Monday’s U.S. Equity Rally Extended Abroad Overnight
June 18, 2024
Share prices in the Pacific Rim today closed with gains of 1.0% in Japan and Australia, 1.2% in Taiwan, 0.6% in New Zealand, 0.5% in China and 0.7% in South Korea. Major stock markets so far in Europe’s day have experienced rises of 1.0% in Italy, 0.4% in France and Spain, 0.3% in the U.K. and 0.2% in Germany. In the United States, where AI mania lifted the SPX and Nasdaq yesterday by 0.8-0.9%, pre-open futures trading has held onto those advance but not increased them.
The dollar has enjoyed another firm session, climbing 0.3% so far versus sterling, 0.5% versus the kiwi, and 0.2% relative to the yen, loonie and euro. Ten-year sovereign debt yields fell five basis points in Italy, three bps in France and Spain and two bps in Great Britain but rose a basis point in the United States, Japan and Germany. A tough day for crypto say Bitcoin slump 1.6%. Oil and gold prices are comparatively steady.
In a day of scant released data abroad, investors now await the news on U.S. retail sales and industrial production, which will be released this morning.
After deliberating between leaving Australia’s Official Cash Rate or leaving such at 4.35%, officials at the Reserve Bank of Australia chose not to change policy but reaffirmed that “the Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome.” After lifting the OCR by three percentage points in 2022 and another 125 bps last year, such has been at its highest level since December 2008 after a 25-basis point increase at the end of last November, but officials are not ruling out a further increase in the future. “There are uncertainties regarding the lags in the effect of monetary policy and how firms’ pricing decisions and wages will respond to the slower growth in the economy at a time of excess demand, and while conditions in the labor market remain tight.”
The flash estimates of CPI inflation last month in the euro area were left unrevised, showing a 0.2% monthly uptick that was associated with a rise in the 12-month rate of price rise to a 3-month high of 2.6%. Core inflation rose 0.2 percentage points to 2.9%, fueled mainly by a 0.7% monthly advance in service sector prices. Inflation accelerated in all four of the joint currency area’s largest economies, but the long-term downward path seems to be still intact.
Expected inflation in Euroland according to the ZEW Institute’s monthly survey printed at negative 33.9, even though investors became more optimistic about the prognosis for economic growth, with that reading printing 3.7 points above May’s level at a 35-month high of 51.3. The ZEW index of investor expectations regarding future German growth rose 0.4 points to a 28-month high but remained below 50 at 47.8 in June. In both Euroland as a whole and Germany in particular, the indices for investors’ perceived current economic conditions continued to lag significantly behind the improvement in expectations.
U.S. retail sales (down 02% in April and then up just 0.1% last month) suffered their weakest two-month sequence in a half year. Compared to a year earlier, sales growth has slowed from 5.5% in December 2023 to 3.8% in March, 2.7% in April and 2.3% last month. Sales softness was broadly experienced across most store categories, evidence that the Fed’s retention of elevated interest rates is promoting ongoing disinflationary pressure. As long as this remains the case, officials will not need to entertain the thought of hiking rate additionally.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland and German ZEW expectations index, Reserve Bank of Australia, U.S. retail sales
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