Winding Down a Rollercoaster of a Week

December 4, 2015

The first week of December already had included weaker-than-expected monetary support from the ECB, weaker U.S. purchasing managers indices, mounting rhetorical evidence that the federal funds rate will be hiked this  month, softer core inflation in the eurozone, public remarks from central bank chiefs in the U.S., Britain, Euroland, Japan, Australia, and Canada, and a possible terrorist act in California.

This Friday end to the week features

  • Releases of U.S. and Canadian jobs and trade figures, German industrial orders, Canadian productivity, the eurozone retail PMI survey, Japanese labor cash earnings, and an unexpected announced increase in OPEC oil production quotas.

The euro continues to trade above $1.0927.  Net changes in the dollar from Thursday’s close include gains of 0.7% against the Swiss franc, 0.4% versus the yen, 0.2% relative to the euro and sterling, and 0.1% vis-a-vis the yuan, which crossed through 6.4000/USD.  The dollar also has declined 1.0% against the kiwi and 0.3% versus the Aussie dollar, while holding steady relative to the Canadian dollar.

Most share prices, with the notable exception of U.S. markets, have fallen sharply.  One hour after the N.Y. open, the Dow had recovered 1.3% from Thursday’s debacle.  But in Europe, stocks were down 0.8% in France, Germany, Switzerland and Britain, 0.5% in Spain, and 2.3% in Greece.  Earlier in the Pacific Rim, stocks lost 1.9% in China, 1.0% in India, 1.5% in Australia, 2.2% in Japan, 1.1% in Hong Kong and 1.0% in South Korea.

OPEC oil ministers at a scheduled meeting announced a 1.5 mb/d increase of production quotas for the cartel to 31.5 million barrels per day.  That merely matches recent reality, as many members had been exceeding their limit.  In any case, oil was bid sharply lower on this unexpected action.  WTI crude fell as low as $39.75 per barrel and is currently down 2.6% on the day.

Comex gold, on the other hand, has climbed 2.5% to $1,088.20 per ounce.

Ten-year sovereign debt yields are four and two basis points higher in the U.K. and Japan, unchanged in Germany, and down a basis point in the U.S. but still high by recent standards at 2.30%.

U.S. labor statistics were better than forecast.  211K jobs were created in November, and the gain in the prior two months got revised upward by a combined 35K.  The jobless rate stayed at 5.0%, and labor participation rose to 62.5% from 62.4% in both September and October.  The broad alternative gauge of un- and underemployment stayed below 10.0% for a second straight month.  Average hourly earnings increased 0.2% on month but decelerated to a 12-month advance of 2.3% from 2.5% in October.

Canadian labor statistics were worse than assumed.  The jobless rate rose 0.1 percentage point to 7.1% from 7.0% and 6.7% a year earlier.  Private employees slumped 40.8K, accounting for all of the 35.7K decline in total workers.

Canadian labor productivity edged up 0.1% last quarter and recorded a 0.7% year-over-year decline versus a 0.6% on-year rise in U.S. productivity.  Reflecting the loonie’s sharp depreciation, unit labor costs translated into U.S. dollar terms sank 6.6% on quarter and 16.3% on year, a stark contrast to the quarterly 0.3% rise in U.S. unit labor costs (+2.9% from 3Q14).

The U.S. posted a $43.89 billion goods and services trade deficit, somewhat greater than September’s $42.46 billion shortfall.  The year-to-October deficit of $444.95 billion was a manageable 5.3% wider than a year earlier.

Canada posted a third straight outsized trade deficit of C$ 2.760 billion in October after deficits of C$ 2.365 billion in August and $2.325 billion in September.  Exports (down 1.8% on month) contracted at a faster rate than imports, which dropped 0.8%.

Canada’s IVEY purchasing managers index jumped 10.5 points to 63.6 in November, its best score in at least 19 months.

German industrial orders rebounded from a 0.7% slide in September with an advance of 1.8% in October but was nonetheless 1.4% below its year earlier level.  Domestic orders for capital goods, a leading indicator of business investment, leaped 4.2%.

The German construction purchasing managers index (PMI) rose to an 8-month high of 52.5 in November from 51.8 in October.

Reflecting the Paris attacks as well as unseasonably warm weather, Euroland’s retail PMI dropped 2.8 points to 48.5.  That was the first sub-50 outcome (meaning a directional contraction) since April and the lowest score in nine months.  Germany’s retail PMI fell to a 14-month low of 49.6.  France’s PMI of 47.8 was at a 7-month low, and Italy’s index sank 1.1 points to a 5-month low of 47.7.

On-year growth in Japanese labor cash earnings accelerated to 0.7% in October but was just 0.4% higher in inflation-adjusted terms.  Japanese consumer confidence printed in November at a 2015 high of 42.6 versus 41.5 in October, but being well below the 50 threshold still connotes more pessimism than optimism.

Australian retail sales rose 0.5% in October after back-to-back 0.4% increases  in the prior two months.  Sales exceeded the October 2014 level by 3.9%.

British new car registrations, a gauge of sales, were 3.8% greater in November than a year earlier.

Swedish and Spanish industrial production were each 4.0% greater than a year earlier in October.  Finnish GDP in 3Q15 was 0.2% less than a year earlier.

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

 

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