Macro Roundup (Aug 31)

SHANGHAI, Aug 31 (SMM) — This is a roundup of global macroeconomic news last night and what is expected today.

The dollar fell on Friday as the US Federal Reserve’s new policy framework suggested that interest rates would remain low, while the yen surged after Japanese Prime Minister Shinzo Abe announced his resignation.

The yen significantly strengthened against the dollar after the news that Abe, Japan’s longest serving prime minister, would step down due to worsening health.

On Wall Street, the S&P 500 is up 7.2% month to date, putting the broader-market index on track for its biggest August gain since 1984. The Dow has rallied more than 8% this month and is also headed for its best August in 36 years.

In an apparent long-term bet on the global economy, Warren Buffett announced Sunday that his Berkshire Hathaway conglomerate had acquired stakes of more than 5% in Japan’s five-leading trading companies. Those companies are Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui & Co., and Sumitomo Corp. The five businesses import everything from metals to food into Japan and provide services to manufacturers.

Economic data front

France’s second-quarter GDP (gross domestic product) contracted by 13.8%, which was in line with prelim figures. Inflation figures also disappointed, with consumer prices falling by 0.1% in August. In July, consumer spending rose by 0.5%, following a 10.3% jump in June. While continuing to rise, spending fell well short of a forecasted 2.0% rise.

In Spain, retail sales dropped 3.9% year-on-year in the month of July, a slight improvement from the previous reading.

The recovery of consumer confidence in Germany was projected to come to a halt in September, according to the monthly consumer climate study published by German market research institute GfK on Friday. The GfK consumer sentiment for September fell to -1.8 points, around 1.6 points down from the previous month, according to the consumer climate index which is based on around 2,000 consumer interviews per month conducted on behalf of the European Commission.

In the US, inflationary pressures picked up in July, with the Core PCE Price Index rising by 1.3% year-on-year. In June, the index had risen by 1.1%. Personal spending rose by 1.9%, following a 6.2% jump in June.

In contrast to the upbeat July numbers, August figures were mixed.

While the Chicago PMI fell from 51.9 to 51.2, the finalized Michigan Consumer Sentiment index was revised up from 72.8 to 74.1. In July, the index had stood at 72.5.

Oil prices inched lower on Friday as Hurricane Laura passed the heart of the US oil industry in Louisiana and Texas without causing any widespread damage and companies were beginning to restart operations.

Data from Johns Hopkins University showed that the number of reported Covid-19 cases worldwide surpassed 25 million. India, among the countries with the highest number of reported virus cases, recently registered the biggest single-day spike globally since the pandemic began, according to the Associated Press.

Shanghai base metals closed mixed on Friday night. Copper added 0.35%, aluminium advanced 0.48% and nickel strengthened 0.64%, while zinc fell 0.3%, lead weakened 0.32% and tin edged 0.09% lower.

Their counterparts on the LME, except for lead and tin, traded higher on Friday. Nickel rose 1.22% to lead the way up, copper increased 0.77%, aluminium inched up 0.12% and zinc firmed 0.78%, while lead slipped 0.38% and tin closed flat.

China’s official manufacturing Purchasing Managers’ Index for August and German retail sales for July and preliminary consumer price index (CPI) for August will be released today.