Dollar Narrowly Mixed and Equities Seemingly Headed for First Weekly Rise in Nearly Two Months

May 27, 2022

The weighted DXY dollar index fell initially in overnight trading but recovered to show minuscule net change. Relative to specific other currencies, the dollar shows overnight net gains of 0.5% against the ruble, 0.2% versus the Turkish lira and 0.1% vis-a-vis the euro, and there’s been no change against the Swiss franc. Losses have occurred of 0.7% against the kiw, 0.6% versus the Australian dollar, 0.4% relative to the yuan, 0.2% against the yen and Canadian dollar and 0.1% versus sterling and the peso.

U.S. equity futures are modestly in the black, supported as earlier this week by news of better-than-expected retail sector earnings last quarter. Share prices in the Pacific Rim closed up 2.9% in Hong Kong, 1.9% in Taiwan, 2.1% in Indonesia, 1.2% in India, 1.1% in Australia, 1.0% in South Korea, and 0.7% in Japan and Singapore. The German Dax and Paris Cac are are 0.8% and 0.9% firmer, but the British Ftse shows a lesser  rise of just 0.2%.

Investors are heartened that the FOMC minutes hinted at the possibility of a pause in rate hikes after the next two to three meetings of 50-basis point increases. Ten-year sovereign debt yields dropped overnight by 7 basis points in the U.K., 5 bps in Germany, 3 bps in the United States and a basis point in the United States. The price of Bitcoin fell 0.6% and to below the $29,000 level. Gold has firmed 0.5%, while WTI oil is 0.3% lower.

CPI inflation for Tokyo, which gets released about 3 weeks earlier than Japanese national data, held steady at 2.4% in May. Consumer price inflation excluding fresh food stayed at 1.9%, and the index that excludes energy as well as perishable food edged up 0.1 percentage point to 0.9%. Month-on-month increases in May were smaller than those in April.

Worries about the drag of Covid on Chinese growth prospects were reinforced by news that corporate profits in Asia’s largest economy had risen just 3.5% on year in January-April. For just April, earnings slumped 8.5% versus the same month a year earlier. Profits had advanced 34.3% on average during 2021.

Taiwan, which does a lot of trade with China, saw consumer confidence slide significantly in May to a 2-year low. Taiwanese real GDP expanded 1.1% on quarter in 1Q, less than half the pace in the final quarter of 2021. Year-on-year economic growth of 3.1% was down from 5.3% in 4Q 2021 but above full-2021 growth of 2.4%.

Austria’s manufacturing purchasing managers index fell 1.1 points in April to a 16-month low.

An absence of any growth in French GDP last quarter surprised analysts and ended a four-quarter streak of positive economic growth. GDP was 5.3% higher than in 1Q 2021, however.

Australia’s retail sector continues to benefit from a relaxation of Covid restraints. Sales have posted four straight monthly advances. Although April’s 0.9% increases was the smallest in that streak, sales were 9.6% above their year-earlier level.

Swedish retail sales grew 0.4% in April and were 2.4% above their year-earlier level.

A 5.3% rise of Spanish retail sales last month more than reversed March’s 4.3% drop, and the 1.5% on-year advance in sales was the most since January.

Portuguese consumer and business sentiment rose in April to respective two- and six-month highs. Finnish consumer confidence again printed below zero but was 0.1 point better than the prior month’s reading.

GDP growth in Singapore last quarter has been revised up 0.3 percentage points to 0.7% on quarter and 3.7% compared to the same quarter a year earlier.

On-year M3 money growth in the euro area slowed to 6.0% in April and to 6.2% in February-April from 6.9% in November-January. But bank lending to non-financial firms picked up and loans to households matched the highest on-year advance since late 2008.

Still Ahead is the releases of several U.S. economic monthly indicators:  personal income, personal consumption expenditures, the PCE price deflator, an advance estimate of the trade deficit, and the Reuters/U. Michigan consumer confidence index.

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


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