Market Pounding Lets Up but Respite Unlikely to Endure

May 10, 2022

Following Monday’s serious damage that saw the SPX and Nasdaq close 17% and 28.2% below their cyclical highs, U.S. stock futures show overnight gains of ranging from +0.6% in the DOW and 0.7% in the S&P 500 to 1.1% in the Nasdaq.

Pac Rim equities today had mostly followed America’s downward lead from Monday, with losses of 1.8% in Hong Kong and Australia, 1.3% in Singapore and Indonesia, and 0.6% in South Korea and Japan. A 1.1% rise in China’s market was an outlier, aided by central bank verbal assurance that growth will be supported. European markets are up, too, ledĀ  by gains somewhat more than 1.0% in Germany, Italy and Switzerland.

10-year sovereign debt yields have given back some gains, with drops of 10 basis points in the British gilt and comparable declines of 9 bps in Italy, 7 bps in Spain, 6 bps in Portugal, 5 bps in the Netherlands, France, Germany and Switzerland, and 3 bps in the U.S. Treasury yield.

The price of WTI oil fell back 1.7%. Bitcoin‘s price recovered 5.1% but is still 52.6% below its 52-week high.The price of gold is little changed.

Tuesday’s betterĀ  tone has occurred without positive developments to alleviate the many factors churning up financial markets. In fact, numerous prices figures reported today underscore the global nature of a serious inflation problem.

Dutch CPI inflation of 9.6% in April was only 0.1 percentage points below March’s 358-month high and up from 1.9% in April 2021.

Czech CPI inflation jumped 1.5 percentage points to a 340-month high in April of 14.2%.

Norwegian consumer prices rose 1.2% on month and accelerated in year-on-year terms by 0.9 percentage points to a higher-than-forecast, 164-month peak of 5.4% in April. Core CPI climbed to a 13-month high, and Norway’s April producer price index leaped 7.2% on month and soared 66.4% on year.

CPI inflation in Ukraine accelerated to a 54-month high of 16.4% in April from 13.7% in March and 10.0% in December. Amid the squeeze on supplies caused by the assault of Russian troops, consumer prices leaped 4.5% on month in March and another 3.1% last month.

In Hungary, consumer prices last month increased 1.6 on month, their largest such advance since early 2012 which lifted the 12-month rate of rise by a full percentage point to a 1-year high of 9.5%.

Danish consumer prices also went up 1.6% on month after climbing 0.6% in the prior month. On-year Danish CPI inflation of 6.7% represented more than a fourfold acceleration from the prior year and was the most in 452 months.

Greek consumer prices rose more than 2.0% for a second straight month, raising the 12-month rate of increase to a 327-month high of 10.2%.

Latvian CPI inflation accelerated 1.5 percentage points to a 162-month high of 13.0%. The monthly rise exceeded 2.0%.

Africa hasn’t escaped inflation, either. Egyptian CPI inflation of 13.1% in April was up from 10.5% in March and 4.1% in April 2021, and it is at a 351-month peak.

In Mauritius, April’s 11.0% consumer price inflation represents a 164-month high, and Ethiopia‘s 36.6% pace was two percentage points higher than the March level and the most in 125 months.

Industrial production data were released by several countries:

  • March output was unchanged on month in Italy after dropping 1.1% in January and 3.4% in February. Compared to March 2021, production rose 3.0%.
  • Greek industrial production exceeded its March 2021 level by 7.9%, the biggest on-year increase since an 8.4% gain in December.
  • Austrian industrial production was 1.1% above February’s level, but the 3.7% year-on-year advance was the smallest in 13 months.
  • Finnish industrial production fell 1.2% on month and rose just 2.6% versus March 2021, the smallest on-year advance in 11 months.
  • Belgian industrial production fell 3.6% on month and 3.7% on year in March.
  • On-year growth of 7.2% in Dutch factory output was the least in 11 months.

In other data news, Germany’s ZEW Institute reported May survey results of investor expectations and perceived impression of current conditions. The German ZEW expectations index recovered from April’s 25-month low of -41 to a 3-month high of -34.3 but still contrasted with the 255-month high of 84.4 touched in May 2021. Also, the index for current conditions in Germany fell eight index points to a 1-year low of -36.5. Regarding Euroland, expectations improved to a 3-month high but still-depressed reading of minus 29.5, and the current situation index for the whole euro area deteriorated 6.5 points to a one-year low of -35.0.

Japanese real household spending rebounded by a greater-than-expected 4.1% in March but still managed to record the largest year-on-year decline (2.3%) in seven months.

The NAB index of Australian business confidence weakened from March’s 5-month high of 16 to a 3-month low in April of +10. Business conditions improved five index points, however, to +20 last month.

Turkish unemployment unexpectedly increased by 0.4 percentage points in March to 11.5% from February’s 8-month low of 11.1%.

British same-store sales posted their greatest 12-month rate of decline (1.7%) during April since November 2019.

U.S. small business sentiment was unchanged in April from a 23-month low hit of 93.2 in March. That’s down from readings of 102.5 last June and 99.8 in April 2021.

In other news, Ferdinand Marcos Junior, the son of the dictatorial leader of the Philippines from 1965 until 1986, won the Filipino presidential election by a big margin.

Covid cases continue to run uncomfortably high in the United States and awkwardly so in light of looser restrictions. Over 110k new cases were reported yesterday, and the 7-day hospitalization rate is running 20% above its level two weeks ago. The saving grace is that deaths (just 329 on Monday, for instance), remain very contained. But the cumulative pandemic death toll in the United States of 996,612 keeps inching closer to the once unthinkable one million mark. Studies comparing overall deaths to the pre-pandemic norms suggest the true Covid death total flew past 1 million some time ago.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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