Ezone Crisis Resolution Remains in Doubt

October 25, 2011

Overnight currency movement has been constrained outside of a 0.6% drop in the kiwi.  The U.S. dollar dipped 0.3% against the loonie, 0.2% relative to the Swissie and sterling, and 0.1% versus the euro, and it is unchanged against the yuan and Australian dollar.

In the Pacific Rim, equities were mixed.  Advances were recorded of 1.9% in China, 2.9% in Thailand, 2.3% in India, 1.0% in The Philippines, 1.1% in Hong Kong, and 0.5% in New Zealand.  Declines occurred in Japan (0.9%), Australia (0.6%), South Korea (0.5%) and Sri Lanka (1.2%).  In Europe, the Paris Cac is 0.4% lower, while the German Dax and British Ftse have edged up 0.5% and 0.2% so far.

The British 10-year gilt yield is three basis points firmer, while the Japanese JGB and German bund are steady.

Oil and gold prices climbed 1.0% and 0.5% to $92.15 per barrel and $16660.30 per ounce.

The Reserve Bank of India raised its repo and reverse repo rates by 25 basis points to 8.5% and 7.5% as analysts anticipated.

Rumors have surfaced of a possible near-term cut in Chinese reserve requirements.

The Shoko Chukin index of Japanese small business sentiment continued the recent see-saw pattern, printing at 46.4 in October after 47.2 in September, 46.4 in August, 47.1 in July and 43.1 in June.  Note that all readings have been below the 50 line of separation between optimism and pessimism.

Consumer prices in New Zealand rose only 0.4% last quarter, which was only slightly more than half what analysts were expecting, and on-year CPI inflation fell to 4.6% from 5.3% in the second quarter.  Much of the 12-month rate of increase reflects a 2.5 percentage point VAT hike late in 2010.

Australia’s index of leading economic indicators dipped 0.1% after being unchanged in July.  A senior Reserve Bank of Australia officials said that lower interest rates are an option if needed.

Industrial production in Singapore fell 0.7% in September, much less than assumed following an out-sized 3.9% monthly increase in August.  Output was 12.8% greater than in September 2010. 

There were some better-than-forecast signs of household well-being in EuropeGerman consumer confidence held steady at 5.2 instead of dipping below 5.0 as had been projected. French consumer sentiment improved two points to 82 in September.  Analysts were expecting a slight deterioration there, too.  The Swiss UBS consumption indicator rebounded to 0.84 in September from 0.49 in August. Polish retail sales were 11.4% higher than a year before in September.

On the other hand, Italian retail sales were unchanged in August and off 0.3% on year, and Italian consumer confidence sank to 92.9 in October from 98.5 in September. 

Swedish producer prices fell 0.7% in September and were 0.2% lower than a year earlier.  Spain’s PPI firmed 0.2% last month, posting a slightly smaller-than-expected 12-month increase of 7.1%.

British mortgage loans in September totaled a smaller than expected 33.1K according to the British Bankers Association.

Here are some data highlights from Monday, October 24:

  • Euroland’s flash purchasing managers composite index weakened 1.9 points to 47.2, lowest since July 2009.  Such suggests zero to negative GDP growth is likely this quarter.  Weakness was widely shared across members and between manufacturing (down 1.2 points to 47.3) and services (off 1.6 points to 47.2).  German manufacturing (48.9 after 50.3) printed below 50.0 for the first time since mid-2009.  The French services PMI plunged 5.5 points to 46.0.  The only bright spot was evidence of receding price pressure.
  • China’s PMI  in manufacturing 1.6 points to a five-month high of 51.1.
  • Japan’s customs trade improved to a seasonally adjusted deficit in September of JPY 22 billion from JPY 265 billion in August, as exports rose 2.0% and imports fell by 2.2%.  The unadjusted surplus was JPY 300 billion, down from JPY 774 billion a year earlier.
  • Euro area industrial orders rebounded 1.9% in August following drops of 0.7% in June and 1.6% in July.  The July-August average was unchanged from the 2Q level.  Orders were 6.2% higher in August than a year earlier.
  • Australian producer price inflation of 2.7% in 3Q was less than forecast and down from 3.4% in the second quarter.
  • Germany’s index of leading economic indicators fell sharply in August.
  • Czech business sentiment rose 2.8 points to 92.4 in October, while consumer confidence improved 2.8 points as well to 80.5.
  • Consumer prices in Singapore slid 0.2% in September and to an on-year pace of 5.5% from 5.7%.

A political consensus in Europe on how to lever up the European Financial Stability Facility (EFSF) remains elusive a day before the EU summit.  There is concern about contagion to Spain and Italy if a credible plan is not announced.

Scheduled U.S. data today include the Case-Shiller and FHFA home price indices, the Conference Board consumer confidence measure, and weekly chain store sales.  The Bank of Canada will announce its latest interest rate decision at 13:00 GMT; analysts project an unchanged 1.0% target. 

Copyright 2011, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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