Stocks fell 4.8% in South Korea and Hong Kong, 3.2% in Japan and Taiwan, 3.0% in China, 2.9% in Australia, and 1.8% in South Africa. The Ftse and Cac40 are 0.4% lower, and the Dax has lost another 0.4%. Stock futures point to a sharp catch-up decline in U.S. equities, which did not trade yesterday. The catalyst for this upheaval was Dubai’s request to reschedule debt payments, which was reminiscent of how the big crisis began in 3Q07.
With risk aversion remaining high, the dollar extended its recovery, advancing 0.8% against the kiwi, 0.7% against the Aussie dollar, 1.0% relative to the Canadian dollar, and 0.5% against sterling, the euro and Swiss franc. From the New York pre-Thanksgiving close, the dollar is up 3.6% against the kiwi, 3.5% versus the Aussie dollar, 2.5% against the Canadian dollar, 1.6% against the euro, 1.5% against the Swiss franc, and 2.1% versus sterling.
The yen retreated 0.7%, however, and is just 0.9% stronger against the U.S. currency than its close on Wednesday. Japanese Finance Minister Fujii warned of possibly seeking a coordinated policy response to recent foreign exchange market movements from his counterparts in the United States and Europe. It is unlikely that he will get that support.
Fixed income assets are back in favor. Ten-year sovereign debt yields fell by 10 basis points in Britain, 7 bps in Germany, and 4 bps in Japan. A drop of 4-5 bps from Wednesday is indicated in Treasuries.
With Dubai at the epicenter of the crisis, oil slumped another 4.9% and is nearly 7% lower than its level on November 18. With the dollar strengthening, gold lost 2.1% overnight and 2.6% from yesterday’s record high to $1163.60 per troy ounce.
Japan released data on the labor market, household spending, retail sales, securities transactions and consumer prices. Activity indicators showed more life than had been assumed.
- The jobless rate unexpectedly fell two-tenths to 5.1% in October, the third consecutive decline of that amount. Employment posted a 1.8% on-year drop, and the job seekers to job offers ratio firmed a tenth to 0.44 from 0.43 in September and a cyclical low of 0.42 in July and August.
- Real household spending increased 0.7% between September and October and by a greater-than-forecast 1.6% from a year earlier. Workers’ real disposable incomes fell 1.9% on year, however.
- Total retail sales in October were 0.9% lower than a year earlier versus an expected decline of 1.1%. Large-store sales plunged 7.2% in the latest 12-month period, paced by a 13.1% drop in clothing.
- Stock and bond transactions generated a Y 119.5 billion outflow in the week of November 21, much less than the net Y 658.4 billion outflow in the prior week.
- Consumer prices fell 0.4% in October and by 2.5% from a year earlier. Core CPI (excluding seasonal food only) slid 0.1% and 2.2% on year), and consumer prices not including food and energy were steady and 1.1% lower than a year earlier. Consumer prices fell 2.6% at a seasonally adjusted annualized rate between April and October, similar to their 2.5% pace of decline in the previous six months.
Euroland sentiment indicators were better than forecast. The business climate index printed at minus 1.56 in November after minus 1.79 in October, minus 2.08 in September and a low of minus 3.27 last March. For the first time this year, the reading was higher than a year earlier, when such was minus 1.62. Economic sentiment in the euro area rose 2.7 points to 88.8 in November versus consensus forecasts of 88.0. Such had been 73.2 in mid-2009 and recorded a low of 64.6 back in March. Industrial sentiment rose two points to minus 19, while consumer sentiment advanced a point to minus 17. Each was as forecast. Sentiment indices for services, retail activity, and construction improved 3, 4, and 3 points to minus 4, minus 11, and minus 26. Yet a third gauge, the EuroCoin indicator rose 0.22 points to 0.55.
Swedish real GDP firmed 0.2% last quarter but was 5.0% weaker than in 3Q08. Inventories accounted for half the on-year decline. Swedish retail sales increased 1.5% in October and 5.5% from a year earlier.
French consumer confidence rose four points to minus 30 in November. A minus 35 reading had been expected.
Finnish retail sales dropped 1.2% in the year to October, more than twice as much as expected. Finnish business sentiment weakened four points to minus 19 in November, and consumer confidence dropped 1.4 points to 10.9. Both readings were worse than assumed.
