Financial Market Risk Aversion Persisting – Currency Thoughts
Financial Market Risk Aversion Persisting
September 4, 2024
Equity markets slumped today by 4.5% in Taiwan, 4.2% in Japan, 3.2% in South Korea, 1.1% in Singapore and Hong Kong, and 0.7% in China. Major European stock markets are down around 0.5-1.0%, and U.S. futures point to a further decline, led by the tech sector. Nvdia, for instance, shows a pre-market slide of 2.1%.
Bitcoin’s price, which touched an overnight low below 56,230, shows a net 1.6% decline.
Ten-year sovereign debt yields are five basis points lower in Italy, four bps lower in Japan, France, Spain and Germany, 3 bps down in the U.K., but the U.S. Treasury counterpart is holding steady.
A number of service sector purchasing manager surveys have been reported, and the U.S. data menu for today offers news on job quits and hires, the trade deficit, and motor vehicle sales. Concern keeps deepening about China’s economic situation and the government’s willingness to promote faster growth. The Bank of Canada is projected likely to announce an interest rate cut today, and the Fed will publish its Beige Book of latest regional economic conditions later in the day. Doubts about the near-term impact of AI are persisting.
A 0.8% July jump in Euroland producer prices was the biggest month-on-month increase in 19 months. Such follows a 0.6% increase in June but was entirely caused by a leap in energy costs. Excluding energy, the PPI went down 0.1% and was a benign 0.2% higher than a year earlier. The overall PPI remained below its earlier level by 2.1% in July.
There’s been a sharp downward revision in estimated Austrian GDP last quarter. Initially reported as unchanged from the first quarter, GDP data for that economy now show a 0.4% quarter-on-quarter decline and a 0.5% slide from the year-earlier level.
Australian GDP grew more slowly than anticipated last quarter, rise 0.2% on quarter for a third straight time and posting the smallest year-on-year increase (just 1.0%) in 14 quarters.
The Central Bank of Chile announced its ninth interest rate reduction since July 2023. The latest cut of 25 basis points to 5.5% follows 250 basis points of easing during the first half of this year preceded by 300 basis points of cuts in the second half of 2023. Continuing rate reductions have been made in spite of an acceleration of CPI inflation from 3.7% last March to an 8-month high of 4.6% in July and have been made because major central banks like the Fed and ECB have shifted to more dovish rhetoric and in response to a drop in Chilean GDP and the Chilean peso’s resilience.
Downwardly revised composite and service sector purchasing manager indices in Euroland for August of 51.0 and 52.5 represent 3- and 2-month highs and are distorted by the lift from the Paris Olympic games, which sent the French services PMI from 50.3 in July to a 27-month high in August. September may show some lingering strength due to the Paralymics, but that thrust will then fade rapidly.
Germany’s composite PMI last month printed below 50 at a 5-month low of 48.4.
The British composite and service PMI readings last month of 53.8 and 53.7 represent four-month highs.
China‘s composite PMI score of 51.2 was unchanged from July’s 9-month low despite somewhat faster improvement shown by the services sector.
India maintained its status as the fastest growth large economy, with August PMI readings of 60.2 overall and 60.9 in the services index.
Japan‘s services PMI matched July’s 53.7 but was a tad lower than the provisional estimate, and its composite PMI improved to a 15-month high of 52.9.
The upwardly revised Australian composite and services PMI readings of 51.7 and 52.5 were their highest since May.
Hong Kong’s private PMI dipped to edged down 0.1 point to 49.4 and was below the 50 neutral level for a fourth straight month.
Singapore‘s manufacturing PMI went up 0.2 points to a 36-month high of 50.9, but Vietnam‘s index fell 0.3 points to a 5-month low of 52.4.
South Africa’s manufacturing PMI moved above 50 for the first time in three months, printing at 50.5. But Lebanon’s private PMI reading of 47.9 was just 0.1 point above June’s 17-month low. In the United Arab Emirates, the non-oil PMI bounced above July’s 34-month low of 53.7 to 54.2 in August.
Sweden’s service sector purchasing managers index fell 0.9 points to a 2-month low in August of 52.9. Sweden also announced a record high current account surplus last quarter, bringing the first half total to SEK 250 billion, some 25% wider than in the first half of 2023.
The U.S. goods and services trade deficit in July of $78.8 billion was up from a gap of $73.0 in June and $64.6 billion in July 2023, and that brought the year-to-date imbalance to $505 billion, 7.7% larger than the deficit accrued over the first seven months of 2023.
U.S. mortgage applications rose 1.6% last week and were associated with a 30-year fixed mortgage rate of 6.43%.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Australian GDP, Central Bank of Chile, Euroland PPI, Service-sector purchasing manager surveys, U.S. trade deficit
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