New Overnight Developments Abroad: Awaiting Central Bank Roll Call and ADP Report

November 4, 2009

Expectations of a dovish FOMC statement have buoyed stocks and commodities but depressed the dollar and yen.  Bank of England and ECB decisions are tomorrow.  There’s interest too in today’s ADP report on private U.S. employment in October.  Analysts expect much better jobs data than in September.

The dollar has fallen 1.2% against the Australian dollar, 0.5% versus sterling, the Canadian dollar and the kiwi, 0.2% relative to the eour and 0.1% against the Swiss franc.  The yen lost 0.6% against the dollar and more versus other major currencies in a further sign of lessening risk aversion.

Stocks gained 3.3% in India, 2.7% in Thailand, 2.4% in Pakistan, 1.8% in Hong Kong, 1.9% in South Korea, 1.6% in Indonesia, 2.0% in Taiwan, 0.4% in Japan and 0.2% in Australia and New Zealand.  In Europe, the Dax and Cac40 have climbed 1.5% and 1.6%, while the Ftse is 0.8% higher.

Sovereign bond yields are up 5 basis points in Germany, 4 bps in Britain, and 3 bps in Japan.

Oil gained 0.6% and is above $80 at $80.06 per barrel.  Gold is probing record territory with a further 0.6% increase to $1091.40 per ounce.

Service sector October purchasing managers reports from Europe look pretty encouraging.

  • Euroland’s index was revised up to 52.6, best since end2007, from a preliminary (flash) reading of 52.3 and scores of 50.9 in September and 45.7 in July.
  • Euroland’s composite index (services and manufacturing) was 53.0 after 51.1 in September and 47.0.  Price components indicate disinflationary pressure.
  • France posted a 36-month high service index of 57.7 versus 53.2 in September and 45.5 in June.  The composite score was 58.6 after 54.8 in September.  France is leading Euroland’s recovery.
  • Germany‘s PMI-services index of 50.7 shows an erratic recovery and was down from 52.1 in September and 53.8 in August.  The German composite index was 52.3 in October versus 52.4 in September, as weaker growth in services neutralized faster growth in manufacturing.
  • Italy‘s PMI-services (52.2 versus 48.5 in September and 44.5 in July) climbed above 50 after 22 straight months of contraction.
  • Services in Spain (47.7 after 46.4) and Ireland (47.4 after 45.5) signaled continuing recessions albeit signs of lessening losses.
  • The British PMI-services jumped to 56.9 from 55.3 in September and 54.1 in August. Orders were at a 2 plus year high.

Euroland producer prices fell 0.4% in September because of a 1.9% slide in energy prices and no change in all other producer prices.  The 0.4% overall drop was as forecast, and so was an on-year decline of 7.7%.  Producer prices declined 0.9% at an annualized rate in the third quarter after dropping at a 5.5% pace in 2Q.

Australia reported disappointing retail sales, which dipped 0.2% in September instead of rising about 0.5% as forecast.  Sales in 3Q09 fell 0.4%.  Analysts wonder if the weakness in retail sales will persuade the Reserve Bank of Australia not to lift rates a third time in December.  But other Aussie data were good.  The services performance index (PSI) improved to 54.8 in October from 49.3 in September with an orders component of 58.5 after 50.7.  Residential building approvals increased 2.7% in September and were 11.7% higher than a year earlier.

Bank Indonesia left its benchmark interest rate at 6.5% as was expected.

Japan’s services PMI worsened again in October, printing at a low 45.0 after 46.0 in September and 48.1 in August.

Japan’s monetary base rose 4.4% in the year to October, less than its on-year gains of 5.6% in 3Q, 7.5% in 2Q or 5.7% in 1Q09.

Singapore’s PMI slid to 50.2 in October from 50.6 the month before.

China’s PMI-services fell to a four-month low of 56.5 in October from 58.1 in September.  China’s composite PMI was 56.9 after 57.8 in September.

India’s service-sector PMI improved 2.4 points to 56.8, suggesting possible double-digit economic growth ahead.

British shop prices according to the Retail Consortium were unchanged both on month and on year in October.

Today marks the thirtieth anniversary of the taking of U.S. hostages at the embassy in Tehran, which marked the start of the escalation of hostilities between the United States and middle eastern Islamic militants.  In U.S. elections yesterday, Republicans swept the governor races in New Jersey and Virginia, clearly a setback for President Obama.  Mike Bloomberg, also a Republican, won a third term as New York City Mayor.

The FOMC statement is due at 14:15 EST (19:15 GMT).  The U.S. ISM-services index arrives at 15:00 GMT.  U.S. auto sales fell 32% in the year to October.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.


Comments are closed.