Nothing but Red on the Screens
May 19, 2022
It’s no longer about the data, or the news for that matter. A self-perpetuating technically-driven downward dynamic has taken over financial markets. For the Nasdaq, the bear market threshold was breached a while ago. S&P futures are within a percent of bear market territory, and its only a matter of time before the Dow joins that pair. U.S. stocks are not alone. Share prices lost 2.5% today in Hong Kong, 1.9% in Japan, 1.7% in Taiwan and Australia, 2.6% in India, 1.3% in South Korea and 1.1% in Singapore. Daily losses of at least 2.0% can be found in the U.K., Germany, and France.
The move out of equities has temporarily depressed ten-year sovereign debt yields by eight basis points in Germany, France and the Netherlands, six bps in Italy and Spain, five bps in the United States and four bps in Great Britain.
West Texas Intermediate oil has sunk 1.5%, but prices for Bitcoin and gold are up 2.5% and 0.8%.
Dollar losses overnight amount to 4.1% against the Russian ruble, 0.9% versus the kiwi, 0.6% relative to the Canadian and Australian dollars, 0.5% against the euro and Mexican peso, and 0.3% relative to the Japanese yen.
Coincidentally, G7 central bankers and finance ministers are engaged in long-scheduled meetings in Bonn Germany to share thoughts on a wide range of issues such as coordinated support for Ukraine, handling the Covid pandemic, and their common threat from climate change. A statement will be released Friday.
Japanese core domestic machinery orders rebounded more sharply than expected (7.1%) in March but still fell 3.6% in the first quarter. Export orders for machinery plunged 14.2% in March and 6.6% in the quarter.
Japan’s customs trade deficit widened 59% month-on-month in April to JPY 1.619 trillion as export growth of 1.0% was exceeded by a 7.9% monthly jump in imports. The unadjusted JPY 839 billion deficit was transformed from a JPY 227 billion surplus in April 2021, thanks to a 28.2% increase in imports that was more than twice the pace of exports.
The difficult backdrop of these times was also reflected in a rare seasonally adjusted current account deficit experienced by Euroland of EUR 1.6 billion during March. That compares to surpluses of EUR 15.7 billion in February and EUR 21.6 billion in January. The unadjusted surplus over the past 12 reported months was equal to 1.8% of GDP, down from 2.6% in the prior one-year period through April 2021.
It was also reported today that construction output in Euroland had stagnated in March, resulting a a greatly shrunken year-on-year increase of 3.3%. For the first quarter, construction output had risen 3.4% versus 4Q 2021 and by 5.6% from the same quarter a year earlier.
Australia’ jobless rate remained at 3.9% in April, matching March’s 48-year low. But employment in the latest month rose just 4k, well short of analyst expectations, and labor market participation dipped slightly.
Britain’s monthly industrial trends survey revealed a 12-point increase of the orders index to 26, matching the record high.
Hong Kong’s jobless rate jumped 0.4 percentage points to a 10-month high of 5.4% in April.
In New Zealand, producer input prices and producer output price growth respectively accelerated last quarter to 3.6% and 2.6% last quarter.
The Central Bank of Sri Lanka Board had agreed to a shock and awe 700-basis point interest rate hike at their policy review in April and consequently decided this month to leave the standing deposit facility rate unchanged at 13.5%. “The Board was of the view that the policy measures that have already been implemented by the Central Bank would continue to be further transmitted to the financial markets, while some signs of tighter monetary policy already being observed in real economic activity.” Even at 13.5%, which compares to a pandemic low point of 4.5%, the interest rate remains far below CPI inflation of 29.8% as of April. Officials are prepared to tighten further if expected inflation continues to rise or inflation fails to ease back eventually.
At the Central Bank of The Philippines, the overnight interest rate was lifted 25 basis points to 2.25% today. This was the first increase since November 2018 but leaves the rate level 175 basis points under its pre-pandemic level of 4.0%. Filipino CPI inflation rose from 3.0% in January and February to a 40-month high of 4.9% in April.
Canadian producer price inflation settled back to a a 2-month low but still lofty 16.4% in April.
The Philadelphia Fed monthly manufacturing survey index tumbled to a 2-year low of 2.6 in May from 17.6 in April and a 7-month high of 39.0 last November.
U.S. jobless insurance claims rose more than forecast last week to a 16-week high of 218k, resulting in a 12-week high in its four-week average.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Australian unemploymentg, Central Bank of Sri Lanka, Central Bank of The Philippines, Euroland current account