Rebound of Appetite for Riskier Assets
July 18, 2022
Fed officials have pushed back against market speculation that the federal funds rate will be lifted by more than 75 basis points this month. They apparently are hopeful that the dip in the price of oil under $100 per barrel and some evidence of tempered price expectations might be a sign of inflation peaking. Similar grasping for pieces of any sighs of good news back in the 1970s proved to be a regrettable tactic.
The price of Bitcoin jumped 7.0% above Friday’s closing and has recovered nearly 20% from the recent 52-week low.
The dollar is broadly lower, with overnight declines of 1.3% against the Russian ruble, 1.1% versus sterling, 0.7% relative to the euro and Mexican peso, 0.6% against the Australian dollar, 0.5% vis-a-vis the Canadian dollar and 0.3% against the Japanese yen and Chinese yuan.
U.S. stock futures have responded to decent corporate earnings reports and are up around 1.0%. In the Pacific Rim, where Japan’s market was shut for Marine Day, share prices closed up 2.4% in Hong Kong, 1.9% in South Korea, 1,6% in China, 1.4% in India, and 1.2% in Taiwan. The British Ftse, German Dax, and Paris Cac are each up more than 1.0%.
Prices for WTI oil and gold are 1.7% and 0.7% firmer.
A by-product of renewed buying of riskier assets today has been the rise in ten-year sovereign bond yields of 18 basis points in Spain, 9 bps in Italy, 8 bps in France, 6 bps in the U.K. and 3 basis points in the United States.
Following Friday’s disappointing batch of Chinese economic data, the People’s Bank of China raised its daily injection of liquidity into the money market and promised a more growth-supporting policy stance.
Portuguese producer price inflation rose 1.2 percentage points further in June to a 3-month high of 25.7%. Such crested in March at 26.7% and was already at a 21-year high of 8.2% by mid-2021.
Consumer price inflation in New Zealand of 7.3% in 2Q 2022 was was up from 3.3% a year earlier and the highest reading in 32 years, but the quarter-on-quarter price increase of 1.7% was marginally less than in 1Q.
New Zealand’s service sector purchasing managers index improved 0.1 point to a 21-year high of 55.4 in June. Such has recovered from 46.0 back in January.
In politically and economically ravished Sri Lanka, the manufacturing and service-sector PMIs fell to 2- and 13-month lows in June of 44.1 and 40.3. Readings below 50 connote contracting activity.
Soaring energy costs are reflected in the Italian and Spanish trade balances. Italy recorded deficits of EUR 12 million in May and EUR 12.2 billion in January-May versus a surplus of EUR 5.6 billion in May 2021. Spain’s trade balance likewise swung from a EUR 140 million surplus in May 2021 to a EUR 4.76 billion deficit in May 2022. Energy imports leaped 160% and 132% respectively in Italy and Spain from a year earlier.
Several U.S. housing market statistics get reported this week, including the monthly National Association of Home Builders index later this morning. Treasury-compiled capital flow movements between the United States and the rest of the world will be released in the afternoon.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: New Zealand CPI
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