The more up to date CPI for July in Tokyo (the whole country has only reported for June) held steady from June with the core rate ex food higher by .9% y/o/y and the ex food and energy figure up by .8% y/o/y. Both though were one tenth more than expected. Expect the BoJ at some point, as hinted at in the press, to lower their inflation estimates again. They meet next week. What is needed is for them to get off their 2% target level as we are approaching 7 years now of shock and awe monetary policy when Abenomics got started. It of course hasn’t worked. JGB yields didn’t respond as they are flat as are the inflation breakevens. The yen is also unchanged but the Nikkei closed down almost .5%.
We saw recently the weak June trade data out of Singapore, a country very dependent on it. Today they reported a 6.9% y/o/y decline in industrial production in June but that wasn’t as bad as the 8.5% expected decline. Electronics production, a key area of softness, was down by 18.8% y/o/y. The Singapore Straits index fell .5% overnight. Bottom line, the slowdown in trade and overseas economies is no longer new news so the degree and length from here is the only thing that is open ended.
Never market moving but France reported consumer confidence for July and it rose 1 pt as expected to 102. In the heat of the Yellow Vest protests it got as low as 87 in December and thus has had a nice rebound. It was though as high as 108 two years ago when their economy had a great year. As I stated yesterday, Mario Draghi should learn the lesson of the Yellow Vest frustration because if he’s successful in generating higher inflation, there will be a lot more of those protests in France and elsewhere in the Eurozone.
Economic confidence in Italy did improve a touch in July as its index went to 101.2 from 99.3 but the manufacturing component fell. The gain instead was driven by retailers, services and construction. Consumer confidence had a nice rebound, rising to 113.4 from 109.8 and almost back to where it was in January.
If you think the Fed is feeling the Trump heat on rate cuts, that’s nothing compared to the central bank in Turkey where the Governor got fired recently and even after the new one cut 425 bps yesterday to 19.75%, President Erdogan said “Even this cut is not enough. Cuts may continue gradually until year end.”
I’ll be back after the US Q2 GDP report.