Stocks Fall Following One-Week Closure of Chinese Markets
October 8, 2012
China’s whole-week National holiday is over, but markets are closed today in the United States for Columbus Day, Canada for Thanksgiving, and Japan for Health-Sports Day.
The World Bank downgraded projected Chinese GDP growth in 2012 and 2013 by a half-percentage point each to 7.7% and 8.1%, respectively. Other Asian growth forecasts have also been lowered, providing an excuse for share prices to drop by 1.0% in China, Singapore Taiwan and Indonesia, 1.2% in India, 0.9% in Hong Kong, 0.3% in Australia and 0.7% in South Korea. In Europe, equities have slumped 1.9% in Italy, 1.5% in Germany, 1.4% in France, 1.0% in Spain and 0.8% in Britain.
The Chinese yuan is unchanged from its September 28 closing before the National Holiday. Other dollar exchange rates reflect the new spike in risk aversion. The greenback is down 0.6% against the yen but up 0.6% versus the euro and Swiss franc and by 0.5% relative to sterling. Commodity-sensitive currencies are barely changed: the U.S. currency has firmed 0.1% against the loonie, eased 0.1% versus the kiwi and shows no net change relative to the Australian dollar.
Other markets also reflect a risk-averse psychology. The yields on ten-year German bunds and British gilts are four basis points lower. Oil prices are 1.6% softer, and gold has fallen 0.6%.
German industrial production fell 0.5% in August after a revised 1.2% increase in July. Output in those two months was on average 1.3% higher than the 2Q level. Weaker production in August was concentrated in a 1.3% decline of intermediate goods.
The seasonally adjusted German trade surplus rose by EUR 2.0 billion on month to EUR 18.3 billion in August, as exports advanced 2.4% while imports went up just 0.3%. The surplus had averaged EUR 15.1 billion per month in the first half of this year and EUR 13.0 billion per month in 2011. The unadjusted August surplus of EUR 16.3 billion was higher than projected and reflected growth from a year earlier of 5.8% in exports but just 0.4% in imports.
The Sentix gauge of investor sentiment toward the euro area printed at a very low minus 22.2 in October versus minus 23.2 in September and an average score in June-August of minus 29.6. October’s further improvement was worse than projected.
The Bank of France’s business sentiment index for France fell back to 92 in September after readings of 93 in August, 90 in July, 91 in June, 92 in May, 94 in April and 95 in both February and March. The central bank’s services sentiment index remained at 91 last month. Monetary officials think real GDP likely contracted by 0.1% last quarter.
Several Czech economic indicators were reported. Unemployment rose to 8.4% in September from 8.3% in August. Construction output fell by 4.7% between August 2011 and August 2012. The trade surplus narrowed 30.5% to CZK 16.9 billion in August from CZK 24.3 billion in July, and industrial production dropped 2.9% in August and 3.1% on year.
Switzerland’s jobless rate remained steady in September at 2.9% seasonally adjusted and 2.8% not adjusted. Swiss consumer prices rose 0.3% in September, trimming the 12-month rate of decline to 0.4% from 0.5% in August and 0.7% in July.
Finland recorded a zero trade balance in August, virtually the same as in July. Ireland’s construction purchasing managers index remained very weak in September at 41.9 following readings of 40.7 in August, 42.2 in July, 42.5 in June and 46.3 in May.
The HSBC purchasing managers survey for services in China printed at a four-month high of 54.3 in September, but weak manufacturing limited the composite PMI index to a stagnant 50.3 after 49.9 in August and 51.9 in July.
Hong Kong’s composite PMI reading of 49.6 in September was the lowest score since 49.4 in May and followed 50.5 in August.
Hugo Chavez won a third six-year presidential term in Venezuela.
British Chancellor George Osborne addresses the Conservative Party annual convention today and will propose substantial further welfare cuts. There is a central banking conference in Frankfurt.
No significant U.S. data are scheduled today. The vice presidential debate between Biden and Ryan occurs on Thursday. G7 finance ministers and central bankers also meet Thursday in Tokyo.
Copyright 2012, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: foreign exchange, German current account, German industrial production, Sentix index