Fragile yet Better Tone in Market

November 22, 2011

Stocks in Europe have firmed 0.8% in Germany, 0.6% in France, and 0.4% in Great Britain.

The dollar, which does best under conditions of high risk aversion, settled back 0.5% against the Swiss franc, 0.4% versus the euro and Aussie dollar, 0.3% relative to the kiwi, 0.2% against the loonie and sterling, and 0.1% versus the yen and yuan.

The yields on ten-year German bunds and Japanese JGBs rose by two and one basis points.  That on British gilts slipped a basis point.  French debt yields remain uncomfortably high and show a 155-basis point premium relative to German 10-year bunds.

Gold and oil prices recovered 1.0% and 1.1% to $1695.00 per ounce and $97.98 per barrel.

Stocks in the Pacific Rim had closed mixed.  Equities rose 1.5% in Indonesia, 1.3% in Thailand, 0.8% in India, 0.7% in Singapore and 0.3% in South Korea and Malaysia.  Share price declines were recorded in Japan of 0.4%, Taiwan of 0.6%, Australia of 0.7%, Sri Lanka and Pakistan of 1.0% each, and New Zealand of 0.1%.  China’s market was unchanged.

The Indian rupee fell to 52.73 per dollar, its lowest value since 1973.

Investors breathed a guarded sigh of relief because so far no credit rating agency has downgraded the U.S. rating.  Obama is threatening to veto any bill that shuns the automatic budget cuts.  The World Bank predicts a soft landing in ChinaSouth Korean lawmakers agreed to a free trade agreement with the United States.  Although Spain’s 3-month and 6-month T-bill auctions fetched much higher yields of 5.11% and 5.23% after 2.29% and 3.30% previously, Fitch did not downgrade that country’s AA- rating further.  The ECB is said to have supported Italian and Spanish debt yesterday.

Markets await revised U.S. third-quarter GDP data, the Richmond Fed index, the FOMC minutes, Canadian retail sales, euro area consumer confidence, and a slew of remarks that could move markets.  Officials set to speak today include the political leaders of Germany, France and Italy, Barroso of the EU, Nowatny, Coene and Likanen of the ECB, Kocherlakota of the Minneapolis Fed, and the German finance minister.

British public finances in October were close to expectations.  Public sector borrowing amounted to GBP 3.4 billion and GBP 6.498 billion excluding financial interventions.  The current budget showed a deficit of GBP 4.472 billion in the month and a public sector net cash requirement equaled GBP 643 million.  Debt dipped to 62.3% of GDP from 62.6% in September but exceeded the year-earlier ratio of 56.5%.

Danish consumer confidence weakened from minus 6.6 in October to a reading of negative 9.2 this month. 

Germany’s index of leading economic indicators fell 1.4% in September on top of a 2.3% drop in August.

The Greek current account deficit widened to EUR 1.1 billion in September from EUR 145 million in August.  The Swiss trade surplus widened 12.6% on month to CHF 2.15 billion in October. Finnish unemployment of 7.0% last month was a tad lower than expected.  Total Norwegian GDP grew 1.4% last quarter, almost twice expectations, while mainland GDP went up 0.8% (and 3.8% on year), which was a bit slower than in the second quarter.

New Zealanders expect inflation over the next two years to average 2.8%, compared to a 2.9% prediction made in the prior third-quarter survey.

Japanese supermarket sales were 0.9% lower in October than a year earlier.  That drops was smaller than the 3.6% fall in September.

Malaysian unemployment ticked up to 3.3% in September from 3.1%.  CPI inflation in Hong Kong remained at 5.8% in October.  The Thai trade deficit of $1.0 billion last month was about twice as much as expected.  Taiwanese unemployment in October matched expectations of 4.3%. 

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

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