A Leap in Chinese Equity Prices

December 14, 2012

Friday has seen the release of the Bank of Japan’s Tankan survey and Preliminary PMI readings for China, Euroland, Germany and France.

Polls in Japan point to a big win for the Liberal Democratic Party in Sunday’s election.

There’s been no breakthrough in the U.S. fiscal cliff talksSusan Rice withdrew from consideration for the Secretary of State post.

The Central Bank of Chile left its main overnight interest rate unchanged at 5.0%.

Overnight movement in the dollar has been only slight, with no change against the euro and Australian dollar, 0.1% upticks against the yen and loonie, and 0.1% downticks versus the yuan, Swiss franc and sterling.  The kiwi eased 0.3% against the U.S. currency.

In response to an encouraging Chinese purchasing managers survey of manufacturers, share price indices in China jumped between 4.3% and 5.1%.  While stocks rose 0.7% in Hong Kong, 0.5% in India and 0.4% in Thailand and Singapore, such fell by 1.4% in the Philippines, 0.4% in South Korea, 0.3% in Indonesia, and 0.1% in Japan and Malaysia.  In Europe, the Paris Cac and British Ftse are unchanged.  Equities are up 0.2% in Spain and Italy and have risen 0.3% in Germany.

Oil prices have increased by 1.1% to $86.81 per barrel.  Gold edged 0.1% higher but remains a tad under $1700 at $1698.50 per ounce.

Ten-year Japanese JGB and British gilt yields firmed a basis point.  The comparable German bund is unchanged in value.

The Japanese quarterly business survey, known as the Tankan, revealed a 9-point drop in the diffusion index for large manufacturers to minus 12, lowest since the first quarter of 2010.  Conditions worsened for nonmanufacturers as well.  In several cases, additional deterioration is anticipated in the first quarter of next year. 

Japanese industrial production growth in October was revised to 1.6% from 1.8% reported initially.  Shipments and inventories dipped 0.1%.  Capacity grew 0.1% but was 2.0% lower than a year before.  Capacity use went up 1.6% but posted a 6.2% on-year decline.  In spite of October’s solid recovery, the level of industrial production that month remained 1.8% below the 3Q average.

Euro area consumer prices fell 0.2% on month in November and recorded a smaller 12-month increase of 2.2% after 2.5% in October, 2.6% in September and 3.0% in the year to November 2011.  Core inflation slowed to 1.4% from 1.5%.  Energy went up 5.7% in the past 12 months, down from a climb of 12.3% in the previous twelve months to November 2011. 

Jobs in Euroland slipped 0.2% between the second and third quarters of 2012 and fell 0.7% in year-on-year terms.  While jobs in Germany were 0.9% higher than a year earlier, such tumbled 8.9% in Greece and 4.1% in both Spain and Portugal.

HSBC reported a 14-month high in China’s manufacturing purchasing managers index for December.  Such surpassed the 50 no-change level for a second straight time with a reading of 50.9, which was a shade above expectations.  New orders rose at a faster pace in December than November.

Euroland’s preliminary purchasing managers survey was mildly encouraging.  The composite and manufacturing indices hit nine-month highs of 47.3 and 46.3, while the reading on services was at a 5-month high of 47.8.  Even though the data point to a steeper GDP contraction in 4Q than 3Q, the downturn lost intensity over the course of the fourth quarter, and the start of a recovery now seems plausibly likely before the middle of 2013.

  • There is considerable diversity in the conditions of euro area members.  Germany’s composite 50.5 score moved above 50 for the first time since April and included a 52.1 reading in services, which was also at an 8-month high.  The French composite PMI, although at a 4-month high of 45.0, signaled pretty severe contraction, however, and the peripheral economies are doing even worse.
  • Manufacturing is lagging services.  The December readings in manufacturing were 46.3 in the whole Ezone, 44.6 in France, and 46.3 in Germany.

Fitch warned of a possible French credit downgrade in the future but retained the rating at triple A.

Singaporean retail sales grew 0.6% on month but recorded a 12-month decline of 1.0% in October.

Indian WPI inflation eased to 7.2% in November from 7.5% in October.

Finnish CPI inflation slowed to 2.2% last month from 2.6% in October.  The Finnish current account swung to a 44 million euro deficit in October from a surplus of EUR 125 million in September. Ireland’s trade surplus widened 14% on month to EUR 3.3 billion in October. Austrian CPI inflation held steady at 2.8% in November.  Hungarian industrial output dropped 1.7% in the year to October.  That was just half as much as in the year to September.

U.S. consumer prices and industrial production get reported today.  The Markit preliminary U.S. PMI December survey results will be unveiled, too, and Canada’s monthly survey arrives of manufacturing sales, orders and inventories.

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

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