· The dollar rallied on Friday on bullish economic data and hit a two-week high against the euro as expectations of central bank stimulus weighed on the single currency.
U.S. homebuilding fell for a third straight month in July amid a steep decline in the construction of multi-family housing units, but a jump in permits to a seven-month high offered hope for the struggling housing market. Better-than-expected retail sales data in the United States on Thursday also encouraged buying of the dollar.
The euro fell 0.14% to $1.109, shy of the two-year low of $1.1025 it reached on Aug. 1. Friday’s fall was caused by growing expectations of an interest rate cut by the European Central Bank after Governing Council member Olli Rehn suggested on Thursday that the central bank could restart its quantitative easing program and was open to extending it into equity purchases.
“Global markets started Friday in a better mood with sentiment boosted by expectations for the European Central Bank to err on the side of bold stimulus as soon as central bankers’ coming meeting on Sept. 12,” said Manimbo.
Measured against a basket of six other major currencies, the dollar was higher by 0.05% at 98.19. It has recovered by 1.25% from its three-week low on Aug. 9.
· Treasury yields rose on Friday, climbing back from their historic lows hit on Thursday, easing fears a global slowdown could tip U.S. economy into a recession.
The yield on the benchmark 10-year Treasury note, which moves inversely to price, was higher at around 1.588%, while the yield on the 30-year Treasury bond was also higher at around 2.047%.
Yields hit a high after a Der Spiegel article said that Germany would boost spending by issuing more debt.
The 10-year note also slipped below 1.5% on Thursday — registering a three-year low.
· President Donald Trump said Sunday he doesn’t see a recession on the horizon after a volatile week for markets.
“I don’t think we’re having a recession,” Trump told reporters. “We’re doing tremendously well. Our consumers are rich. I gave a tremendous tax cut and they’re loaded up with money.”
The bond market flashed a signal Wednesday that is normally interpreted as a sign a recession is on the horizon. The yield on the 10-year Treasury note briefly broke below the rate for the 2-year. The Dow Jones Industrial Average dropped 800 points or about 3% as the bond market spooked investors.
The president called the heads of J.P. Morgan Chase, Bank of America and Citigroup as the stock market tanked Wednesday, according to people with knowledge of the situation. Trump asked the executives for a read on the health of the U.S. consumer, according to one of the people.
The executives said the consumer was doing well, but could do even better if issues such as the China-U.S. trade war were resolved, this person said.
Trump’s top economic advisor Larry Kudlow said Sunday strong retail sales and low unemployment were signs the economy remained strong.
· Bank of America CEO Brian Moynihan channeled President Franklin D. Roosevelt when it came to assessing predictions that the recovery is ending and a downturn beginning. Moynihan cautioned that stirring up fear of what Democrats are already calling the Trump recession may make it actually come to pass. Moynihan’s words of warning came two days after he and other bank chiefs discussed the economy, and the market’s sharp drop, in a teleconference with President Donald Trump. —David E. Rovella
· White House trade adviser Peter Navarro defended President Donald Trump's commitment to American farmers on Sunday, as some farmers say the US trade war with China directly hurts them.
"This President has the backs of farmers," Navarro told CNN's Jake Tapper on "State of the Union." He said "a lot" of the money the US is taking in from tariffs is "going right to the farmers."
American farmers are showing nervousness about the US-China trade war, including postponing buying tractors and other equipment.
· Japanese manufacturers turned pessimistic about business prospects for the first time in more than six years in August as the specter of a global downturn looms large amid the escalating Sino-U.S. trade war, the monthly Reuters Tankan survey showed on Monday.
The monthly poll, which tracks the Bank of Japan’s (BOJ) closely-watched tankan quarterly survey, found manufacturers’ mood slid for a third straight month to minus 4 in August from the prior month’s plus 3.
· Hong Kong is gearing up for more protests this week after hundreds of thousands of anti-government demonstrators braved heavy rain to rally peacefully on Sunday, marking a change to what have often been violent clashes.
Sunday’s turnout of an estimated 1.7 million, according to the rally’s organizer, showed that the movement still has broad-based support despite chaotic scenes last week when protesters occupied the Chinese-ruled city’s airport, for which some activists apologized
Police said on Monday that while the demonstration was mostly peaceful, acts of “breaching public peace” happened afterwards with some protesters shooting hard objects at government offices and aiming laser beams at police officers.
· U.S. President Donald Trump said on Sunday he would likely wait until after Israel’s Sept. 17 elections to release a peace plan for the region that was designed by White House senior adviser Jared Kushner.
Kushner, Trump’s son-in-law, is the main architect of a proposed $50 billion economic development plan for the Palestinians, Jordan, Egypt and Lebanon that is designed to create peace in the region.
· Oil prices on Friday rebounded from a two-day drop, alongside equities as expectations of further stimulus by central banks helped to ease recession concerns.
But oil’s gains were capped after the Organization of the Petroleum Exporting Countries trimmed its global oil demand forecast in a downbeat outlook for the rest of 2019 as economic growth slows. The cartel also highlighted challenges in 2020 as rivals pump more, building a case to keep up an OPEC-led pact to restrain supplies.
Brent crude was up 49 cents, or 0.8%, at $58.72 a barrel, after falling 2.1% on Thursday and 3% the previous day. U.S. crude rose 40 cents, or 0.7%, to $54.87 a barrel after having dropped 1.4% in the previous session and 3.3% on Wednesday.
BNP Paribas cut its forecast for 2019 for U.S. crude by $8 to $55 per barrel and for Brent by $9 to $62 per barrel, citing slowing economy amid the trade dispute.
Reference: CNBC, Reuters, Bloomberg, CNN
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