Less Risk Aversion than Yesterday

October 15, 2015

Share prices recovered 2.4% in China, 2.1% in Hong Kong, 1.2% in Japan and South Korea, 1.1% in New Zealand and Singapore, 0.9% in India and Taiwan, and 0.% in Australia.  Equities have risen in Europe so far today by 1.7% in Germany and Italy, 1.4% in France, 1.1% in Greece, 0.6% in Spain and 0.5% in Switzerland and Britain.

Ten-year sovereign debt yields are up two basis points in Japan and a basis point each in Germany and the United Kingdom.

Gold is steady at $1184.56 per ounce.  WTI oil fell by 1.3% to $46.02 per barrel, however.

The dollar settled back 0.6% against the yen, 1.2% versus the kiwi, 0.5% relative to the Aussie dollar, 0.2% vis-a-vis the loonie and 0.1% against sterling.  The dollar has firmed 0.3% against the euro and 0.1% versus the Swissie but is steady against the yuan.

The Monetary Authority of Singapore, whose interest rate policy is subordinated to exchange rate management, lowered the slope further of allowed appreciation in the trade-weighted Singapore dollar.  Such constitutes an easing.  The width and midpoint of the targeted exchange rate trading band was not changed.  The same actions had been taken at an unscheduled policy meeting last January.  Ordinarily, policy is reviewed in October and April.  In April 2015, no changes were undertaken.  Singapore has weak growth and sub-zero total CPI inflation.  On-year growth in retail sales increased to 6.7% in August from 5.5% in July.

The Bank of Korea’s seven-day repo rate was left at a record low of 1.5% as most analysts were expecting.  It’s been at that level since a 25-basis point reduction in June.

Bank Indonesia’s BI reference interest rate was kept at 7.5% as expected.  The last change was a 25-basis point reduction in February 2015.  Officials foresee some room for further easing but are being cautious because high global uncertainty makes the rupiah vulnerable.

Bank lending in China went up CNY 1.050 trillion in September, exceeding expectations, and M1 money growth accelerated to a 12-month pace of 11.4% from 9.3%.  Such was the highest on-year pace thus far in 2015.  However, M2 money growth dipped back to 13.1% after printing at 13.3% in both July and August.

There’s been an unusually large downward revision in Japanese industrial production in August, which now shows a month-on-month drop of 1.2% versus a dip of 0.5% estimated initially and following a 0.8% drop in July.  A 0.7% decline in shipments was also greater than its initial estimate.  The ratio of inventories to shipments shot up 6.2% in the latest month, while capacity usage and capacity respectively dropped 0.9% and 0.2%.  Industrial production was 0.4% lower than in August 2014, and the average July-August over 2Q drop of 1.4% strengthens the possibility that GDP contracted for a second straight time last quarter.

Japan’s tertiary index, which measures service sector activity, also was disappointing, as such edged up just 0.1% in August after being unchanged in July.  Japan’s government downgraded its assessment of the economy, observing that “weakness can be seen in some areas.”  The assessment of industrial production’s trend was changed from flat to weak.

The Fed Beige Book of regional economic conditions, released yesterday afternoon, found fewer districts, 9 out of 12, to be experiencing modest or moderate expansion and observed that the strong dollar seems to be dampening tourism and manufacturing exports.

New Zealand’s manufacturing purchasing managers index rose 0.4 points to a 7-month high of 55.4 in September.  Consumer confidence improved 3.7% in October.

Australia’s monthly labor market report revealed an unexpected 5.1K decline in jobs, with full-time positions falling back 13.9K.  Australia’s unemployment rate stayed at 6.2%, but the participation rate edged down 0.1 to 64.9%.  Motor vehicle sales in Australia posted an unadjusted on-year increase of 5.7% in September (7.7% on a seasonally adjusted basis).

There have been dovish remarks from an ECB Council member, Nowotny.

Dutch retail sales slid 0.5% on month and 0.7% on year in August.  Finnish GDP fell 2.7% on month and 2.1% on year in that same month.  The German government revised projected GDP growth this year to 1.7% from 1.8% but retained a forecast of 1.8% for 2016.

U.S. consumer prices slid by an expected 0.2% in September, cutting the on-year change to zero from 0.2% the month before.  Core inflation of 0.2% on month and 1.9% on year was above August’s pace, however.

U.S. jobless insurance claims dropped to 255K last week, 7K less than in the previous week.  The Empire State manufacturing index rose 3.3 points in October but remained depressed with a value of -11.36.

The Philly Fed manufacturing indices is also scheduled for release today.  Dudley and Bullard, presidents of the N.Y. and St. Louis Feds, speak publicly today.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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