A Big Rumor

November 10, 2011

Yesterday’s market extremes initially continued Thursday but have moved back somewhat amid unconfirmed rumors of a special ECB Governing Council meeting to authorize much heavier, possibly unlimited, bond purchases via the SMP facility.  Even if true, it seems doubtful that such would be a lasting panacea for what has evolved into an insolvable quagmire.

The dollar has relinquished 0.6% against the euro and Swissie, 0.5% versus the loonie, 0.4% relative to the Aussie dollar, and 0.2% against the yen and sterling.  The greenback is up 0.1% on balance against the kiwi and yuan.

Stocks were blown away in the Pacific Rim, plunging by 5.3% in Hong Kong, 3.4% in Taiwan, 2.9% in Japan, 2.5% in Singapore, 2.4% in Australia, 1.9% in Indonesia and 1.2% in India.  In Europe, the Dax is 0.6% stronger but the Paris Cac and British Ftse have lost a further 0.2% and 0.3%.  In the United States, the DJIA and S&P show modest gains of 0.6% and 0.5%, while the Nasdaq is steady.

A one-year Italian bill auction fetched a yield of 6.087%, up from 3.57% previously and the highest result since September 1997.  The 10-year Italian-German bond yield spread remains above 500 basis points but some 30 basis points below the peak of 553 bps hit earlier.

Ten-year yields on Treasuries, German bunds and British gilts are nine, seven, and five basis points higher than the Wednesday close.  JGBs dipped a basis point.

Oil prices are 1.6% higher at $97.23 per barrel, while gold has fallen 1.1% to $1772.80 per troy ounce.

Former ECB Vice President Lucas Papademos, the market’s preferred choice, accepted his selection as leader of a Greek Unity government. 

The Bank of England left its key interest rate at 0.5% and retained a GBP 275 billion ceiling on the Asset Purchase Program.

Bank Indonesia unexpectedly cut its reference interest rate by 50 basis points to 6.0%.  The reduction follows an initial 25-bp cut in October, and today’s move establishes a new cyclical low.

The South African Reserve Bank left its benchmark interest rate steady as expected at 5.5%.

Australian labor statistics were decent in October.  Unemployment fell to 5.2% from 5.3%, and full-time jobs increased 20.0K.  total jobs increased by 10.1K but were only 0.8% greater than in October 2010.  New Zealand reported a 3.3-point drop in consumer confidence to 109.0 in November and a 3.0-point decline of its business purchasing managers index to 46.5 in October.

China’s trade surplus of $17.0 billion last month was 34% smaller than the street consensus and resulted from the smallest on-year rise of exports (15.9%) since February and an greater-than-projected 28.7% increase in imports.

Japan had some disappointing data.  Core private domestic machinery orders fell 8.2% in September, trimming the 3Q increase to 1.5%.  A 3.8% drop is forecast for the final quarter of calendar 2011.  Export orders plunged 21.7% in the latest month and were 13.9% lower than a year earlier.  Japanese consumer confidence printed at 38.6 last month, less than expected, unchanged from September, and sufficiently weak to compel Japanese officials to downgrade their assessment of household confidence.

French industrial production fell 1.7% in September but were 3.4% greater than a year earlier.  Italian industrial production dropped 4.8% that month and were 1.9% below a year earlier.  Irish and Finnish industrial posted monthly declines in September of 2.9% and 0.4%.  Greek unemployment climbed 2.1 percentage points to 18.4% in in August.

German consumer prices were unchanged on month in October, trimming the 12-month increase to 2.5% from 2.6% in September.  Non-energy CPI inflation was only 1.4%.  German wholesale prices dived 1.0% in October and fell to an on-year pace of 5.0% from 5.7% in September and 10.9% in March.  French consumer prices firmed 0.2% on month and 2.3% on year in October.

Consumer prices between September and October rose by 0.7% in Sweden, 0.3% in Iceland and 0.2% in Denmark.  They were unchanged in The Netherlands and 0.1% lower in Norway.  Romania’s CPI inflation rate ticked up a tenth to 3.6%.  Britain’s leading and coincident economic indicator indices respectively fell 0.3% and firmed 0.1% in September.

The United States reported import prices, the trade balance, and weekly jobless insurance claims.

  • Import prices fell 0.6% on month in October and recorded a 12-month increase of 11.0% after climbing 3.9% in the year to October 2010.  Non-fuel import prices were 4.9% higher than a year earlier.
  • A smaller-than-expected $43.1 billion goods and services trade deficit was posted in September.  The imbalance was also less than the average shortfall of $46.9 billion per month in January – August, but the year-to-date deficit has been 9.8% greater than what accrued over the first nine months of 2010.
  • First-time jobless claims of 390K were below 400K, a key dividing line, and the four-week average was exactly 400K versus 408K in the prior four weeks to October 8.

The Canadian trade deficit improved dramatically to a surplus of CAD 1.246 billion in September from a deficit of CAD 487 million in August.  Energy accounted for 43% of the month-to-month improvement.  Canada imports oil but exports natural gas and had a CAD 5.27 billion energy trade surplus on balance in September.  Trade was in surplus last quarter to the tune of CAD 465 million after swinging to a CAD 3.68 billion deficit in 2Q from a CAD 1.36 billion surplus in 1Q.

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

Tags: , , , ,


Comments are closed.