The Morning After in America… Central Bank Focus in Europe

October 4, 2012

Mitt Romney won the presidential debate last night by a wide margin.  He was quicker on his feet and able to define the choice for voters on Republican terms.  Now we await opinion polls to see how far the debate shifted voter preferences.  A second vote of confidence or no confidence will be cast by the markets.  A rise in equities and the dollar will convey investor approval for the direction the Republicans wish to take economic policy. 

Neither the Bank of England nor the ECB are expected to announce new policy initiatives.  BOE decision is due at 11:00 GMT, and the ECB press conference starts at 12:30 GMT.  The Bank of Japan Policy Board met Thursday for the first day of an interest rate meeting that also is unlikely to modify the current stance.  All three banks are in a mode of quantitative easing.

The dollar is lower by 0.3% against the euro and Swiss franc, 0.2% versus the loonie and sterling, and 0.1% relative to the Australian and New Zealand dollars.  The yen is down 0.1%, and the yuan is steady, with Chinese markets closed all week for the National Holiday.

Share prices are narrowly softer in Europe, having so far declined 0.4% in Italy, 0.3% in Spain and 0.2% in France, Germany, and Britain.  Japan’s Nikkei climbed 0.9%.  Share prices also rose 1.3% in the Philippines, 1.0% in India, 0.7% in Malaysia, 0.5% in Indonesia, and 0.3% in Australia and Singapore.

Spanish sovereign debt auctions of 2-, 3-, and 5-year paper produced mixed results.  ECB Pdt Draghi is expected to stick to his insistence that Spain will not be eligible for the OMT program unless the government submits to mandated reforms and macroeconomic targets.

Ten-year German bund, British gilt and Japanese JGB yields are unchanged.

Gold and oil prices are up 0.6% and 0.7% at $1790.80 per ounce and $88.79 per barrel.

Australian retail sales rose 0.2% in August, the third increase in four months, and were 3.7% higher than a year earlier.  Aussie building permits increased 6.4% in August, breaking a streak of three straight declines.  Permits were 15.4% lower than a year earlier.

Germany’s construction purchasing managers index improved for the second month in a row but remained below the 50 no change level with a reading in September of 48.6.  Future expectations in construction hit their lowest point of 2012.

India’s service-sector PMI rose to 55.8, highest since February, from 55.0 in August and 54.2 in July.  The composite purchasing managers index printed at 55.0 in September after 54.3 in August and also indicated the strongest positive growth since February.

Britain’s Halifax house price index fell 0.4% in September.  Such was 1.2% lower in 3Q12 than in the third quarter to 2011.  U.K. car registrations were 8.2% greater last month than in September 2011.

Dutch consumer prices rose 0.4% on month and 2.3% on year in September, a shade less than forecast.

Swiss industrial production rose 3.3% in the second quarter and by 4.6% from 2Q11.

Hong Kong retail sales volume was 3.2% higher in August than a year before.

The Federal Reserve publishes minutes of the last FOMC meeting at 16:00 GMT today.  U.S. scheduled data arriving today are weekly jobless insurance claims and monthly factory orders.  Yesterday’s ADP estimate that private jobs rose 162K in September has led market players to suspect that tomorrow’s Labor Department jobs data will be better than economists are predicting.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.


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