Asian equity markets have risen overnight, with Japanese stocks receiving a lift from the yen, which has been falling for a second day as a result of increased speculation that Tokyo might intervene to control it.
The US dollar is continuing to rebound, with a 2.3% advance over five days, its biggest in a year. Continuing strength is beginning to pose a major question for the Chinese central bank and its approach to the yuan. Capital flows for China have stabilized as a result of a weakened dollar. Should the central bank depreciate the yuan if the dollar rises, or allow it to rise with the greenback? Either has consequences for export.
In Canada, a national index for consumer confidence – measuring optimism for the economy – rose 2%, hitting a 2016 high. However, the economic data of late hints at Canada’s dependence on global economic trends and the commodity market, which could turn into issues for the Canadian economy and labor force. Meanwhile, the economy will face a hard hit from the wildfires, which are expected to have a worse impact than Hurricane Katrina for the US, with insured losses anticipated to reach $9 billion. The loonie has dropped as the markets absorb the impact.
In Europe, economic data was generally positive. German factory orders grew more than expected, while business sentiment in the EU improved, coming at 6.2%. However, trade data came in mixed. Construction and manufacturing are down sharply in Germany, while France also saw some broad-based weakness.