Important Data to Digest

October 3, 2014

Friday sees the release of service-sector PMI surveys for many countries, Euroland retail sales, the U.S. monthly jobs report, and U.S. and Canadian trade figures.  Investors also continue to assess yesterday’s ECB press conference and the tense and fluid situation in Hong Kong.

Markets remain closed in China for the National Holiday and are closed today in Germany for Unity Day.

The dollar is generally higher, advancing by 0.6% against the kiwi, 0.5% relative to the yen, Australian dollar and sterling, 0.4% vis-a-vis the euro and Swiss franc, and 0.2% against the loonie.  With China closed, the yuan is unchanged.

Equities in the Pacific Rim lost 1.0% in Indonesia, 0.8% in South Korea and 0.2% in New Zealand and India but rose by 1.5% in Taiwan, 0.8% in Singapore, 0.4% in Australia and 0.3% in Japan.  Hong Kong’s Hang Seng index hit a four-month low early but closed up 0.6% for the day.  In Europe, share prices have risen 0.9% in Spain, 0.8% in Britain, 0.6% in Italy, and 0.5% in France.

The ten-year British gilt yield rose four basis points, but the Japanese JGB is a basis point lower.  With Germany closed, peripheral yield premiums have narrowed.

Gold and oil drifted 0.7% and 0.1% lower to $1,206.30 per ounce and $90.91 per barrel.

Retail sales in the euro area produced a significant upside surprise in August, climbing 1.2% on month in volume terms after a 0.4% drop in July, and recording growth of 1.9% from a year earlier.  Sales in July-August averaged 0.6% greater than the 2Q level.

Euroland’s service-sector purchasing managers index, however, slipped to an 8-month low of 52.4 in September down from a preliminary estimate of 52.8 and July’s 53.1 reading.  Italy (48.8) posted a 9-month low, and the French reading of 48.4 and Spain’s score of 55.8 were at three-month lows.  Ireland recorded a 3-month high of 62.5, including the strongest expansion of new business since May 2006, while Germany’s reading of 55.7 was a 2-month high but accompanied by the weakest business outlook in 15 months.

Euroland’s composite PMI printed at 54.1, a 2-month high after scores of 53.7 in August and 55.7 in July.  Italy’s score fell to a 10-month low of 49.5.  France’s 48.4 was at a 3-month low, as was Ireland’s score of 60.0 and Spain’s 55.3.  Germany’s PMI ticked up to 54.1 from 53.7.  The data all in all suggest positive but weak growth in the third quarter.

China’s government-authorized service-sector PMI dropped 0.4 points to an 8-month low of 54.0.  August had seen the first quickening of service sector growth since May, but activity again slowed last month.

Japan’s report was upbeat in contrast.  The service-sector PMI rose 2.6 points to an 11-month high of 52.5 and included the fastest rise in input prices since September 2008 and the best reading for orders since May of last year.  Japan’s composite PMI rose 2.0 points to a 6-month high of 52.8.

The British service-sector PMI slid 1.8 points to a 3-month low of 58.7.  Services and construction are motoring along well, while manufacturing has slowed appreciably in an increasingly two-speed economy.

Australia’s PMI for services sank four whole points to a 13-month low of 45.4 in September.  It was the seventh straight sub-50 reading.  Australian new home sales rebounded 3.3% in August following a 5.7% decline in July and a 2.6% increase in the second quarter.

Russia is barely clinging to positive growth according to PMI readings in September of 50.5 in services after 50.3 and 50.9 on the composite index, a 3-month low.

Sweden’s service-sector PMI of 55.6 represents a two-month high and pretty buoyant activity.  Swedish industrial output slid 0.2% in August and was 2.4% below its year-earlier level that month.  A 5.2% on-year drop had occurred in July.

South Africa’s PMI advanced 1.5 points to a 21-month high of 52.6.  August had seen the first reading above 50 since March.

Bank of Japan Governor Kuroda denied that yen appreciation is problematic, while Economics Minister Amari said a decision had not been made on whether to hike the sales tax further to 10% in October 2015.

Markets now await the U.S. jobs report, U.S. and Canadian trade data, and the Institute of Supply Management’s U.S. non-manufacturing PMI report.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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