Japanese Stock Market Rebound and Lower-Than-Forecast U.S. PPI Inflation – Currency Thoughts
Japanese Stock Market Rebound and Lower-Than-Forecast U.S. PPI Inflation
August 13, 2024
Japan’s Nikkei-225 equity index surged over 1000 points (3.5%). Smaller stock market gains in the Pacific Rim were experienced in China, Hong Kong, Indonesia, Singapore and Australia, but India’s Sensex fell 0.9%. Share prices in Europe are marginally firmer.
The S&P 500 and Nasdaq each rallied at least 1.0% following the U.S. July producer price report in which a 0.1% uptick in the overall index shaved half a percentage point off its 12-month rate of increase to a 4-month low of 2.2%. The effects of monthly increases of 1.9% in energy and 0.6% in food were counterbalanced by a 0.2% dip in service sector costs, their largest decline in 16 months. Core producer price inflation (excluding food and energy) fell 0.6 percentage points to a 4-month low of 2.4%. The data support the view that the Fed will begin cutting interest rates next month. U.S. consumer price figures arrive tomorrow, followed by the report on import price due Thursday.
A separate compilation of U.S. small business sentiment by the NFIB rose to a 29-month high in July.
The weighted DXY dollar index fell overnight by 0.3% overnight to its softest level since March. The greenback lost 0.5% against sterling but just 0.2% against the euro and 0.1% versus the yen.
Ten-year sovereign debt yields have dropped today by six basis points in Italy, five bps in Spain, four bps in the United States and France, and three basis points in Germany and Great Britain.
WTI oil’s price settled back 1.1%, while Bitcoin and gold firmed marginally.
Investor sentiment toward Europe took a significant backwards step this month, falling to 7-month lows in the case of both German and the whole euro bloc. Germany’s reading dropped to 19.2 in August from 41.8 in July, while Euroland’s gauge of 17.9 was down from 43.7. Perceived conditions now in Germany were at a 4-month low, which promoted a dip in expected inflation as well.
Chinese bank lending and money growth remained depressed in July. The amount of new yuan lending, CNY 260 billion, was the smallest monthly amount since late 2007, and on-year M2 money growth was less than 6.5% for a second straight month.
Japanese domestic corporate goods price inflation accelerated to an 11-month high of 3.0% in July, and import prices were 10.8% above their year-earlier levels. Separately, Japanese machine tool orders exceeded year-earlier levels by over 8.0% in both June and July in stark contrast to a 2.1% on-year decrease in January-July. The yen benefits from the increasing need for the Bank of Japan to raise interest rates even as other major central banks prepare to lower such.
British unemployment declined to 4.2% in the second quarter, but July jobless insurance claims swelled in July to 135 thousand. Growth in average weekly earnings continued to decelerate, printing at a 31-month low of 4.3% overall last quarter and a 21-month low of 5.4% for regular pay only.
Australia’s wage cost index grew 4.1% year-on-year in 2Q 2024, the same as in the first quarter. Rhetoric from Reserve Bank of Australia officials, who do not rule out the possible need to hike interest rates additionally, has been more hawkish lately than the comments from officials at other major central banks. Other Australian data released today showed a 2.8% increase in consumer sentiment last month, a 2-point rise in business conditions, but also a 2-point drop in business confidence.
Spanish consumer price inflation in July has been confirmed at the preliminary estimated 2.8%, which represents a 5-month low and drop from a 10.8% peak hit in July 2022.
Real GDP in Singapore grew 0.4% on quarter and 2.9% on year during 2Q 2024. Average growth in 2023 had been 1.1%.
The Turkish current account deficit in the first half of this year was only $12 billion in size, just a third of its width in the first half of 2023. June saw a surplus of $407 million.
South African unemployment last quarter increased to 33.5% and has surpassed 30% since the third quarter of 2020.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British and Australian labor market data, Chinese money and credit growth, Euroland and German ZEW expectations index, U.S. PPI and small business sentiment
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