Both Good and Bad News on a Busy Day

November 30, 2011

The People’s Bank of China implemented the first reserve ratio reduction, effective December 5, since 2008, cutting the ratio for largest banks by 50 basis points to 21.0%.  Such came after the close of trading and following a 3.3% drop in Chinese share prices on the final day of November.  The Bank of Thailand also eased monetary policy.

The EFSF agreement in Europe potentially leverages up the rescue fund by only a quarter as much as the initially proposed one trillion euros.  The plan now is to see if an agreement can be fashioned to more heavily involve the IMF and ECB more heavily.

S&P downgraded fifteen major financial institutions, including Bank of America, Citigroup, Wells Fargo, UBS, JP Morgan, Goldman Sachs and RBS.

Stronger-than-assumed Australian data lifted commodity-sensitive currencies. 

German retail sales and labor statistics for November were better than expected, but euro area unemployment and inflation exceeded forecasts.

Japanese data released overnight were mixed.

U.S. private-sector employment growth in November was much better than expected, according to ADP data.

The dollar is unchanged against the euro, yuan, and sterling.  It fell by 0.5% against the Aussie dollar and by 0.4% versus the kiwi and loonie.  The dollar shows gains of 0.2% versus the yen and 0.1% against the Swiss franc.

Asian share prices were mixed, and European losses have reversed into positive ground since news of the Chinese reserve ratio reduction.  Equities fell by 3.3% in China, 1.5% in Hong Kong, 1.2% in Taiwan, and 0.5% in Singapore, Japan, and South Korea, but gains were recorded of 1.9% in Malaysia, 1.0% in Australia, 0.7% in Indonesia, India and Thailand, and 1.0% in New Zealand.  The German Dax is 1.3% stronger, and the British Ftse and Paris Cac have risen so far by 0.7% and 0.6%.

Oil climbed 0.5% and above the $100 per barrel barrier to $100.26, while gold edged 0.2% higher to $1722.50 per ounce.

The yields on ten-year German bunds and British gilts fell by six and five basis points.  That on Japanese JGBs firmed a basis point.

In data from Japan,

  • Construction orders in October were 24.3% greater than a year earlier versus a 1.9% increase posted in the third quarter.
  • Japanese housing starts recorded a smaller 5.8% on-year drop after falling 10.8% between September 2010 and September 2011.
  • Japanese industrial production rose 2.4% in October but were just 0.3% higher than the average 3Q level and 0.4% greater than in October 2010.  METI officials retained the assessment that “industrial production appears to be flat” even though a 1.2% 4Q-over-3Q increase is projected.
  • Motor vehicle production in October was 20.3% greater than a year earlier.
  • The purchasing managers index for manufacturing slid to a 7-month low of 49.1 in November from 50.6 in October.  Input prices were at a 13-month low, and both orders and production contracted.
  • Labor cash earnings posted there first on-year increase in five months, albeit of just 0.1%.

In Australia,

  • New home sales increased 5.5% last month to a one-year high.
  • Private business investment growth of 12.3% in 3Q11 was 50% faster than assumed and constituted the best quarterly gain since 4Q05.
  • Private credit grew less than forecast in October, edging up 0.2% on month and 3.5% on year.
  • M3 growth decelerated to 9.1% on year in October from 9.8% in September.  In New Zealand, by contrast, M3 climbed 5.5%, up from 5.0% in the year to September.

Building permits in New Zealand shot up 11.2% in October after a sharp drop the month before.

GDP growth in India slowed to the lowest on-year pace, 6.9%, in more than two years during July-September.  Mining and manufacturing activity were particularly soft.  The central bank continues to focus on elevated inflation and is unlikely to let the GDP result deter further monetary tightening.

In Thailand, which has been hammered by the worst flooding of the century, the central bank cut its key rate by 25 basis points to 3.25%, and two of seven policymakers wanted to double that decline to 50 basis points. Thailand’s current account surplus of $39 million in October was far smaller than expected, and business sentiment deteriorated to a reading of 36.7 last month from 48.5 in September.

A central bank rate cut in Brazil later today is also likely.

The volume of German retail sales rose 0.7% last month, not 0.1% as forecast, but such was still 0.4% lower than a year earlier.  Sales in January-October were 1.1% greater than a year before.

After a 6K increase in October, the declining trend in German unemployment resumed in November, and the drop of 20K was three times greater than forecast.  The jobless rate settled back to September’s low of 6.9% after October’s 7.0% reading.  On-year employment growth of 1.2% in October matched the 3Q result.

Italian producer price inflation remained steady at 4.5% last month.  Consumer price inflation edged down a tenth to 3.3% and 3.7% on an EU-harmonized basis.  Italy’s jobless rate ticked up to 8.5% in October from 8.3%.

French domestic PPI inflation accelerated to 5.5% in October from 5.2%.  Import price inflation was at 8.3%.  French consumer spending was unchanged in October and 0.9% weaker than a year earlier.

The euro area jobless rate of 10.3% in October was the highest since the common currency began operation at the start of 1999.  Such had been 10.2% in September, 10.1% in July and August, and 10.0% in May and June.  Youth unemployment is at 21.4%.  Spanish joblessness of 22.8% is four times greater than Germany’s harmonized level.  Austrian unemployment of 4.1% constitutes the low end of the region’s range of outcomes. 

Euroland’s gauges of leading and coincident economic indicators respectively rose 0.2% and 0.1% in October.  The Swiss index of leading economic indicators, according to KOF, worsened to a reading of 0.35 this month from 0.75 in October.

According to the euro area’s preliminary data, consumer price inflation stayed at a cyclical high of 3.0% in November instead of dipping as analysts had been assuming.

British consumer confidence bounced a point to minus 31 in November from a 20-month low of minus 32 in October.

Greek retail sales volume posted monthly and year-on-year declines in September of 4.3% and 6.5%.  Portuguese industrial output and retail sales were respectively 0.7% higher and 9.7% weaker in October than a year earlier.  Irish unemployment ticked up to 14.5% in November.  Spain’s current account deficit was four times wider in September than in August. Dutch PPI inflation of 8.3% in October was the lowest such has been since August 2010.

Danish GDP fell 0.8% last quarter, twice expectations, and by 0.2% from a year earlier.  Norwegian retail sales were only 1.0% higher than a year before in October.  Sweden’s current account surplus of SEK 76 billion last quarter was 16% bigger than the 2Q surplus. 

Polish GDP grew 1.0% last quarter and by 4.2% in on-year terms.  Hungarian producer price inflation accelerated as expected to 7.0% last month. 

Turkey posted an $8.0 billion trade deficit last month, 26% wider than in October 2010.  South Africa recorded a 9.6 billion rand trade deficit last month.  The year-to-date deficit is 14% wider than a year earlier.

The 206K ADP estimate of private employment growth in November was the most so far in 2011 and 65% more than predicted.  Mortgage applications in the United States plunged 11.7% last week.  Other U.S. releases scheduled today will cover unit labor costs and productivity, pending home sales, and the Beige Book.  Canada reports monthly and quarterly GDP as well as producer prices and raw material prices. 

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

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