Quarter-End Distortions

September 29, 2011

Markets can get flooded around quarter-end periods by a rush of data releases and transactions inspired by accounting objectives.

Investors continue to watch the unfolding European debt crisis.  Germany’s parliament is expected to approve the expanded EFSF facility today, but the vote will be a barometer of the support Chancellor Merkel retains from her own party.

Following yesterday’s sell-off of equities in North America, stocks in the Pacific Rim are mixed, with advances of 2.7% in South Korea, 1.5% in India, 1.2% in Malaysia and 1.0% in Japan but losses of 0.9% in China, 0.8% in Australia, 0.7% in Hong Kong and 0.6% in Thailand.  The Paris Cac and German Dax are up 0.8% and 0.7%, respectively, while the British Ftse has eased 0.3%.

The dollar traded lower by 0.7% against the kiwi, 0.6% versus the Aussie dollar, 0.5% against the euro, 0.4% relative to the Swissie, 0.3% against sterling, and 0.2% against the Canadian dollar.  The dollar has firmed 0.2% against the yen and 0.1% relative to the yuan.

Ten-year German bunds and British gilt yields fell by four and seven basis points.  The 10-year JGB remained at 1.00%.

Oil prices climbed 1.0% to $82.02 per barrel.  Gold edged 0.2% higher to $1621.20 per ounce.

The conventional wisdom is that Japan attracts capital inflows ahead of the end of its fiscal first-half, but stock and bond transactions last week generated a net JPY 2.22 trillion outflow.  Japanese residents bought JPY 1.47 trillion net of foreign bonds last week.

Japanese retail sales were disappointing in August.  Total sales and large-store sales were each 2.6% weaker than a year earlier after having recorded on-year increases of 0.6% and 0.8% in July.

German data were better than forecast.  The retail purchasing managers index remained above 50, signaling continuing expansion.  Such printed at 51.4 in September and had an average score in 3Q of 52.0 after a mean of 53.0 in 2Q.  German unemployment fell by 26K in September, three time more than expected and the biggest monthly decline in five months.  The jobless rate dipped to 6.9% from 7.0% in August, and employment in August rose 0.1% on month and 1.3% on year.

The French retail purchasing managers index among retailers recovered to 51.3 in September from 46.0 in August.  That was the first reading above 50 since May. 

Euroland’s retail PMI remained below 50, however, but indicated only a marginal rate of contraction.  The Ezone PMI printed at 49.6 after 48.0 in August and 48.2 in July.  While retail expanded in both Germany and France, such activity against contracted noticeably in Italy where the PMI-retail index printed at 44.9 after 42.4 in August.  Italy hasn’t seen expanding retail activity since February.

Overall business sentiment in the euro area weakened another 3.4 points to 95.0 in September.  The index was at 103.0 in July and peaked in February at 108.0.  Consumer confidence sagged 2.6 points to minus 19.1.  Industrial-sector sentiment dropped 3.2 points to minus 5.9.  Services fell 3.7 points to zero, and retail dropped by a further 1.1 points to minus 9.8.  Construction decreased 2.6 points to minus 26.0.  The business climate index weakened .12 points to minus 0.06, but that was less deterioration than the .38-point slide in August.

U.K. mortgage approvals of 52.4K in August exceeded expectations.  So did a GBP 0.5 billion rise in net consumer credit, but net mortgage lending of GBP 0.6 billion fell a shade below forecast.  British M4 fell 0.6% in the year to August.  The U.K. Nationwide house price index edged up 0.1% in September but showed a 0.3% downtick from a year earlier.

Romania’s central bank as expected left its benchmark interest rate at 6.25%.

Swedish retail sales slid 0.3% on a volume basis in August and posted a smaller 0.2% on-year increase after 1.1% in the year to July.  Norwegian retail sales volume increase 1.7% on month and 6.7% on year in September. Spanish retail sales in value terms were 4.0% lower in August than a year earlier and posted a drop of 5.4% in January-August. 

Spain’s flash harmonized consumer price inflation rate accelerated to 3.0% this month from 2.7% in August. Belgian CPI inflation held steady at 3.6% in September.

Producer prices rose 7.7% in the year to August in Singapore and by 9.6% in South Africa, but such dropped 1.0% in Hungary.  South African M3 growth accelerated to 6.2% in August from 5.6% in July. 

The final revision of U.S. 2Q GDP data arrives today.  So do the Kansas City Fed manufacturing index and figures for pending home sales and jobless insurance claims.  Canada releases producer prices and raw material prices today.

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

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