Dollar Rallying Further, Stocks Fragile
April 27, 2022
The weighted DXY dollar index advanced another 0.4% overnight to its highest level since mid-March 2020 when the Covid pandemic was still a new phenomenon. The dollar rose 0.7% versus the Japanese yen, 0.5% against the euro, and 0.3% relative to the Swiss franc, but the U.S. currency has slid somewhat against the Australian and New Zealand dollars and is unchanged relative to sterling and the Canadian currency.
There has been a modest rebound in U.S. equity futures following Tuesday’s debacle that saw the tech-intensive Nasdaq plunge to its weakest level since December 2020. Equity markets recovered 2.5% in China but tumbled 1.2% in Japan and 2.1% in Taiwan, while also experiencing losses today in South Korea, India, Australia, New Zealand, and Indonesia.
The price of WTI oil, up 0.4%, has been buoyed by Russian talk of curbing supply. Gold has edged 0.1% lower. The Bitcoin market remains erratic, rebounded 2.6% overnight but still marginally below $40,000.
The 10-year Treasury yield and British gilt yield are four and three basis points firmer today.
The 10-year Japanese government bond yield is flat at 0.24%, as the Bank of Japan Board began the first day of a 2-day policy review that is not expected to change that central bank’s accommodative stance.
Germany, France, Finland, Taiwan, and South Korea reported consumer confidence figures. The improvement seen earlier this year from a relaxation of Covid restrictions has been dealt a big blow from the Russian invasion of Ukraine and soaring food and energy prices.
- German consumer confidence plunged to a record low of -26.5 heading into May from -15.4 a month earlier and -8.1 late in February.
- French consumer confidence printed at a 40-month low of 88, four points below the street consensus and down from 103 in mid-2021.
- Finnish consumer sentiment weakened to a two-year low in April. Going back more than a decade, it was only lower than now in April 2020.
- Consumer sentiment in Taiwan fell to a 10-month low at present.
- South Korean consumer confidence defied the prevailing trend, rising 1.6 index points in April to a 3-month high of 103.8 but still remaining 6.5 points softer than in mid-2021.
The Confederation of British Industry’s monthly index of activity in distributive trades had slipped from +28 in January to +9 in March and was expected to print modestly below zero this month but instead suffered a big dive to minus 35 in April, which is a 13-month low.
Economic sentiment toward Switzerland, an economy highly dependent on trade and exposed to negative repercussions from Russia’s invasion of Ukraine, printed at a 74-month low of -51.6 in April compared to -27.8 in March and +9.0 in February.
Austria’s manufacturing purchasing managers index fell 1.4 points to a 15-month low of 57.9 in April. A record high of 67.0 had been touched last June.
Australian consumer prices, which are reported quarterly, jumped 2.1% in 1Q 2022, their largest quarterly increase since 3Q 2000. This lifted year-on-year CPI inflation to an 83-quarter high of 5.1% from 3.5% in the previous quarter. 5.1% is a half percentage point more than analysts were fearing and well above the Reserve Bank of Australia’s medium-term inflation target band of 2-3%. Core inflation of 3.7% versus a record low of 1.1% a year earlier constitutes a 12-year high.
Swedish producer price inflation accelerated 5.2 percentage points in March to a record high of 24.5%. PPI inflation had been only 1.3% in March 2021 and was negative for several months prior to then. Swedish unemployment of 8.2% last month compares to 10.0% a year earlier. Sweden’s trade surplus of SEK 5.1 billion in 1Q 2022 was less than a fifth as much as in the first quarter of 2021.
Corporate earnings in China were 8.5% greater than a year earlier in the first quarter of 2022, down from on-year growth in full-2021 of 34.5%.
The early flash estimate of last month’s U.S. merchandise trade balance revealed a record deficit of $125.3 billion. This represents a shocking 18% leap compared to February, thanks to an astonishing 11.5% monthly increase of goods imports. Prior to July 2020, the monthly goods deficit had never exceeded $80 billion.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Australian CPI inflation, German and French consumer confidence, U.S. merchandise trade deficit
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