11-11-11: One’s Are Wild

November 11, 2011

It’s Veterans Day in the United States, France and Canada.  The Armistice to end the First World War was signed 93 years ago today.  Overnight market activity was comparatively subdued, but closures for today’s holiday will be only partial.  U.S. stock markets are open.

The new Greek cabinet to be headed by Lucas Papademos has not been introduced, but rumors claim that Finance Minister Evangelos Venizelos will retain that post.

The EU Competition Commissioner Mario Monti, a non-partisan career technocrat, is the leading candidate to lead a unity Italian government, but members of the center-right government hold out hope that they might be able to hold onto exclusive power.  Berlusconi steps down only after parliament approves austerity including an increase of Italy’s retirement age.  Ten-year Italian bonds yields of 6.72% remain very high.  While Italy’s deficit is hardly the biggest one on the block, it’s become the key focus of the debt crisis because of a roughly 120% debt-to-GDP ratio.  Only Greece’s 168% is higher.  The EU reportedly rebuffed China’s conditions for lending to the ESEF.

The dollar was unchanged overnight against sterling, the Aussie and New Zealand dollars, and the yuan. The dollar firmed 0.3% against the loonie but lost 0.3% against the euro and yen.  The Swissie is 0.1% softer against the dollar and remains weaker than than 1.2300 per euro.  There’s been some chatter that the most recent intervention by Japan’s Ministry of Finance, reported October 31, may have extended over several days.

Stocks in the Pacific Rim rose 2.8% in South Korea, 1.2% in Australia, 0.9% in Hong Kong, 0.8% in Taiwan, and 0.2% in Japan but fell by 1.0% in India and 0.2% in China.  The German Dax, Paris Cac and British Ftse are 0.5%, 0.4%, and 0.3% stronger.

Gold and oil prices edged up 0.3% and 0.1% to $1764.70 per ounce and $97.85 per barrel.

Three central banks announced policy decisions.

  • Peru’s reference central bank rate was left unchanged as expected at 4.25%.
  • The Bank of Korea made no change to the 3.25% seven-day repo rate.  This result also was correctly anticipated.
  • Bank Negara Malaysia kept a 3.0% overnight policy rate, citing a moderating global economy and heightened market volatility.

Domestic corporate goods prices in Japan fell 0.7% in October, cutting their 12-month rate of increase to 1.7% from 2.5% in the year to September.  Import prices also dropped by 0.7% but were 11.5% higher than a year earlier.

Japan’s tertiary index, which measures service sector activity, fell 0.7% on month and 0.4% on year in September.  The index still managed to be 1.1% higher in 3Q than in the second quarter.

Chinese bank lending expanded 587 billion yuan in October, some 17% more than expected and the most since April.  Loans had recently been surprising analysts on the weak side.  Chinese M2 was 12.9% higher than a year earlier, similar to street expectations and September’s 13.0% gain.

Hong Kong real GDP only firmed 0.1% last quarter, slicing its on-year advance to 4.3% from 5.0% between 2Q10 and 2Q11.

British producer price inflation slowed more than expected, supporting the view of Bank of England officials that inflation may decelerate rather substantially in the coming year.  The producer output price index was unchanged on month and slowed from a three-year high of 6.3% to a 5-month low 5.7% on-year pace.  Core PPI-O slowed too, reaching 3.4% from 3.8%.  Producer input prices fell by 0.8%, reducing their on-year advance to 14.1%, lowest so far this year, from 17.7% in September.  Core PPI-I inflation slowed to 10.5% from 13.1%.

Spanish GDP was unchanged last quarter and only 0.8% greater than a year earlier. Greek import prices rose 1.0% in September and accelerated to a 12-month advance of 8.3%.  Portuguese consumer prices increased 1.1% in October and by 4.2% from a year earlier.  Hungary’s CPI recorded increases of 0.7% on month and 3.9% on year in October.

New Zealand food prices posted a third straight monthly drop, falling 1.3% in October.  Such were just 1.1% higher than in October 2010. 

Industrial production in India was only 1.9% greater than a year earlier in September, only half as much as projected and down from a 5% on-year pace earlier in 2011. Turkish industrial output rose 1.5% in September and by 12% from a year before.

This will be a quiet day from a data standpoint in North America — just the preliminary U. Michigan index of U.S. consumer sentiment and Mexican consumer confidence.  But lots of people are speaking (Yellen and Williams from the Fed, Gonzalez-Paramo of the ECB, Stark formerly of the ECB, Almunia of the EU and French President Sarkozy).  Attention will continue to be riveted on Europe, especially today’s Italian Senate vote on austerity.

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

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