In Search of Market Clarity

September 27, 2013

No single market theme stands out.  Quarter-end is fast approaching.  Another U.S. fiscal showdown looms.  Overnight data have been mixed.  Esther George, K.C. Federal Reserve President, criticized the FOMC’s backtrack on tapering; she favored a cut to $70 billion in monthly asset purchases.  Japanese Finance Minister Aso did some backtracking of his own, indicating the government is not prepared to cut corporate taxation just yet.  Australia’s new Conservative government expects a bigger budget deficit in FY13/14 than the outgoing Labour government had predicted.  Aussie Prime Minister Abbot is unconcerned about rising house prices and sees no bubble there.

The dollar strengthened against commodity-sensitive currencies overnight, rising 0.7%, 0.3%, and 0.2% versus the Australian, New Zealand and Canadian dollars.  The greenback otherwise has dropped 0.6% relative to the yen, 0.5% versus the Swiss franc (which hit a 3-month euro high), 0.3% vis-a-vis sterling and 0.1% against the euro.  Once again, the yuan is unchanged against the dollar.

Share prices firmed 0.6% in Taiwan, 0.4% in Indonesia, China, Hong Kong and New Zealand and 0.2% in South Korea and Australia.  Equities dropped by 0.8% in India, 0.4% in the Philippines and 0.3% in Japan.  Stocks are also trading lower in Europe, with losses of 1.0% in Italy, 0.9% in Britain, 0.7% in Spain and 0.4% in Germany and France.

The ten-year British gilt and Japanese JGB yields are down by three and one basis points, respectively, while the German bund is flat.  Anxiety about Italy’s slip-sliding political situation is stirring up fear of rising peripheral interest rates.

Oil fell by 0.6% to $102.42 per barrel.  Gold edged 0.1% higher to $1324.20 per ounce.

Japanese CPI inflation rose further above zero because of energy price pressures.  Overall consumer prices in August were 0.9% above a year earlier, and the CPI that excludes fresh food accelerated to a 57-month high of 0.8%.  But consumer prices excluding food and energy were still 0.1% lower than in August 2012.  In sequential month-on-month terms, national consumer prices edged up 0.1% in August, while total Tokyo consumer prices remained unchanged in September from August.

Japanese stock and bond transactions last week generated a net outflow of JPY 555 billion, nearly the same as the outflow of JPY 607 billion in the previous week.

Britain’s Nationwide house price index advanced by 0.9% in September, lifting the 12-month increase to 5.0% from 3.5%.  U.K. consumer confidence rose three points in September to a reading of negative 10.  The British services index in May-July was 0.5% higher than in the prior three months.

Revised French nation income accounts confirmed the preliminary 2Q-over-1Q 0.5% advance in real GDP but bumped on-year growth up a tenth percentage point to 0.4%.  All of the quarter’s expansion was generated by real final domestic demand and inventories.  French real household spending went up 0.4% in July but then erased that gain in August.

Retail Ezone purchasing managers survey results show a setback in September.  Euroland’s index declined 1.7 points to a 4-month low of 48.6, thus connoting renewed contraction.  The German and French readings of 52.4 and 47.1 also represented four-month lows.  Italy’s score of 44.9, was at a 24-month high, however.

But Euroland sentiment indices improved in September.  The business sentiment index of 96.9 was 1.6 points above August’s reading and almost a full point higher than analyst expectations.  Industrial sector sentiment went up 1.1 points.  Consumer confidence climbed by 0.7 points.  There were confidence gains of 1.9 points in services, 3.6 points in retail, 1.1 points in industry, and 4.4 points in construction.  The business climate index showed a reading of -0.20 after -0.22 in August and -1.03 last April.

Austria’s manufacturing PMI slid to a 2-month low of 51.1 in September from 52.0 in August.  Orders grew at their slowest pace in three months.

Irish retail sales fell 2.6% on month in August, nearly halving their on-year advance to 2.6% from 4.7% in July.  Spanish retail sales were 4.5% smaller in August than a year earlier.  Swedish retail sales, in contrast, increased 0.3% on month and by a larger 2.4% on year in August.  In Portugal, both business sentiment and consumer confidence strengthened between August and September.  Finnish consumer confidence went up 1.3 points to 6.3 in September. 

Italian business sentiment easily surpassed expectations in September, jumping 3.2 points to a reading of 96.6.  The Swiss index of leading economic indicators rose 0.16 points to a 1.53 reading in September.

Consumer prices in Germany’s most populous state, North Rhine Westphalia, were unchanged for a second straight time in September. Their 12-month rate of increase ticked down 0.1 of a percentage point to 1.5%.   Belgian CPI inflation slowed to 0.9% in September from 1.0% in August.  Icelandic and Greek producer prices declined by 2.8% and 2.0% in the year to August. Harmonized CPI inflation in Spain was cut to 0.5% in September, a third of the pace in August.

Chinese corporate profits recorded a significantly bigger on-year advance of 24.2% in August.  In Thailand factory output slid 3.1% in the year to August.  Producer prices in Singapore fell 0.7% in the year to August despite an August-over-July advance of more than 1.0%.

U.S. personal income and spending figures are due today, as is the revised September U. Michigan/Reuters consumer confidence index.  ECB President Draghi speaks publicly, and so do the Chicago and New York Fed presidents.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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