Equity Rally Extended

October 2, 2012

Monday’s better market tone extended into Tuesday, fed by a surprise Australian Official Cash Rate cut and hopes of a Spanish bailout.

Stocks rose 1.1% in New Zealand, 1.0% in Australia, 0.8% in the Philippines, 0.7% in Singapore, 0.6% in Taiwan, 0.5% in Indonesia, and 0.3% in India.  China remains closed for the entire week, and Japan’s Nikkei slipped 0.1% today.  In Europe, share prices have climbed 1.5% in Spain, 1.1% in Italy, 0.5% in Germany and 0.3% in France and Britain.

Spanish sovereign debt yields settled back further.  Ten-year German bund and British gilt yields fell by four and two basis points.  The 10-year JGB eased a basis point, however, to a mere 0.76%.

The dollar slipped 0.5% versus the euro, 0.3% against the euro, 0.2% against the Swiss franc and sterling, and 0.1% relative to the loonie.  The greenback climbed 0.5% against the Australian dollar and edged up 0.1% against the yen.

Oil prices rose 0.3% to $92.73 per barrel. Gold is off 0.1% at $1781.50 per ounce.

The Reserve Bank of Australia announced the fifth easing of monetary policy since November 2011.  The cut to 3.25% from 3.5% was not anticipated and was justified by a weaker global economic outlook, Australia’s lower terms of trade, and the view that Aussie inflation will stay in target.

  • The central banks in Australia and New Zealand released commodity price data.  Australia’s index in September was 14.9% lower than a year earlier in SDR terms and down by 18.5% in local currency terms.  New Zealand’s index rose 3.5%, in contrast.

Japan’s monetary base grew by an accelerated 9.0% on year in September, reflecting expanded quantitative easing.  The base rose 8.0% between 3Q11 and 3Q12, up from a 2.6% second-quarter on-year advance.  Japanese labor cash earnings were 0.2% higher than a year earlier in August after posting a 1.6% drop in July.

Consumer prices in South Korea rose 0.7% in September and 2.0% from a year before after a 1.2% 12-month increase in August. 

The Nationwide index of British house prices relapsed in September, dropping 0.4% on month after a 1.1% rise in August.  The index fell 1.4% from September 2011, its seventh straight on-year decline.

The U.K. construction purchasing managers index was below the 50 no change level for the third time in four months.  Such printed at 49.5 in September versus 49.0 in August.  The quarterly average reading of 49.8 compares to 52.8 in the second quarter.  Weakness in construction is likely to persist.

Producer prices in the euro area climbed 0.9% in August, led by a 2.4% jump in energy.  Other producer prices went up just 0.3%.  In on-year terms, total PPI inflation rose to 2.7%, reflecting 12-month advances of 7.9% in energy and 1.0% in non-energy goods.  On-year PPI inflation ranged from 1.6% in Germany to 2.5% in France, 4.1% in Spain, and 6.8% in Greece.

Spanish unemployment jumped by 79.6K in September, more than twice as much as August’s increase.

Romanian producer price inflation accelerated to 7.2% in August from 5.7% in July.  Romanian retail sales rose 0.7% in August and were 4.7% above a year earlier.  Hungary’s trade surplus narrowed 44% on month to EUR 431 million in July.

The global manufacturing purchasing managers index, according to a JP Morgan measure, worsened two points to a 43-month low of 45.7 in September.

South African motor vehicle sales were only 1.4% higher than a year before in September.

U.S. data arriving today will include the New York PMI index, auto sales, and weekly chain store sales.  Market and political attention has turned to tomorrow’s first of three Romney-Obama debates.  This one is being held in Denver.  Later in the week are the ECB and Bank of England policy decisions where analysts look for no new modifications and on Friday the Labor Department U.S. jobs report.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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