Share Price Plunge Continued Ahead of U.S. Jobs Report

August 5, 2011

Equities plummeted 5.6% in Taiwan, 4.9% in Indonesia, 4.3% in Hong Kong, 4.0% in Australia and Pakistan, 3.7% in Japan, 3.6% in South Korea and Singapore, 3.0% in New Zealand, 2.7% in Thailand, 2.2% in India, and 2.1% in China.  In Europe, the British Ftse and German Dax have so far lost 2.5% and 2.3%.

Consensus expectations for the rise in U.S. jobs last month have been scaled back to 85K.  The report is due at 12:30 GMT.

Confusion surrounds the willingness of the ECB to buy member sovereign bonds.  German members on the Governing Council apparently oppose this policy.  Some unconfirmed rumors today that the ECB has been asking for prices on Spanish and Italian debt. 

Japanese intervention so far is said to exceed $50 billion.  Swiss National Bank has verbally sparred.  The dollar drifted back 0.8% against the yen overnight to 78.4 after spiking upward to 80.25 yesterday.  The franc is unchanged today at CHF 0.7668.

The U.S. currency otherwise is unchanged against the Australian dollar, down 0.4% against the euro and yuan, off 0.2% relative to sterling, and up 0.1% versus the Canadian and New Zealand dollars.

Following Thursday’s plunge, oil prices fell another 0.9% to $85.82 per barrel and has dropped 24.7% since the peak in equities at the end of April.  If there’s a hope to avert a recession in advanced economies, it lies in the rapidly cheapening cost of energy.  Gold prices firmed 0.5% to $1667.30 per ounce.

Ten-year German bund and British gilt yields rebounded six and three basis points.  The 10-year JGB fell another basis point to 1.01%.

German industrial production fell 1.1% in July compared to expectations of a marginal uptick.  Output was only 6.6% greater than a year earlier.  July’s monthly decline was spearheaded by a 2.0% drop in capital goods.  Although production still managed to rise 1.1% in the second quarter, June’s level was 0.4% below the 2Q mean.

The Canadian labor force survey, released 90 minutes ahead of its U.S. counterpart, is disappointing.  An increase in employment of just 7.1K in July was only about a third as much as hoped, and a 0.2 percentage point decline of the unemployment rate to 7.2% occurred because 28.6K discouraged workers left the job force.

The Reserve Bank of Australia released its quarterly Monetary Policy Statement with new macroeconomic forecasts.  Projected GDP growth in the four quarters to 4Q11 has been revised downward by a whole percentage point to 3.25%, but CPI inflation was bumped up to an estimated rise of 3.5% from 3.25% predicted earlier.   Officials remain optimistic about 2012 economic growth but concede the existence of large downside global risks.

Australia’s construction purchasing managers index improved marginally from a very depressed level, climbing to 36.1 in July from 35.8 in June.  Such remained below May’s reading of 39.6, and being far beneath the 50 no change threshold, the latest reading connotes a rather quick pace of contraction.

Japanese international reserves jumped by $13.1K in July, well above the first-half $6.94 billion per month rate of increase.

Japan’s index of leading economic indicators continued to recover, rising to 103.2 in June from 99.4 in May and 96.0 in April.  The coincident index climbed to 108.6 from 106.1 the month before.

Indonesian GDP advanced 2.9% in the second quarter and was 6.5% greater than in 2Q10.  Filipino CPI inflation of 5.1% in June was a tenth percentage point lower than in May.  Taiwan posted on-year CPI and WPI inflation of 1.3% and 4.0% in July.

Britain’s Halifax house price index rose 0.3% in July, which trimmed the 12-month rate of decrease to 2.6% in May-July from 3.5% in April-June and 4.2% in March-May.

British producer output prices increased by 0.2% on month and 5.9% on year in July.  That’s a slight acceleration.  Core PPI-O rose to 3.3% from 3.2%.  Producer input prices advanced 0.6% in July, raising the on-year comparison to a 34-month high of 18.5% from 16.8% in June.  Core PPI-I was at 13.1% last month.

Italian GDP rose by an as-forecast 0.3% in the second quarter.  On-year GDP growth eased to 0.8% from 1.0% in 1Q11.  Italian industrial production in June was weaker than assumed, dropping 0.6% on month.  Adjusted for variations in working days, production was just 0.2% higher than a year earlier.

Currency appreciation continued to depress Swiss CPI inflation in July.  The Swiss CPI fell 0.8% on month and was just 0.5% higher than in July 2010.  In harmonized terms, on-year CPI inflation amounted to a mere 0.3%.

Several European industrial production reports came out besides Germany’s.  Dutch industrial output fell 0.3% in June and was 2.4% greater than a year earlier.  Norwegian industrial production rebounded 5.2% in June but showed an on-year decline of 4.9%.  Spanish industrial production sank 2.0% on month and 2.7% on year in June.  Such was only 0.6% higher in the first half of 2011 than in 1H10.  Hungarian industrial production fell 0.6% in June and was just 1.0% above a year earlier.

The French trade deficit narrowed 12.8% in June to EUR 5.6 billion because of a 2.0% on-month decline in imports.  Iceland’s trade surplus contracted sharply to ISK 1.78 billion in June from ISK 6.79 billion in May.  Greek consumer prices fell 1.4% in June, cutting the 12-month increase to 2.4% from 3.3% in May. 

U.S. reports today on the labor market figures could set the tone for next week.  U.S. consumer credit data also arrive, as do Canadian building permits.

Copyright 2011, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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