Dollar and Bond Yields Up, Stocks Down

October 27, 2010

The dollar advanced 1.3% against the Australian dollar, 0.4% versus the Canadian and New Zealand dollars, 0.3% relative to the Chinese yuan, and 0.2% against the euro and Swiss franc.  The dollar is unchanged against sterling and the yen.

Ten-year sovereign bond yields have climbed five basis points in Japan and Germany and four basis points in Britain.  Treasury yield indications are up as well.

Equities fell by 1.8% in China, 1.9% in Hong Kong, 1.2% in Singapore and Thailand, 1.1% in India, 0.9% in Australia, 0.8% in Indonesia, 0.6% in Taiwan and 0.5% in South Korea.  The British Ftse is 0.5% lower, but the Paris Cac and German Dax are trading 0.2% and 0.1% higher.

Oil and gold prices lost 0.8% and 0.3% to $81.88 per barrel and $1334.90 per ounce.

Australian consumer prices rose less than expected last quarter, dampening speculation of a central bank rate hike next week.  The total CPI advanced 0.7% from the second quarter but fell to 2.8% on year from 3.1% in the year to 2Q.  Core inflation eased for an eighth consecutive quarter to 2.4% from 2.7% in 2Q, 3.05% in 1Q, 3.5% in 3Q09 and 4.7% in 3Q08.

Japan’s Shoko Chukin index of small business sentiment weakened to 46.4 in October from 47.3 in September and 48.4 in August.  Manufacturing printed down six-tenths at 48.0, and the non-manufacturing component was 45.1, down 1.2 points.  More deterioration is anticipated in next month’s readings.

Based on CPI reports from Hesse, Brandenburg, Saxony and North Rhine Westphalia, German consumer price inflation in October was probably less than the street expectation of 1.3%.

Real consumer spending on French manufactured goods rebounded with a 1.5% jump in September after a 1.6% drop in August and advanced 1.2% in the third quarter following a 0.8% decline in 2Q.  September’s advance was spearheaded by an 11.2% surge in autos.

Euro area M3 grew 1.0% in the year to September and 0.8% in the year to 3Q.  Private loans and private credit posted on-year increases of 1.2% and 0.9% in September.  Lending to non-financial firms dropped 0.6% on year, while mortgage lending was up 3.4%.

The ECB allotted EUR 42.5 billion in its three-month refinancing operation, which was a bigger amount than anticipated.

There was more provocative currency war remarks from Chinese officials, this time by the trade minister who complained about inflationary printing of money by the Fed.  The yuan has fallen back 0.5% against the dollar since the weekend after firming prior to the G20 meeting in South Korea last Friday-Saturday.

Bank of Japan Deputy Governor Nishimura warned that financial regulatory reforms could impede world recovery.  The finance minister has threatened to reuse intervention.

New Zealand’s business outlook index improved for the first time in five months, rising to 30.5% from 26.7% in September.  The business sentiment component printed at 23.5%, up from 13.5%.

Italian business sentiment advanced unexpectedly and by 1.2 points to a 30-month high of 99.8 in October.

South Korean real GDP growth halved to 0.7% in the third quarter.  On-year growth was 4.5%, down from 7.2% in 2Q.  Export growth slowed markedly in spite of official efforts to contain the won’s appreciation.

South African on-year consumer price inflation decelerated for a ninth straight month, reaching 3.2% in September after 3.5% in August.

Charles Bean, head economist at the Bank of England and a member of the Monetary Policy Committee, asserted that there seems to be less spare capacity than one might expect in Britain.  Another British policymaker, Adam Posen, said the U.K.’s recovery is not inflationary.

Household lending in Sweden was 8.9% higher in September than a year earlier.

The Greek finance minister forewarned that his country’s deficit-to-GDP ratio in 2009 was probably over 15%, not 13.7% as thought before.  Greek PPI inflation picked up to 5.8% last month from 4.6% in August.  In Finland, business sentiment improved this month, but consumer sentiment worsened.  Retail sales volume in Spain fell 2.9% in the year to September, which was worse than August’s drop.  Iceland posted a 3.3% rise of consumer prices in the year to September.

Taiwan’s index of leading economic indicators fell by 0.4% in September.

Central bank rate decisions are awaited later in Norway, Poland, and New Zealand.  No changes seem probable.

The U.S. will be releasing durable goods orders, new home sales, and oil inventory data.  Dudley of the New York Fed and Carney of the Bank of Canada speak later today.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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