Some Setbacks, Many Data Reports, and Powell to Testify – Currency Thoughts

Some Setbacks, Many Data Reports, and Powell to Testify

June 30, 2020

After a big gain on Monday, U.S. equity futures point to a lower Tuesday open. In Europe so far, share prices have settled back 0.7% in the U.K. and Spain, 0.4% in Italy, 0.3% in Switzerland and 0.1% in France. In the Pacific Rim, markets closed up 1.4% in Australia, 1.9% in New Zealand, 1.3% in Japan, 0.8% in China and 0.7% in South Korea.

The dollar strengthened overnight by 0.4% against the euro, 0.3% relative to the Australian dollar, 0.2% versus sterling and 0.1% vis-a-vis the yen and loonie.

The 10-year Treasury yield remains unchanged at 0.62%, but the 5-year yield matched its all-time low. The 10-year British gilt and German bund yields are 2 and 1 basis points lower.

Fed Chairman Powell and U.S. Treasury Secretary Mnuchin will be testifying before the House Financial Services Committee shortly after noon local time about the effectiveness of their stimulus and prospects.

Some of today’s data accentuated the extreme shock to growth of the global pandemic.

British real GDP sank 2.2% on quarter in 1Q to post the largest on-year slide in 42 quarters (1.7%). Consumption, business investment and government spending fell on quarter by 2.0%, 1.1% and 4.1%. The British current account deficit more than doubled between 4Q and 1Q to GBP 21.15 billion, equivalent to 3.8% of GDP. That matches the current account deficit to GDP ratio in all of 2019. Not much is expected from trade talks between the U.K. and the EU.

Japanese industrial production plunged by a much greater-than-forecast 8.4% in May. Following a 9.8% drop in April, that resulted in a 25.9% year-on-year collapse, the biggest drop since the summer of 2009. As a ratio to industrial shipments, inventories shot up 6.9% on month and 40.3% on year. Meanwhile Japan’s 2.9% jobless rate in May was 0.3 percentage points higher than in April and at a 3-year peak. Jobs contracted 1.1% on year. Japanese housing starts posted their 11th straight year-on-year drop in May, this time by 12.3%, while construction orders that month were 6.1% weaker than a year earlier.

Spanish GDP dived 5.2% in the first quarter, the steepest such drop in at least 25 years and resulting in a negative on-year growth rate of 4.1% versus positive growth in the year through 4Q19 of 1.8%.

Danish GDP fell 2.0% on quarter and 0.2% on year last quarter. That compares with positive growth of 2.0% in the previous four quarters through 1Q19. Denmark recorded its highest jobless rate last month since the end of 2013.

The monthly measure of Canadian GDP compiled from the supply side dropped 7.5% in March and then plunged a further 11.6% in April. It was 17.1% lower than a year earlier, with 12-month declines of 22.5% in industrial production and 15.5% in service sector activity.

South Korean industrial production fell 6.7% on month and 9.6% on year in May. Construction output fell 4.3% in May after a 3.9% slide in April.

Belgian industrial production plunged 15.5% on month and 23.9% on year in April.

Greek retail sales plummeted 25.5% on month and 24.6% on year in April.

Retail sales in Hong Kong were 33.9% weaker than a year earlier in May, and that was actually a smaller 12-month rate of decline than in any of the prior three months.

Despite a 9.8-point rebound in Switzerland’s KOF-compiled index of leading economic indicators to 59.4, the level continues to be extremely depressed relative first-quarter readings that averaged 97.7.

South African GDP fell 2.0% on quarter in 1Q and was 0.1% weaker than a year earlier.

Portuguese industrial production only recovered 2.5% in May after a 19.3% plunge in April. This left its 12-month rate of decline at 26%.

Despite the comparatively quick containment of the initial Covid-19 outbreak in China, that economy’s manufacturing is not reviving similarly in kind. The NBS manufacturing purchasing managers index in June (50.9) reflects a weakly positive rate of expansion. Such averaged only 50.75 in the second quarter. Non-manufacturing has outperformed the factory sector with a June PMI score of 54.4, up from 53.6 in May, 53.2 in April, 52.3 in March and 29.6 in February.

Price data reported on this final day of the second quarter were also subdued.

In the 12 months through May, producer prices fell 3.1% in The Philippines, 11.8% in Greece, 5.3% in Italy, 4.1% in France, 2.7% in Austria, and 5.5% in Malaysia. Hungary’s PPI inflation rate dropped 2.0 percentage points on month to a 7-month low of 1.7%.

Consumer price inflation in the euro area stayed positive but just barely in June, edging back 0.2 percentage points above May’s four-year low of 0.1%. Core CPI dipped 0.1 percentage point to 0.8%, and the inflation of food, alcohol and tobacco slid 0.3 percentage points to 3.1%. But energy component rose 0.7% on month and by 2.5 percentage points on year to minus 9.4%.

Within the euro area, comparisons of CPI inflation in June 2019 to June 2020, show a slide in  to 0.8% from 1.5% in Germany, to 0.1% from 1.4% in France, to -0.4% from +0.8% in Italy, to -0.3% from 0.6% in Spain, to 1.7% from 2.7% in the Netherlands, to -1.7% from +0.2% in Greece, and to -0.7% from +1.1% in Ireland.

One of the bright spots among today’s flood of data reports involved Swiss retail sales, which jumped 30.7% in May and recorded a 140-month high year-on-year increase of 6.6%.

India posted its first quarterly current account surplus in 11 years, totaling $600 million in 1Q.

In South Korea, retail sales rebounded 4.6% on month and 1.7% on year in May.

Turkey’s year-to-date trade deficit of $21.01 billion was twice the size of the $10.46 billion deficit in the first five months of 2019.

The U.S. Case-Shiller house price index was 4.0% higher than a year earlier in April. The Chicago regional PMI recovered only 4.3 index points in June from May’s 457-month low of 32.3.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: British GDP and current account, China purchasing managers index, Euroland CPI, Powell and Mnuchin, Swiss retail sales


You can leave a response, or trackback from your own site.

Source link Automated Business

Be the first to comment on "Some Setbacks, Many Data Reports, and Powell to Testify – Currency Thoughts"

Leave a comment

Your email address will not be published.