Spanish consumer prices swung to positive territory in November (+0.4% from a year earlier) versus minus 0.6% in the year to October. Belgian consumer prices still posted a slight on-year drop (0.1%) in November. Slovakian producer prices firmed 0.2% in October but fell 5.8% from a year earlier. That economy reported higher business sentiment but lower consumer sentiment in November.
Poland’s central bank, as expected, announced yesterday that it was keeping its key interest rate at 3.5%.
Italian hourly wages climbed 3.2% in the year to October compared to a 3.1% on-year rise in September.
On Thursday, Germany reported a lower-than-forecast 0.2% monthly drop in consumer prices and a positive 0.3% on-year rate of inflation. It was announced today that import prices increased 0.5% in October, their second sizable monthly gain in three months, and a diminished 8.1% on-year drop after declines of 11.4% in the 12 months to both August and September. Oil accounted for the entire rise of import prices last month. Without that factor, the import price index was steady on month and down 7.9% on year. In the year to August, such had declined 6.9%.
The Swiss index of leading economic indicators rose 0.18 to 1.62 in November.
New Zealand’s trade deficit narrowed 13.5% in October to NZ$ 487 million.
Not all Asian stock markets tanked today. Some were closed for Hari Raya Haji, which commemorates the conclusion of the annual Haj to Mecca. Such closures were observed in Malaysia, Singapore, and Indonesia.
No significant U.S. data releases are scheduled today. Many workers will be extending their holiday. In Canada, the 3Q quarterly current account will show a large deficit. The Bank of Mexico is unlikely to change its interest rate following this month’s policy meeting.
Copyright Larry Greenberg 2009. All rights reserved. No secondary distribution without express permission.
U.S. Healthcare Debate
November 24, 2009 · 1 Comment
New York Times columnist David Brooks has a piece today that casts healthcare legislation as a choice of two different sets of values, an America that offers more security and better decency or one that retains greater economic vitality, and that indeed is how opponents against changing the present system are generally casting this debate. It’s a straw man argument in part because it pits the alternative to the status quo as the various bills and amendments tabled in the congress, which themselves are gerrymandered products of compromise.
I prefer to frame the debate in two questions: 1) does America’s current heath care system deliver better results than any others that have been devised? And 2) Will the system’s flaws increase or decline over time if the system is not modified? The answer to the first is “no” because people are living longer in other countries and paying a much lower relative price for heath care than Americans do. The answer to the second question can be stated with less certainty, but the evidence strongly suggests that health care costs will continue to rise as a share of GDP and reach levels that eventually strangle the very economic vitality that Brooks argues is embodied in choosing the less humane status quo over a system offering a better chance of coverage.
Since the present system is unsatisfactory and unsustainable, the burden of proof lies with those who argue against changing it on the assertion that modifications could saddle America with a more flawed program. Perhaps the most unique feature of the U.S. healthcare system is the prominent obligation of employers to pay the cost. Who has a greater vested interest in the physical health of Americans: business managers, their stockholders, or a government of the people and for the people sworn to “promote the general welfare?” Who has a more natural stake in how the United States looks 25 or 50 years from now, business or government? Outside of ensuring a safe workplace, is it right for business to bear any responsibility for the healthcare of its workers? The firm pays the worker in exchange for services rendered. Workers, who become sick or leave a business for other reasons, are replaceable. The same logic does not extend to the aggregated level of government. As with education, government needs to ensure a competitive workforce both now and through future generations and therefore does have an intrinsic incentive to see that minimum standards get met.
It’s not hard to find signs of a broken U.S. healthcare system. Treatment is stressed more than prevention because treatment is more profitable than prevention. The proliferation of “ask your doctor” ads and the huge share of the national healthcare bill spent on people in the last months of life are two other symptoms of a need for repair. Whether any law out of congress could leave America worse off or better is an open question. Certainly the pharmaceutical law passed earlier this decade was a regrettable piece of legislation.
If congress is so fractious and ruled by powerful interest groups as to render beneficial lawmaking impossible, that’s a problem with the state of democracy, not an endorsement of present healthcare. Such doesn’t prove that the devil we know is better than all alternatives. To repeat, other systems that do not rely on the prominence of employer-financed healthcare already exist and are giving their people longer, healthier lives at much less cost.
Copyright Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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