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Looking on the bright side

Opportunity outweighs threats

Investors are trying to look on the bright side of life and making a fairly decent job of it. China’s threat to Hong Kong, America’s threat to China, Dominic Cummings’s threat to the British Prime Minister, and Covid-19’s ongoing threat to everybody have all been outweighed by the glittering opportunity of a rekindled global economy as lockdown ends.

Never mind that the creation of a new economic normal – let alone a return to the old one – will be a slow and tortuous process. Markets don’t really do grey, things are either black or white, and yesterday’s gloom has reinvented itself as today’s good cheer. The safe-haven Japanese yen and Swiss franc were 0.4% lower alongside the euro and the US dollar was down by twice that much, giving up a cent to sterling. The Canadian dollar shared a 0.4% lead with the Norwegian krone and the antipodean dollars were in third and fourth place behind them.

The pound had more wins than losses, picking up an average of 0.2% against the other major currencies. It only had one UK ecostat to deal with; the CBI’s Distributive Trades Survey. The balance was five points up from last month’s record low, at -50%, though, “retail sales volumes remained deeply depressed in the year to May”.

 

US data proliferate

There was little to glean from the rest of Tuesday’s economic statistics. An optimist would point to improvements in several of the figures but by no means were all higher on the month. A speech by Bank of Canada governor Stephen Poloz did nothing for or against the Loonie.

The Chicago Fed’s National Activity Index did no favours to the US dollar, deteriorating by a dozen points to -16.74 in April. It was a record low by a large margin but not a great surprise. Indices from the FHFA and S&P put house prices 5.7% and 3.9% higher on the year. New home sales were up by a modest 0.6% in April but at least the change was positive. Consumer confidence held steady in May following a sharp decline in April, perhaps because it could not fall any further. The Dallas Fed’s manufacturing outlook survey was 25 points less negative in May than in April, at -49.2.

All of yesterday afternoon’s data came from the United States. Overnight the Reserve Bank of New Zealand’s Financial Stability Report for May said the country’s financial system was in a “good position to support recovery”. The ABS reported that construction work done in the first quarter was down by 1% compared with the previous three months.

 

ECB

European Central Bank president Christine Lagarde and board members Luis de Guindos and Andrea Enria will all take part in (separate) online events today. This morning the bank published a piece about non-performing loans in the context of the pandemic. A dull-looking ecostat agenda holds little promise of enlightenment.

Ahead of London’s opening the krone got a modest boost from news of a 4.8% increase in Norwegian retail sales in April. Unemployment came in a touch higher on the month but lower than forecast at 3.6%. Swiss business confidence comes out this morning.

After lunch Canada reports on building permits and the Richmond Fed prints its manufacturing index, which should be slightly less negative. This evening brings the Federal Reserve’s Beige Book report on the US economy as well as ANZ’s assessment of NZ activity.

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