipped to a 2-month low in August, and British debt rose to 99.5% of GDP, most since the early 1960s.

Canadian retail sales increased 4.2% in June, but the 12-month 6.2% rise was the smallest in five months.

German producer price inflation jumped to a 553-month high of 10.4% last month, thanks to a 1.9% monthly increase, which exceeded expectations by more than twofold and was the largest advance since mid-2008.

South Korean producer prices rose 0.7% on month and 7.1% on year in July. PPI inflation began 2021 at 0.9% in January.

Irish wholesale prices recorded only a 2.1% year-on-year drop in July versus on-year declines of 5.3% in June and 14.0% in February.

Norwegian real GDP rebounded 1.1% last quarter from the first quarter’s 0.6% slide and recorded the largest rise from a year earlier (6.1%) since 2000. Swedish capacity usage rose to 91.3% in 2Q, its highest in seven quarters.

The Greek first-half 2021 current account deficit of EUR 7.5 billion was marginally larger than a year earlier. Taiwan’s $39.2 billion current account surplus in the first half was likewise similar to a year earlier, but Indonesia’s current account deficit of $3.29 billion was much smaller than a gap of $6.34 billion in the first half of 2020.

On the central banking front, the People’s Bank of China‘s 1-year and 5-year loan prime rates were kept at 3.85% and 4.65%, respectively, for a anotherĀ  month where they have been since cuts in April 2020. And officials at the Central Bank of Jamaica indicated a predisposition to increase their record low 0.5% policy rate at the next review in September.

Next week’s main event will be the central banking symposium in Jackson Hole, Wyoming and hosted by the Kansas City Fed.

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

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