60 Day U.S./Iran Cease-Fire Now Expired and A Lot of Japanese & Chinese Data Reported
August 17, 2026
(126) The 60-day window allowing Iran and the United States to work out a mutually acceptable modification of Iran’s nuclear program expired today with nil progress. The cease-fire was plagued from the get-go by differing interpretations of language meant to restore normal traffic through the Strait of Hormuz. Hardly any ships are currently going through that passageway, and a new flare-up in the conflict between Israel and Lebanon is an additional conflict pressure point. The outlook of this stalemate, fast approaching a half year, was best summed up by Trump’s warning that Americans should accept elevated energy costs to continue in the period ahead.
A second theme affecting world financial markets has been diverging expectations regarding the monetary policies of the United States on the one hand and the European Central Bank on the other. Both have scheduled interest rate reviews next month, and while bets on a U.S. rate hike have fallen in the wake of last week’s released price data, market participants are increasingly resigned to expecting a Euroland’s second tightening since June.
The dollar slid 0.2% against the euro overnight, touching a 2-month low earlier today of $1.1614, and fell even more sharply relative to the Aussie dollar (-0.6%), kiwi and Swiss franc (each by 0.4%).
Among ten-year sovereign debt yields while the U.S. Treasury has marked time at 4.69%, counterparts in Japan and Australia have increased today by six and four basis points.
Stock markets in the Pacific Rim closed mostly higher, including gains of 2.4% in South Korea, 1.4% in China, 1.6% in Indonesia and 0.7% in Japan, Australia’s market lost 0.5%. In Europe so far, a 0.5% share price rise in Italy has been counterbalanced with marginal dips in France, the U.K. and Spain and Germany’s unchanged reading. U.S. futures have moved inconsequentially as investors await earnings reports this week from the major retailers.
The price of West Texas Intermediate crude oil is elevated but barely changed at $82.51 per barrel. Bitcoin and silver are up 1.2%, while gold‘s move has been considerably smaller.
Japanese third quarter GDP growth of 0.3% (or 1.1% at an annualized rate) was smaller than expected, below the second quarter’s annualized pace of 1.9%. The pace of 1.1% compares similarly with earlier reports of 1.5% in the U.S. economy and 1.8% in the euro area. Over the four quarters through 3Q 2025, GDP expanded just 0.7%, just a third as much as the U.S. economy and also less than the rises of 1.0% in the euro area and 1.2% in Great Britain. Japanese growth in the quarter was dominated by inventory building and net foreign demand. Private domestic demand exerted a drag. On-year growth in the GDP price deflator of 2.9% in the first half of 2026 exceeded target but is now losing momentum.
Japanese industrial production growth in June was revised to a gain of 1.9% from 1.3% reported earlier and a year-on-year advance of 4.9% from 4.2%. But for the second quarter as a whole, production went up just 0.2% versus 1Q and by 1.7% from a year earlier. Capacity utilization leaped 4.1% versus May and by 6.0% year-on-year. Finally, Japan’s tertiary index of service sector activity fell on month by 0.2% but rose quarter-on-quarter by 0.8%.
Chinese data reported today by and large underperformed expectations. Retail sales were only 0.6% higher in July than a year earlier, and the gain in industrial production of 4.5% was down from 5.3% in June. China’s rate of unemployment rose by 0.2 percentage points to 5.2%, reversing the prior month’s decline. Fixed asset investment posted a bigger year-to-July decline (-6.7%) than the first half average slide of 5.7%, and property prices (-3.2%) posted an on-year drop of at least 3.0% as such did in every month of the first half of this year.
The New York Fed’s Empire State manufacturing index in August had been projected to fall somewhat but instead increased five points to its best level since late-2021.
Canadian consumer price inflation accelerated in July both overall to a 2-month high of 3.0% and excluding food and energy to a 4-month high of 2.3%. The results exceeded expectations.
Other price releases this Monday included Bulgarian consumer price inflation, which slowed to a 4-month low of 4.5% in July, having touched a 38-month high of 6.9% earlier this year. Czech CPI inflation was confirmed at a 2-month high of 1.7%, also in July, and Malaysian consumer price inflation that month of 1.8% constituted a 4-month low. New Zealand food price inflation, which crested at 5% in August 2025, slowed to a 19-month low of 1.9% ithis past June.
New Zealand’s composite and service sector purchasing manager indices printed at 2-month low os of 52.6 and 50.6.
And GDP in Thailand contracted by 0.2% last quarter, and the economic drag of the Middle East war deepened. GDP growth had slowed from 1.9% in last year’s final quarter to 0.6% in the first quarter of 2026.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Chinese retail sales and industrial production, Japanese GDP
ShareThis
