European Equities Absorb New Hit

December 14, 2011

Share prices are so far down another 1.5% in France and 0.9% in Great Britain and Germany.  Earlier, stocks fell 1.0% in China, 0.8% in India, 0.7% in Thailand and Sri Lanka, 0.5% in Hong Kong and Singapore, and 0.4% in Japan.

The dollar had risen 0.5% against the kiwi, 0.2% versus the yen, loonie, euro, and Australian dollar, and 0.1% relative to the yuan and sterling.

While British gilt and Japanese JGB yields are steady, 10-year German bunds have slipped two basis points.  Italy’s auction of 5-year notes went as well as hoped, fetching a bid-cover ratio of 1.42 and an average rate of 6.47%.

Gold prices fell another 1.8% to $1634 per ounce for a cumulative decline of 4.6% ($79) so far this recession-fearing week.  Oil dropped 0.6% and below $100 to rest at $99.53 per barrel.

A high official in Germany’s Free Democratic Party and General Secretary of the CDU/CSU/FDP ruling coalition resigned over the government’s stance regarding the European Stability Mechanism (ESM).  Germany’s Chancellor presents a key report on last week’s EU summit before parliament.  The finance minister will be speaking, too.

Data released today accentuate the negative, reinforcing the market’s risk aversion and sense of impending doom.

Germany’s prestigious IFO economic institute slashed its forecast for GDP growth in 2012 to 0.4% from a prior estimate of 2.3%.

Industrial production in the euro area dipped 0.1% in October on top of September’s dive of 2.0%.  Output was 0.9% lower than the average 3Q11 level and just 1.3% higher than in October 2010.  Production of capital goods, which had increased 10.7% in the year to May 2011, recorded a 12-month rise of just 5.3% in the latest month.  Greek industrial production plunged 12.4% from a year earlier, while output in Germany rose by 4.2%.

Britain reported mixed labor statistics.  The count of jobless claims in November went up only 3.0K, much less than expectations of almost 14K, and constituted just 5.0% of the labor forces.  But the ILO unemployment rate in August-October was at a 17-year high of 8.3% and up from 7.9% in May-July.  Moreover, wage growth remains anemic.  Excluding bonus pay, wage earnings were just 1.8% greater in August-October than a year before, and the 2.0% gain when bonus pay is included represented a six-month low.

Consumer confidence in Australia fell for the third time in four months and has fallen 14.8% over that span.  Vacancies for skilled workers posted a fifth straight decline, falling 1.0% in November.

The Swiss ZEW expectations index printed at a weaker negative 72.0 in December following readings of minus 64.3 in November and minus 54.4 in October.

China’s Conference Board-compiled index of leading economic indicators slid 0.1% in October, while the coincident index edged up just 0.1%.  Between July and September, such had climbed by 1.0% and 0.9%.  Chinese M2 money posted less-than-forecast on-year growth in November of 12.7% after 12.9% in October, 13.0% in September, 15.9% in June, and 17.2% last January.  A 562 billion yuan rise in bank lending was marginally better than predicted but down from 587 billion yuan in October and a monthly mean increase of 622 billion yuan over the first nine months of 2011.

The Swiss PPI/import price index highlighted that economy’s flirtation with deflation, dropping four times more than predicted on month (0.8%) and by 2.4% between November 2010 and November 2011.

Indian WPI inflation of 9.1% was around where analysts were expecting and too high.  The central bank’s top priority continues to be the containment of inflation in contrast to many other central banks where the priority is shifting to supporting activity.

Chile’s central bank left its key overnight rate unchanged as expected at 5.25%.

The Hong Kong Monetary Authority, as is its custom, took the Fed’s cue and left its base rate steady at 0.5%.

Norway is likely to learn of a 12.5 to 25-basis point central bank rate cut later this morning.

South African CPI inflation edged up 0.1 percentage points to 6.1% in November.  South Korean joblessness remained steady at 3.1% in November.

Spanish CPI inflation dipped to 2.9% from 3.0% in October.  Finnish CPI inflation also dipped that much to 3.4% from 3.5%.

The reported October rebound in Japanese industrial production was revised down to 2.2% from 2.4% and followed a 5.3% plunge in September.  Therefore, output was only 0.1% higher than the 3Q average level and also 0.1% greater than a year earlier.  Capacity usage increased 4.1%, but capacity was merely 0.4% better than in October 2010.

Scheduled North American data today include the Canadian monthly survey of manufacturing trends, Canadian auto sales, and that country’s index of leading economic indicators.  In the U.S., import prices and weekly energy inventories and mortgage applications are due.  Energy ministers of OPEC are meeting in Vienna.  West Texas Intermediate oil prices have averaged $94.97 a barrel so far this year and are presently 4.8% above that mean.

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

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