Peripheral Bond Premiums Sharply Lower; It’s Jobs Data Day in the U.S.

December 3, 2010

The dollar is mostly lower, with losses of 0.5% against the Australian dollar, 0.3% versus the yen and sterling, and 0.2% against the Canadian dollar, kiwi, and euro.  Dollar-Swiss is an exception, rising 0.1%, and the yuan is steady against the greenback.

In the Pacific Rim, equities rose 0.7% in the Philippines, 0.5% in Pakistan and Taiwan, 0.4% in South Korea and Australia and 0.1% in Japan and Indonesia.  Stocks fell 0.6% in Hong Kong, 0.8% in Singapore and 0.2% in Malaysia.  In Europe, the Paris Cac shows a rise of 0.4%, while the German Dax and British Ftse have edged 0.1% lower.

The ECB was a heavy buyer of peripheral sovereign debt after confirming that 1- and 3-month refinancing operations with full allotment and fixed 1.0% rates are not now being discontinued.  Portugal’s 10-year premium to bunds fell below 300 basis points, and Spain’s premium is more than 100 basis points narrower than on Tuesday.  The Irish premium narrowed over 60 bps since Wednesday.  Ten-year German bund, British gilt and Japanese JGB yields firmed four, three, and one basis point today.

 Oil and gold prices rose 0.3% and 0.2% to $88.31 per barrel and $1391.40 per troy ounce.

Many service sector purchasing manager indices and some composite PMI readings were reported today.  Scores of 50 divide expanding activity from contractions.

  • Australia’s service PCI fell back to 46.2 in November after recovering from 45.6 in September to 50.7 in October.
  • Japan’s service PMI improved to 49.5 from 57.2 in October and surpassed the long-term average reading of 44.5.  Japan’s composite reading was 48.7 after 47.2 in October.
  • Britain’s services PMI edged down two-tenths to 53.0 but remained above the 10-month low of 51.3 seen in July and August.  Nonetheless, a weak business confidence element points to difficulty ahead.
  • Euroland’s composite PMI was revised to 55.5 from a preliminary 55.4 and 53.8 in October.  The data seems to imply 4Q GDP growth around 0.5%.
  • Euroland’s services PMI was 55.4 after 53.3 in October and 54.1 in September.  Input prices reached a 25-month high.
  • Germany posted composite and service readings of 59.0 and 59.2, retaining the lead position in the euro area with the strongest jobs growth since September 2007..
  • France’s services PMI fell to 55.0 from 55.7.  The composite French index firmed two-tenths to 59.0.
  • Spain had a service PMI reading of 48.3, up 1.8 points but below 50 for a fourth consecutive month.  GDP probably contracted this quarter.
  • Italy provided a pleasant surprise as its service-sector PMI jumped to a 7-month high of 54.4 from 51.0 in October.
  • The Irish PMI for services remained near the breakeven line with a reading of 50.8 after 50.9.
  • Russia’s services PMI slipped from 55.6 in October to 54.1 and was below its long-term trend of 56.8.
  • India posted a composite PMI above 60 (61.3 after 58.4 in October) for the first time since August.  Business confidence was particularly high, but so were signs of inflation.
  • According to the HSBC data, China’s composite PMI fell 1.6 points to 55.8, while the services PMI dropped by 3.3 points to a 9-month low of 53.1 in November.
  • Hong Kong’s composite purchasing managers index rose to 53.5 from 53.0 in October, 52.8 in September and 52.3 in August.
  • Brazil’s composite and service PMIs rose 0.7 and 0.3 points to 51.5 and 52.1.  The composite index reached a five-month high.

Following a 6.6K drop in September and a 3.0K rise in October, Canadian jobs advanced 15.2K last month.  The three-month change of +3.9K per month is quite weak.  Canada’s jobless rate fell from 7.9% in October to a 22-month low of 7.6% in November due to a sharp decline in youth participation in the labor force.  Such hasn’t been so low since August 1999.

Brazil’s central bank tightened reserve requirements to 20% from 15% for time deposits and to 12% from 8% for cash deposits.  Brazilian GDP likely expanded between 7% and 8% in 2010.

Bank Indonesia remained one of the few Asian central banks not to begin raising interest rates.  The benchmark central bank rate was kept at a record low 6.5% for a sixteenth straight time.

Paced by food sales, retail sales volume in the euro area outperformed expectations in October with a rise of 0.5%, the most since May.  The 12-month rate of increase climbed to 1.8% from 1.5% in September.  October sales were 0.4% greater than the 3Q average level.

Consumer confidence in Spain advanced last month to 70.0 from 67.1 in October.  Spanish October industrial output was 1.9% lower than a year earlier.

Swiss consumer prices rose 0.2% both on month and on year in November.  Analysts were expecting a rise of just 0.1%.

Manufacturing labor costs in Norway rose 0.8% last quarter.  British construction orders sank 4.0% in 3Q and by 14% on year.

Malaysia’s trade surplus of MYR 6.9 billion in October was similar to September’s surplus.  Turkish consumer prices were steady on month in November, cutting the 12-month rate of increase from 8.2% to 7.3%.  PPI inflation in Turkeyeased to 8.2% from 9.9% in October.

Aside from the Labor Department jobs report at 13:30 GMT, the United States will be releasing its service-sector PMI figures at 15:00 GMT.  Factory orders are also due at 15:00 GMT today.

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

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