August Kicks Off With Signs of a Global Slowdown and a Further Drop in the Dollar

August 1, 2022

The dollar fell overnight by a further 0.5% on a weighted basis and is 3.6% below last month’s multi-decade high.

Dollar losses so far this Monday amount to 2.0% against the kiwi, 1.0% versus the yen, 0.7% relative to the Australian dollar, 0.6% vis-a-vis sterling, 0.4% against the euro and peso, and 0.2% versus the Canadian dollar and Swiss franc.

Ten-year sovereign bond yields in Europe went up three basis points in Germany, France, and Italy and by five bps in the U.K., but fell four basis points in Italy. The 10-year U.S. Treasury yield edged a basis point higher, and its Japanese counterpart remains unchanged.

Share prices closed up 0.9% in India and Singapore and 0.7% higher in Japan and Australia. Switzerland and Canada are observing holidays. Stock markets in Germany, France, Spain and the U.K. are slightly higher, while U.S. stock market futures are marginally softer.

A 2.2% drop in WTI oil’s price reflects expectations of slackening global demand.

Monday’s data release menu has been dominated by a slew of manufacturing sector purchasing manager surveys that highlight a loss of demand momentum, unwelcome inventory buildups, eroded optimism about the future due to worries about the war in Ukraine, but also some relief on the inflation front.

Euroland’s manufacturing PMI printed 2.3 points lower and fell for the first time since mid-2020 dropped below the 50 threshold that divides expansion from contraction. Indices for Germany, France, Italy, Spain and Greece were each at 40-something and their lowest readings in 19-to-26 months.

Britain‘s 52.1 PMI reading was at a 25-month low. Although at 59.1, the Swiss PMI fell to a 19-month low.

Poland scored a 26-month low of 42.1. The Czech PMI reading of 46.8 was the second sub-50 score in a row and represents a 25-month low. The Russian manufacturing PMI slid 0.6 points to a 3-month low of 50.3, and Turkey’s rate of contraction intensified with a 26-month low of 46.9. Hungary‘s PMI, in contrast, rose 0.8 points to a 3-month high of 57.8.

The most dramatic deterioration reported today occurred in Denmark, where the manufacturing PMI plunged from 71.3 in June to 38.0 in July. Sweden‘s PMI reading last month of 53.1 was the lowest in 24 months.

Japan’s manufacturing PMI was revised 0.1 lower to a 10-month low of 52.1. South Korea’s PMI of 49.8 was at a 22-month low. All three Chinese PMIs in July were down from June: the NBS manufacturing index at a 3-month low of 49.0, the NBS non-manufacturing index at a 2-month low of 53.7, and the S&P Global manufacturing survey measure at a 2-month low of 50.4. The Filipino PMI (50.8), Taiwanese PMI (44.6) and Vietnamese PMI (51.2) represent 6-, 26- and 10-month lows. But the Indonesian and Malaysian PMI readings for July of 51.3 and 50.6 were their highest since April, and Thailand’s measure rose 1.7 index points to a 5-month high of 52.4. India’s manufacturing PMI rebounded from a 9-month low of 53.9 in June to an 8-month high of 56.4 in July.

Australia‘s S&P Global manufacturing PMI was unrevised at a 6-month low of 55.7, and the AIG-compiled Australian PMI fell back to match May’s 4-month low of 52.5. South Africa’s Absa-compiled manufacturing PMI dived almost 5 points to a one-year low of 47.6.

Among other data reported today,

German retail sales volume in June underperformed street expectations by a considerable margin, dropping 1.6% on month and 8.8% on year. The 12-month rate of decline was the most since at least 1994.

Euroland’s jobless rate printed at a record low of 6.6% for a third straight month in June. That’s down from 7.9% a year earlier.

Consumer price inflation in Indonesia accelerated to a 91-month high of 4.94% in July. Core CPI of 2.86% was twice its year-earlier pace.

Like many countries, South Korea’s trade balance has been weakened substantially by the rising prices of imported commodities and Covid lockdowns in China. The balance swung from a surplus of $1.79 billion in July 2021 to a deficit last month of $4.67%, with import growth of 21.8% more than twice the on-year rise of exports.

Construction continues to be restrained by rising interest rates around the world. Building permits in New Zealand recorded a month-on-month drop in each month of 2Q 2022 that in total amounted to around 11%.

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

 

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