Japanese Election, BOJ Tankan, and a Hostage Crisis in Sydney

December 15, 2014

The LDP/Komeito coalition in Japan captured over 68% of the lower house parliamentary seats, enough to override opposition vetoes.  Turnout of 52.4% in the snap election constitutes a record low and was down from 59.3% two years earlier.  Prime Minister Abe had called the election as a confidence vote in his decision to delay a planned October 2015 sales tax hike, but the big question looking forward is whether he will not enact key structural reforms.

The Bank of Japan reported its quarterly survey of corporations.  Business conditions this month were not very different from those in September, but companies anticipate a deterioration over the coming three months.  Small firms, unlike large ones, pulled in their investment horns and now anticipate a 6.7% drop in capital spending this fiscal year versus an 8.9% expansion still planned by larger companies.  A 1.4% increase in sales is forecast by all survey respondents, together with a 0.3% dip in net earnings this fiscal year.

A sole gunman, reportedly with ties to Al Qaeda islamist terrorists, has taken many hostages in a chocolate store in Sydney, Australia.  Some of the hostages have gotten out, while others remain caught.

Share prices fell in the Pacific Rim but have rebounded a bit in Europe.  Japan’s Nikkei dropped 1.6%, and equities closed down by 1.0% in Hong Kong and Indonesia, 0.9% in Singapore, 0.6% in Australia, 0.5% in Taiwan and 0.3% in New Zealand.  Stocks in Europe show gains of 0.7% in Spain, 0.6% in the U.K. and Italy, 0.5% in France and 0.4% in Germany.

The dollar has firmed 0.4% against the Australian and New Zealand dollars as well as sterling, 0.2% vis-a-vis the euro and Swiss franc, and 0.1% relative to the loonie , yuan and yen.

The better tone in European equities reflects a 0.5% rise in WTI oil prices to $58.08 per barrel.  Comex gold, in contrast, fell back 0.9% to $1,211.80 per ounce.

While the 10-year Japanese JGB yield settled back three basis points to 0.37%, the 10-year British gilt and German bund show rises of 5 and 1 basis points.

The British industrial trends survey index posted a 4-month high of 5 in December after printing at 3 in November, -6 in October and -4 in September.

The U.K. Rightmove house price index posted a second straight month-on-month drop in December, trimming its 12-month rise to 7.7% from 8.5%.  Such had climbed 7.6% in the year to October.

Swiss domestic producer prices fell 0.7% on month and 1.4% on year in November.  The combined PPI/import price index was 1.6% lower than a year before.  The on-year drops were significantly greater than in October and than analysts were anticipating.  Swiss National Bank officials have been very worried about persistent deflationary risks.

Indian wholesale prices were unchanged in November from a year earlier, thanks to a 4.9% plunge in energy.  The WPI had posted on-year rises of 2.4% in September and 1.8% in October.

Germany’s index of leading economic indicators fell by 0.5% in October and a combined 1.9% over the last three available months according to the Conference Board.  The index of coincident economic indicators rose 0.2% and was unchanged between July and October on net.

Australian motor vehicle sales contracted 0.6% in November following a 1.6% monthly drop in October.  The on-year decline was 3.8%.

New Zealand’s service-sector PMI fell 2.2 points to 54.8 in November from 57.0 in October and 58.0 in September.  Like all PMIs, the 50 level delineates expanding from declining activity.

In the year to November, Finnish consumer prices rose 1.0%, while Denmark’s PPI fell by 2.6%.  Dutch retail sales in the year to October grew 2.2% nominally and 2.6% in inflation-adjusted terms.

Singaporean retail sales recorded a greater 8.1% year-over-year advance in October than the 5.5% rise seen in the 12 months to September. Turkey’s jobless rate averaged 10.5% in the third quarter.

Finland’s current account surplus narrowed 21.4% to EUR 555 million in October, and Norway’s trade surplus fell 21.7% to NOK 24.6 billion in November.

This will be a busy day for U.S. data releases, featuring industrial production, the National Association of Home Builders index, Treasury-compiled capital flow figures and the Empire State Manufacturing Index.  An FOMC press conference is scheduled for Wednesday, when the Fed may drop its “considerable time” guidance on continuing the current policy.  Canada reports existing home sales today. 

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

Tags: ,


Comments are closed.