Setback for France, Good News from America

November 20, 2012

Moody’s withdrew France’s top-grade sovereign credit rating.  S&P had already done this some time earlier, and coincidentally the cover story of this week’s Economist presents an alarming portrayal of France as “the time-bomb at the heart of Europe” and the “biggest danger to Europe’s single-currency.”  Moody’s cited structural problems such as France’s persistent erosion of competitiveness and rigid labor laws.  The fiscal outlook is uncertain, and Moody’s left the rating outlook at “negative,” suggesting possible further downgrades.

U.S. housing starts increased 3.6% in October, more than expected and reaching the highest level, 894K, since July 2008.  Permits declined 2.7%.

The dollar shows gains of 0.5% against the yen and kiwi and 0.4% versus the Australian dollar.  U.S. currency movements since Monday’s close amount to 0.1% or less against other key monies.’

U.S. share prices opened lower in spite of the housing starts report.  The Dow is off 0.4% at this writing.  In other markets, share prices rose 0.8% in New Zealand, 0.6% in Australia and South Korea but fell 0.1% in Japan.  Stocks are up 0.3% in Germany but down 0.7% in Italy, 0.5% in Spain, 0.2% in Britain and, somewhat surprisingly, just 0.1% in France.

Oil and gold prices have slipped by 0.8% to $88.53 per barrel and 0.2% to $1730.40 per ounce.

Ten-year British gilt and German bund yields firmed by four and three basis points.  The 0.73% 10-year Japanese JGB yield is unchanged from yesterday.

European officials are in talks to decide whether to approve Greece’s bid for next month’s installment of aid.

Japan’s all-industry index dropped another 0.3% in September to 0.2% below the 3Q average level and 1.1% lower than a year earlier.  The index declined 0.5% in the third quarter after dipping 0.1% each in the first and second quarters.  In comparisons of supply components between August and September, industrial production plunged 4.1%, public administration dropped 0.8%, and services rose 0.3%.  Construction, up 2.5%, was the brightest spot.

Chinese foreign direct investment posted a 0.2% on-year dip in October, reducing the year-to-date decline to 3.5% from 3.8% over the first nine months of 2012.

The Bank of Japan as expected failed to make news at this month’s Board meeting, leaving its stimulus settings (a virtual zero interest rate policy and a JPY 91 trillion ceiling on quantitative easing) as they were.  The vote was unanimous and was accompanied by an unchanged economic assessment.

Turkey’s central bank implemented a further 50-basis point reduction of its overnight lending rate to 9.0%.  This narrowed the lending-borrowing rate corridor to 400 basis points.  The 5% borrowing rate and 5.75% benchmark repo rate were not modified.

Published minutes from the Reserve Bank of Australia’s November 6 meeting allow for the possibility of further monetary ease.  The Official Cash Rate previously had been cut in several steps from a peak of 4.75% over the year to November 2011 to 3.25% by October 2012.  Officials want to give time to assess the full impact of those cuts and expressed some dissatisfaction that CPI inflation had not dropped quite as much as expected.

Australia’s index of leading economic indicators fell 0.3% in September, and the index of coincident indicators was flat according to the Conference Board.

German producer prices were unchanged in October and posted a smaller 1.5% 12-month rate of increase.  Energy dipped 0.1% on month, while other producer prices collectively held unchanged.

Norwegian mainland GDP posted a larger-than-forecast 0.7% increase last quarter, but the on-year growth rate slowed to 1.2%.  Including offshore oil, total GDP fell by 0.8% in the third quarter.

Dutch consumer confidence weakened five points to a lower-than-projected reading of minus 37 in November. Belgian consumer sentiment dropped seven points to minus 24, which also was worse than analysts were predicting.

Polish industrial production jumped 7.7% on month and 4.6% on year in October, surpassing expectations.  Polish producer output prices fell 0.7% in October, trimming their 12-month increase to 1.0% form 1.8%.

The Swiss trade surplus widened 46% on month to CHF 2.82 billion in October.

Finnish joblessness eased 0.2 percentage points to 6.9% in October.

U.S. chain store sales in the week of November 17 slid 0.3% but were 2.5% higher than a year before according the ICSC index.  The Johnson-Redbook sales index was flat over the first three weeks of this month, up 1.4% on year, and up 1.8% on year in the week of November 17 alone.  Black Friday this week is the most important shopping day of the year.

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

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