Investors Selling Just About Everything for Dollars

September 23, 2022

The weighted DXY dollar index rose 0.8% overnight and is trading currently near its intra-day level. At that high, DXY was a mere 5.5% below its peak going back to 1985 and 55.5% above its 2008 low. The dollar shows overnight gains of 1.8% against sterling, 1.1% versus the New Zealand dollar, 1.0% relative to the Australian dollar, 0.8% against the euro, 0.7% vis-a-vis the Mexican peso, 0.6% against the Chinese yuan, 0.4% versus the Japanese yen and Swiss franc, and 0.2% relative to the Canadian dollar.

Just about everything else is falling.

  • Prices for Bitcoin, oil, and gold dropped 2.4%, 3.5% and 1.5% so far today.
  • Sovereign debt sold off, driving 10-year yields up by 30 basis points in the U.K., 15 bps in Italy, 9 bps in Spain, 8 bps in France, and 5 bps in 10-year U.S. Treasury yields.
  • The Japanese took today off, observing the Autumnal Equinox holiday. But other Asian stock markets closed down 1.8% in South Korea, 1.7% in India, 1.2% in Hong Kong, 1.3% in Taiwan, 1.1% in Singapore, and 0.7% in China and New Zealand. European stock market losses so far amount to 3.1% in Italy, 2.8% in Spain, 2.5% in Germany, 2.2% in France, and 2.1% in Great Britain.
  • U.S. stock futures are down slightly more than 1.0%.

One trigger for the market chaos has been preliminary purchasing manager September survey findings that by and large depict a reintensification of inflationary pressure and a deepening economic slowdown as the third quarter drew to a close. Another fresh concern arose from the tax cut plans of British Prime Minister Truss, which investors worry will cause exploding fiscal debt, and yet another worry is that the expected far-right election victory in this Sunday’s Italian election may lead to greater intra-EU strains at a time that demands solidarity to face up to Russia’s economic and military threats.

Euroland’s composite purchasing managers index sank to a 20-month low in September of 48.2. Manufacturing printed at a 27-month low of 48.5, while the services PMI dropped to a 19-month low of 48.9.

Germany performed significantly worse than France or Euroland as a whole. The German composite, manufacturing, and service sector PMI readings of 45.9, 48.3, and 45.4 represent the weakest activity in 28, 27, and 28 months. Elevated energy uncertainty, very high inflation, and destocking exerted an intensifying drag. In France, the composite PMI printed above 50 at 51.2, thanks to a higher-than-forecast services index of 53.0, but the manufacturing index’s slide to 47.8 from 50.6 is bound to infect services in coming months.

In the U.K., the composite PMI fell 1.2 points to a 20-month low of 48.4 despite an uptick in manufacturing to a 2-month high of 48.5. Services fell below the 50 threshold to a 20-month low of of 49.2.

Australia’s composite PMI index rose 0.6 points to a 2-month high of 50.8, with manufacturing activity (53.9) continuing to outpace services, which had a subdued 50.4 reading in September. Unlike Europe, indicators of pricing pressure eased somewhat further in the latest month.

South Korean producer price inflation slowed further to 8.4% in August, having crested at 10% in June. The latest 12-month increase was higher than that of 7.3% in August 2021.

Chilean PPI inflation of 17.2% in August represents a 19-month low andwas down from 21.0% in July and 28.7% in August 2021.

Malaysian consumer price inflation ticked up 0.3 percentage points in August to a 16-month high of 4.7%.

Singaporean consumer prices climbed 0.9% on month  in August, lifting the 12-month inflation rate to a 170-month high of 7.5% there.

The Central Bank of Paraguay engineered a 25-basis point policy interest rate hike to 8.5% at this month’s review. Starting from a record low of 0.75% until August 2021, a string of monthly increase had lifted the rate by 450 basis points by the end of last year, and today’s move extends the increase in 2022 to 325 basis points so far. At 8.5%, nonetheless, the new policy rate level still lies beneath consumer price inflation, which accelerated from 5.6% in August 2021 to 10.5% last month.

Spanish GDP growth in the second quarter was revised upward to 1.5% on quarter from 1.1% reported initially and to 6.8% on year from 6.3%.

Dutch quarterly GDP growth in 2Q of 2.6% matched the preliminary estimate and was associated with a year-on-year advance 5.1%, smallest since such turned positive in the second quarter of 2021. The Dutch current account surplus shank sharply to EUR 7.5 billion in the second quarter from EUR 20.2 billion in 1Q 2022 and EUR 22.7 billion in 2Q 2021.

British consumer confidence weakened five index points to a record low of -49 in September, which compares with a reading of -14 a year earlier. The CBI monthly survey of British distributive trades plunged from a 13-mnth high of +37 in August to a five-month low of -20 in September.

Filipino consumer sentiment printed much lower in the third quarter (-12.9) after a five-quarter high of -5.2 in the second quarter.

In Taiwan during the twelve months through August, retail sales rose 12% (a 3-month low), while industrial production increased by 3.7% (most in 3-months).

Canadian retail sales dropped 2.5% in July following a 1.0% increase in June. This decline trimmed the on-year advance to 8.0% from 11.1% in the prior month.

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

 

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