Eurozone Sees Another Crisis Averted!

In This Issue.

* Dollar has the conn again.
* China’s FX reserves increase again!.
* Oil and Gold had a bad week..
* French parliamentary elections next .


And now. Today’s A Pfennig For Your Thoughts.

Good day. And a Marvelous Monday to you! We got back on the grid Friday night, and things are getting back to normal, although the road to town is still under water, and houses have to get put back together, but all-in-all, we made it through this time without major devastation from flood waters! This time we took what we learned that didn’t work the last time, and improved it, and well. that’s all I have to say about that.. Except neighbors, friends, and families came together of all ages to help whomever needed the help, and I was thoroughly impressed by all of that. So, a crisis was averted, and now it’s time to move on with life.. The Guess Who greets me this morning with their great song: These Eyes. (Burton Cummins is one of my fave rock singers!)

The Big news this weekend came from France, where the polls were correct for once, and Centrist, Emmanuel Macron, won the presidential election by a landslide garnering more than 67% of the votes. The euro reacted favorably after National Party candidate Marine le Pen, conceded yesterday afternoon. The euro popped up over the 1.10 handle initially, but settled down and was trading just below that figure last night, but what appears to be profit taking has pushed the euro down further in the 1.09 handle this morning. What’s up next for France will be the parliamentary elections, but given the margin of victory for Macron’s party, one would think that the National Party would not be able to win many seats, and that would be another feather in the hat of the euro.

As I do my usual morning review of the currencies and metals I see that while the Dollar Index is still below 100, the dollar seems to be in charge, as the Commodity Currencies of Australia (A$), New Zealand (kiwi), Canadian dollar (loonie), S. Africa (rand) , and a few others, are all getting sold, and the Petrol Currencies that include: Russian (rubles), Brazil (real), Norway (krone), Mexico (peso) and a few others there too, these currencies are all underwater, and not being allowed to come up for air.

The euro, British pound sterling, Swiss franc, Swedish krona, the Euro Wannabes of Hungary, Poland and Czech Republic, along with the Indian rupee, are all holding their ground against the dollar this morning. (notice none of these countries produce Oil)

That leaves two major currencies that I haven’t listed above. The Japanese yen, and Chinese renminbi. First the Japanese yen. Well, Japan is just back from their Golden Week, holiday, and with the Geopolitical Tensions easing a bit, yes is getting sold, as it should, in my humble opinion.. Bad fundamentals, bad demographics, and debt up to their eyeballs, there’s nothing to like here, so let’s move along, eh?

There was good new and not so good news from China this past weekend. First the good news.. China’s currency reserves are on the mend, posting an increase in April, which marks the 3rd consecutive month of increases. You may recall that a lot of pundits were doing their best Chicken Little because China’s currency reserves fell below $3 Trillion? Well, China threw out some currency controls to slow down the outflow of cash, and that seemed to do the trick. And now those currency controls have been removed, and China still posts an increase to their currency reserves in April.. Good stuff here folks..

The not so good stuff was a report early this morning in Asia that showed China’s Import and Export growth slowing.. That would be a hit to Global Growth Tent Revival, which has taken on more than its share of hits lately, which leads me to believe that the Tent is going to have to be taken down soon. UGH!

But one thing that will keep some air under the Tent is the Reserve Bank of New Zealand (RBNZ) meeting this week. I’m looking for the RBNZ to move their bias from tightening to neutral.. Which is just like a rate hike to me! The RBNZ might even move their timeline for a rate hike up, so I’ll be watching for that!

And before I move too far away from China this morning, I wanted to point something out that I found to be quite interesting.. Did you know that China is holding a Summit and didn’t invite the U.S.? The Summit is being held in China and is bringing together the potential participants of the “New Silk Road” project , where China is going to build a trade route to Europe on land. Historically, all trade with China from Europe was done by ships. So, if you had a strong navy, (first the U.K., then the U.S.) you could dominate the shipping. But China, in their never ending effort to replace the “dollar standard” is making every effort to eliminate the ability of the U.S. to enter into this “New Silk Road” that will include ports, highways, bridges, tunnels, airports, dams, telecommunication networks, and anything else you can think of! This is quite the undertaking for China, but I think they’ll achieve their goal, and in the end, no dollars will be used along the “New Silk Road”. Just another step for China and the distribution of their renminbi to the masses.

The Bank of England (BOE) will also meet this week (Thursday) and there will be nothing to come of this meeting.. The latest CPI (consumer inflation) in the U.K. was weak, and growth was also below expectations, so it’s highly unlikely that the BOE will do anything at this time. But don’t expect them to point out a weak economy as the problem, but instead point to BREXIT unknowns.. Shame on you BOE for not pointing to the real problems plaguing the U.K.’s economy!

