Euro Firmer Despite Some Poor German Data

October 6, 2014

The dollar is generally softer, with losses of 0.7% against the Australian currency, 0.4% versus the yen and loonie, 0.3% relative to the euro, 0.2% against the kiwi and Swiss franc and 0.1% vis-a-vis sterling. 

European share prices have risen 1.0% in Spain, 0.8% in Germany, 0.5% in Switzerland, 0.4% in Italy, 0.3% in Britain and 0.2% in France.  In the Pacific Rim, where Chinese markets remained closed for the National Holiday, the Hang Seng recovered 1.1% on the smaller size of the street mob.  There were also gains of 1.2% in Japan, 1.0% in Indonesia, 0.8% in Singapore, but losses of 0.5% in Australia, 0.4% in South Korea and 0.2% in India.

WTI oil rose 0.4% and is back above 90 dollars at $90.13 per barrel.  Comex gold edged 0.2% higher to $1,195.02 per troy ounce.

The ten-year British gilt and German bund yields slid by two and one basis points.

After a 4.9% jump in July, German industrial orders plunged back 5.7% in August.  The drop was more than twice expectations and left orders 1.3% lower than a year earlier.  Orders in July-August averaged 0.3% below the 2Q level.  Foreign orders plummeted 12% on month in August, while domestic demand fell 2.0%.

The German retail purchasing managers index slumped 2.3 points to a 53-month low of 47.1 in September.  Such had crested at 56.2 as recently as June.  Euroland’s retail PMI score was at a 17-month low of 44.8 despite a 5-month high in Italy’s reading of 45.4.  The French retail PMI was at an 18-month low of 41.8.

Investor sentiment toward Germany sank to a 25-month low according to Sentix measure.  Euroland’s Sentix printed at a 17-month low of negative 13.7 in October, 3.9 points weaker than in September and 27.8 points worse than the 2014 peak of +14.1.

Germany’s construction purchasing managers index improved 2.3 points to 50.0, a six-month high but only at the threshold of neutrality between expansion and contraction.

Data compiled by J.P. Morgan indicated that the global services PMI and composite PMI readings fell in September by 1.3 and 0.2 points, respectively, to 55.3 and 54.9.

In the weekend first round of Brazilian presidential elections, Rousseff, the incumbent, secured just over 40% of the vote and will face the right-of-center candidate, Neves, in a runoff vote on October 26.

The World Bank’s semi-annual forecast of East Asian GDP revised down projected growth for developing economies in the region to 6.9% this year and next followed by 6.8% in 2016.  Lower expected growth in China (7.4% in 2014, 7.2% next year, and 7.1% in 2016) was the driving force behind the downward revision.

Job ads in Australia recorded a fourth straight monthly advance in September, this time of 0.9% after gains of 1.6% in August and 0.5% in July.  Expected Australian inflation in the latest survey of 2.2% over the coming year was 0.2 percentage points less than in last month’s survey.

No U.S. data releases are scheduled, but the Canadian IVEY-PMI arrives.  Monetary policy meetings began today in Japan and Australia.  Decisions will be announced on Tuesday.

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

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