Last Week of July Starts with Equities and Bond Yields Rising and Dollar and Bitcoin Falling

July 25, 2022

The dollar fell overnight by 0.6% against the peso and sterling, 0.4% versus the ruble and Australian and Canadian dollars, 0.3% relative to the euro but rose 0.3% against the yen, 0.2% versus the Swiss franc and 0.6% vis-a-vis the Turkish lira. The weighted DXY dollar index is 0.4% softer.

U.S. equity futures point to a 0.6% advance. Share prices are so far up 0.7% in Italy, 0.4% in Germany, 0.3% in Spain and 0.2% in Great Britain. These advances contrast will overnight lower closings of 0.8% in Japan, 0.6% in China and India and 0.4% in South Korea and Indonesia.

Bitcoin’s price retreated 2.6%, even as gold stayed steady and WTI oil rose 0.9%.

The ten-year U.S. Treasury yield rise of five basis points exceeds increases of two and one basis points in its German and British counterparts. The 10-year Japanese JGB yield fell two basis points.

The German business climate index compiled at the IFO Institute fell to a 25-month low  in July, prompting officials there to say the economy is on the cusp of a recession. Current conditions and business expectations each weakened more than analysts were prediction. At 88.6, the overall index is down from 101.8 in mid-2021 but above its record low of 74.2 in April 2020. Manufacturing, trade, construction and services all took big hits in the broad turn for the worse.

The monthly British industrial trends orders index dropped to a 15-month low of 8 in July from readings of 18 in June and 26 in May.

Turkish business confidence slid to a one-year low in July.

Czech business and consumer confidence fell to 4-month and 275-month lows in July.

Elevated inflation and the war in Ukraine remain the driving factors of the current gloom. The Federal Reserve is expected to announce its second straight 75-basis point federal funds rate hike at mid-week.

And the National Bank of Kazakhstan, one of the former members of the USSR, became the latest central bank to raise its policy rate to fend off runaway inflation. The interest rate increase of 50 basis points to 14.5% follows earlier increases of 50 basis points in April, 325 basis points in February, 50 bps in January, and a trio of 25-bp moves in July, September and October of 2021. The pandemic low of 9.0% had prevailed previously for a year. At 14.5%, the new policy rate level merely matches on-year CPI inflation, which has accelerated from 8.5% in  January to 14.5% last month. This is well above a target centered on 5%, and officials concede that inflation will be higher than their latest prediction this year and probably not crest until early in 2023.

CPI inflation in Singapore posted 1.0% monthly increases in both May and June, lifting the 12-month rate of increase to a 165-month high of 6.7% from 2.4% in June 2021 and -0.5% in June 2020.

Chinese Covid lockdowns sap Hong Kong of much of its economic energy. Hong Kong experienced a record trade deficit in June of HKD 68.5 billion, as exports sank 6.6% on year while imports moved 0.5% higher.

Taiwanese industrial production dipped 0.4% in June, and the 0.7% 12-month rate of rise was the least in 29 months. A record high on-year 22.5% increase in Taiwanese retail sales last month merely reflects its extraordinary drop a year earlier.

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

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