I guess telling you that the price of Oil is really slipping lower and lower, because it’s all over the cable news. But how much lower can it go before the Oi producers here in the U.S. begin to feel the pinch and pain? Before fracking, I could tell you what the cost of getting Oil out of the ground was, but not now.. Only the Shadow Knows.. But the U.S. producers have just about rendered the OPEC countries’ production cuts, a nonevent. And now we sit on a huge supply of Oil..

And Gold.. Boy, oh, boy did Gold ever get whacked and whacked and whacked again last week! Have the short paper traders taken their pound of flesh yet from Gold, or is there still more to come? The early morning trading has Gold up $3 but that’s not really any indication. The trading action this week will determine if the whacking is over or not. The short paper traders have made Gold cheaper, for those that thought they missed these levels the last time we visited them.

And the U.S. Data Cupboard.. Well, last Friday’s Jobs Jamboree didn’t disappoint the rate hike campers, as the BLS said that April had seen 211,000 jobs created. And the Unemployment Rate dropped to 4.4%.. But something interesting also happened.. The Average Hourly Earnings showed a drop to 2.5% from 2.7%.. I know Chris asked this question on Friday, but I’m going to ask it again.. How in the world does an economy generate so many jobs that it’s near full employment, but wages can’t grow?

Well, this is where looking under the hood is handy. The BLS reported that the bulk of the jobs created in April were minimum wage jobs. You know the bartenders, wait-staff, and food service jobs. there’s nothing wrong with someone taking a min. wage job, it’s just that it doesn’t do anything to improve the economy, for there will be little if any disposable income to spend with a min. wage job. And don’t look now, but. The BLS had to add 255,000 jobs in April with their Birth / Death Model. So, if we were just talking about the surveys, the Jobs report would have been negative. But don’t let that get in the way of a feel good story about jobs.

To recap. The French Election was good for the euro, as Centrist Macron won, in a landslide, and now the focus switches to the Parliamentary elections. The euro got all lathered up and rose above 1.10 briefly, but has come back down to earth this morning. The Commodity Currencies and Petrol Currencies are all getting sold, as both Gold and Oil got sold like funnel cakes at a State Fair last week. The RBNZ meets this week, and Chuck is looking for them to move their bias from tightening to neutral. China had good news and not so good news this past weekend, and the Global Growth Tent Revival too another hit.

For What It’s Worth. Well, Gold may be getting sold by the paper traders, but in physical form the demand for the shiny metal is still strong, as evidenced in this report from China, that can be found here:

Or, here’s your snippet: “CHINA’S consumer demand for gold rose 8 percent year on year to 282.4 tons in the first quarter of 2017, compared with an 18 percent drop in global demand due to a slower pace of central bank buying and a previous high base, the World Gold Council said yesterday.

China’s investment in gold bars and coins jumped 30 percent to 105.9 tons in the first quarter, the fourth-highest on record, while jewelry demand fell 2 percent year on year.

Global demand for bars and coins rose 9 percent to 289.8 tons in the same period, said the WGC in a report.

Chinese investors reignited their passion for bullion in the past two quarters, as “concern over the weakness of the yuan lingers, outlook for the property market is gloomy, and the stock market looks weary,” said Roland Wang, WGC’s managing director for China.”

Chuck again. I just don’t know what else to say about what’s going on with Gold right now, other than the short paper traders sure have given potential buyers of Gold some cheaper buying opportunities..

Currencies today 5/8/17. American Style: A$ 7410, kiwi .6935, C$ .7310, euro 1.0943, sterling 1.2960, Swiss $.9938, . European Style: rand 13.4980, krone 8.6274, SEK 8.8354, forint 284.33, zloty 3.84, koruna 24.3905, RUB 58.04, yen 112.47, sing 1.4042, HKD 7.7839, INR 64.23, China 6.8653, peso 18.94, BRL 3.1770, Dollar Index 98.94, Oil $46.26, 10-year 2.33%, Silver $16.36, Platinum $919.70, Palladium $818, Gold $1,233.20, and SGE Gold. $1,244.45

That’s it for today. Well, the weekend started out good, sports-wise, for us here in St. Louis, as the Cardinals and Blues won Friday night, that pattern didn’t hold true yesterday, as the Cardinals won again, but the Blues’ season came to an end. And once again, there’ll be no Stanley Cup raised in St. Louis. The Blues celebrated their 50th year here since expansion in 1967, I sure hope we don’t have to wait much longer! My beloved Cardinals saw 3 of their outfielders go down with injuries last week, and had to call up a kid from Single A Ball! Now that’s a jump! Congrats to son Andrew as he was named co-coach of the year, in his conference. The State Water Polo Tournament comes to an end this week, and Andrew’s Lindbergh High Team are in the thick of things again. Good luck Flyers! Jackson Browne takes us to the finish line today with his song: These Days.. And with that, I’ll get this out the door, but first, tell you that I hope you have a Marvelous Monday, and Be Good
To Yourself!

Chuck Butler
Managing Director
EverBank Global Markets
Editor of A Pfennig For Your Thoughts