Quarter-End Data Blast Includes Several Extremes

June 30, 2022

It’s been a good session for the dollar but a disastrous one for equities and Bitcoins.

The weighted DXY dollar index has climbed 0.4%, and came within 0.2% of its multi-year high during overnight hours. The dollar has risen 0.6% against the euro, 0.4% relative to the Swiss franc and Mexican peso, 0.3% vis-a-vis the loonie, and 0.2% versus the Turkish lira. The Japanese yen did even better, rising 0.3% against the dollar.

The price of Bitcoin plunged almost $1,000 (4.8%), and prices for oil and gold are down 1.2% and 0.6%.

Share prices in the U.K., Germany, France, Italy and Spain have all slumped at least 2.0% so far on the final day of the second quarter. The Russian MOEX sank 8%. Stock markets in the Pacific Rim closed down 2.7% in Taiwan, 2.0% in Australia, 1.9% in South Korea and 1.5% in Japan, but the Shanghai Composite index ended with a 1.1% advance. A big drop is suggested by U.S. futures.

The stampede into less risky investments saw 10-year sovereign debt yields drop 13 basis points in Germany and the Netherlands, 12 bps in Spain, 11 bps in France, 9 bps in Italy, just 6 bps in the U.K. and U.S. and not at all in Japan.

Inflation remains uppermost in investor minds, and the news hasn’t been good on that front:

  • French CPI inflation increased 0.6 percentage points to a 443-month high of 5.8%. French PPI inflation of 27.3% in May remained close to April’s record high of 27.9%.
  • Italian PPI inflation clocked in at 34.6% in May, not far from its record high of 36.9% set in March.
  • German import price inflation of 30.6% in May was powered by energy, whose prices exceeded year-earlier levels by more than 140%.
  • Cypriot CPI inflation of 9.1% in May was the most in 404 months and up from 2.4% a year earlier.
  • Greece experienced record high PPI inflation of 48.8% in April.
  • Portuguese consumer price inflation accelerated from a mere 0.5% in June 2021 to a 354-month high of 8.7% one year later.
  • Filipino PPI inflation of 6.9% in May was at a 137-month high.
  • Belgian PPI inflation last month was just 0.1 percentage point south of its record high of 40.6% set in April.
  • South African producer price inflation rose to more than a 9-1/2 year high of 14.7% in May.
  • In Sri Lanka, CPI inflation accelerated from 18.7% in March to 29.8% in April, 39.1% in May and 54.5% this month.
  • Record high producer price inflation in Hungary of 38.3% last month was up from 28.8% in April and 11.3% a year earlier. The PPI posted monthly surges of over 2.0% in both April and May.
  • Austrian PPI inflation tripled from 6.6% in May 2021 to 20.9% in May 2022.

Germany’s labor market has had difficulty absorbing Ukrainian refugees. There were 133k more jobless workers in June than May, and unemployment rose to 5.3% from 5.0%.

Following a 5.4% monthly plunge in April, German retail sales recovered by a less-than-expected 0.6% in May, resulting in the third straight on-year decline. The 3.6% 12-month drop was larger than those in April and March.

Swiss retail sales rose 1.1% in May but were 1.6% weaker than a year earlier. Meantime, the Swiss leading economic indicators sank to a 17-month low.

Here’s a whopper: The British current account deficit ballooned to a record GBP 51.7 billion in the first quarter, equal to 18.3% of GDP from GBP 7.3 billion (1.2% of GDP) in the previous quarter. This news was accompanied by news that first-quarter GDP growth of 0.8% versus 4Q 2021 and 8.7% versus the same quarter a year earlier was the same as estimated previously. A third data record put house price year-on-year inflation at a 6-month low of 10.7% in June, down from 14.3% in March and 13.4% in mid-2021 in the Nationwide index..

Russian monthly GDP has swung from a year-on-year advance of 5.7% in January to a 4.3% on-year drop in May.

Japanese industrial production, which had risen 0.8% in the first quarter, cratered 7.2% on month in May after a decline of 1.5% in April. May housing starts were 4.3% fewer than a year earlier, their first on-year decline since February 2021, but construction orders in Japan in May matched April’s year-on-year increase of 30.5%.

China’s NBS-compiled manufacturing and non-manufacturing purchasing managers indices improved to 4- and 13-month highs of 50.2 and 54.7 in June, respectively. The rises reflect further lifting of Covid lockdowns.

In South Korea, on-year increases of 7.8% in industrial production and 0.7% in retail sales were the most in nine and two months, respectively. But retail sales dipped 0.1% on month and haven’t risen on such a basis since December. Also, South Korea’s manufacturing sector confidence index dropped to a 16-month low in June.

Spain’s current account of 479 million euros in April was in deficit for the fourth time in five months and compared to a 930 million euro surplus in April 2021.

As expected and in the face of its highest inflation in over 30 years, the Executive Board at the Swedish Riksbank intensified the speed of stimulus withdrawal. The policy interest rate, which from a negative 0.50% base, had been raised by 25 basis points each in December 2018, December 2019 and April 2022, was hiked by 50 basis points to 0.75%. Forward guidance now anticipates the rate rise to nearly 2.0% during the second half of 2022. Officials also agreed to purchase bonds during 2H 2022 at only half the projected amount indicated after April’s policy review. Core inflation is projected to slow from almost 7% this year to 2% by 2024, and officials are “prepared to raise the policy rate faster if this is needed to ensure that inflation returns to the 2% target.”

U.S. personal consumption expenditures rose just 0.2% last month, half what analysts were expected, and representing the first inflation-adjusted decline (-0.4%) so far this year. The PCE price deflator jumped 0.6% on month after April’s 0.2% increase but held steady in year-on-year terms with an increase of 6.3%, which was the third such reading in four months. Energy and food price inflation accelerated, but core PCE price inflation receded to 4.7% from 4.9% in April, 5.2% in March and 5.3% in February.

There has been a very tight shot group in new U.S. jobless insurance claims over the past four weeks, but their average of 231.75k was noticeably higher than the 207k average during the previous four weeks through May 28.

Canadian monthly GDP grew 0.3% in April, led by a 1.3% advance in industrial production, but May is expected to produce the first GDP decline since January.

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

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