A Pause after Some Weak U.S. Housing Data – Currency Thoughts
A Pause after Some Weak U.S. Housing Data
August 16, 2024
A surprisingly frenzied move into riskier assets this week hit a mild speed bump from weak U.S. housing starts and building permits last month. Starts dropped 6.8% on month to a four-year low and were 16% below the year-earlier level. Permits fell 4% on month and 7% on year. Only two days earlier, however, the weekly report on mortgage applications had delivered news of a 25% upsurge in mortgage applications over the past fortnight in response to the recent large drop in mortgage rates. So the initial stock market response to today’s housing starts data was more of a pause than a retreat. Also, Chicago Federal Reserve District President Goolsbee expressed the concern that tight monetary policy mustn’t be maintained longer than needed.
In other stock markets today, equities closed up 3.6% in Japan, 2.1% in Taiwan, 2.0% in South Korea, 1.9% in Hong Kong, 1.7% in India, and 1.3% in Australia. The German DAX is up about a half percent.
Ten-year sovereign debt yields rose overnight by four basis points in Japan and two bps in the United States but have slipped three bps in the U.K., two bps in France and a basis point each in Germany, Spain and Italy.
The dollar has relinquished some ground, easing 0.9% versus the yen, 0.4% against the Australian dollar and sterling, 0.3% vis-a-vis the euro, and 0.6% relative to the Swiss franc.
The prices for Bitcoin and gold have strengthened 1.7% and 1.3%, while that of West Texas Intermediate oil is down 1.7%.
The preliminary U. Michigan/Reuters U.S. consumer sentiment index for August printed slightly above street expectations and 1.4 index points above July’s result but at a mere 67.8 remains entrenched in a zone of anxiety that dates back to the onset of the Covid pandemic. Sentiment had printed at 101 in February 2020 but subsequently got as low as 50 by mid-2022.
Among price data reported this Friday,
- Producer output price inflation in New Zealand accelerated last quarter to a 5-quarter high of 3.4%.
- German wholesale price inflation, which had crested at 20.3% in May 2022, stayed below zero percent for a fifteenth straight month in July, albeit by a margin of just 0.1 percentage point.
- Czech producer price inflation increased 0.7 percentage points to an 11-month high of 1.7% last month.
- Croatian consumer price inflation slowed to a 37-month low of 2.2% in July versus a former high of 17.5% touched in November 2022.
- Bulgarian CPI inflation in July of 2.4% was close to May’s 37-month low of 2.3% and down from 18.7% hit in September 2022.
British retail sales in July went up 0.5% on month and 1.4% on year, matching expectations. For May-July, sales were 1.1% above the average in the prior three months, and 0.9% greater than a year earlier.
Euroland’s seasonally adjusted trade surplus recovered from EUR 12.4 billion in May to EUR 17.5 billion in June, thanks to a 2.4% drop in imports. The unadjusted trade balance improved from a EUR 3 billion deficit in the first half of 2023 to a surplus of EUR 107.5 billion in the first half of this year.
Real GDP in Hong Kong grew much more slowly in the second quarter (+0.4%) than in the first quarter of this year, confirming an earlier estimated year-on-year advance of 3.3%. Malaysian GDP jumped 3.9% on quarter and 5.9% on year (most in six quarters) during 2Q 2024.
Japan’s tertiary index, a gauge of service sector activity, sank 1.3% in June and was 0.1% lower than in June 2023. By comparison, the tertiary index had risen 1.5% in calendar 2021, 1.6% in 2022 and 1.9% in 2023.
Swiss industrial production increased 3.9% last quarter and recorded its greatest year-on-year advance (7.3%) since the summer of 2021.
Canadian housing starts, like their U.S. counterpart, experienced a difficult July, dropping to a 49-month low that month. A separate Canadian data report revealed monthly declines in manufacturing sales and orders of 2.1% and 4.7% during June.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland trade balance, Japanese tertiary index, U.S. housing starts
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