A Better Market Tone than Last Week

October 15, 2012

In Europe, share prices have advanced by 1.4% in France, 1.1% in Italy, 0.8% in Germany, 0.6% in Spain, and 0.5% in Britain.  Japan’s Nikkei closed up 0.5%, and equities also rose 0.5% in New Zealand.  Declines of 0.4% were posted in China and South Korea, however.

The dollar has recovered 0.4% against the yen and is unchanged against the Swissie, Aussie dollar and yuan.  The greenback is down 0.2% versus the lonie and 0.1% against the euro but up 0.1% relative to sterling and the kiwi.

Greece’s 10-year sovereign debt yield slipped to a 2012 low of 17.68%.  Prime Minister Samaras is hopeful that an agreement with Greece’s troika of creditors will be finalized by the start of the EU summit this Thursday and Friday.  Ten-year German bund and British gilt yields ticked up a basis point, whereas the 10-year Japanese JGB edged a basis point lower to 0.76%.

Gold prices dropped 0.7% to $1747.00 per ounce, and oil is off 0.3% at $91.55 per barrel.

Chinese data released over the weekend were reassuring.

  • The trade surplus widened 3.9% on month to a 3-month high of $27.7 billion in September as on-year export growth quickened sharply to 9.9% from 2.7% in August and 1.0% in July.  Imports grew 2.4% on year, which reversed a shocking 2.6% contraction in August.
  • CPI and PPI inflation remains subdued and not a hindrance to monetary easing.  Consumer prices in September were 1.9% higher than a year earlier and posted a 1.9% 3Q12-over-3Q11 increase as well, down from 2.9% in the second quarter.  Producer prices declined 3.6% in the year to September, their seventh straight on-year drop.  The on-year decline averaged 3.3% in 3Q, more than twice as much as the 1.4% decline in the year to 2Q.
  • Growth in China’s stock of international reserves was more subdued, advancing by $50 billion to $3.29 trillion last quarter and by 2.8% on year after soaring 20.9% between September 2010 and September 2011.
  • Money growth quickened in September.  M2 rose 14.8% on year, more than forecast and the strongest on-year advance so far in 2012.  That was up from 13.5% in August and 12.4% in the year to January 2012.  M1 and M0 growth respectively accelerated to 7.3% and 13.3% from 4.5% and 9.7% in August.
  • Bank lending of 623.2 yuan last month was near expectations and matched the average level in July-August.

According to revised data, Japanese industrial output sank 1.6% in August after dropping 1.0% in July.  The July-August level was 2.6% lower than the 2Q average, and August production was 4.6% less than in August 2011.  The inventory ration fell by 2.3% in the latest month.  Capacity usage dropped 2.6%, and capacity contracted 0.2%.

Australian motor vehicle sales in September were 4.7% stronger than in August, the largest monthly increase since July 2011, and 14.4% higher than a year before. Loans to homes increased 1.8% in August, more than reversing July’s 0.7% drop, but investment loans fell by 0.8%.

South Korean export and import prices recorded on-year declines of 1.9% and 2.4% in September.  The trade surplus of $3.1 billion was similar to that in August.

Retail sales in Singapore rose 0.9% on month and 3.2% on year in September. 

New Zealand’s service sector PSI index printed at 49.6 in September, the first sub-50 reading since July 2010.

Wholesale prices in India were 7.8% higher than a year earlier in September, the highest pace since July 2011.

Britain’s Rightmove house price index recorded a 3.5% monthly increase in October, most since February.  The 12-month increase of 1.5% was twice as much as 0.7% in September.

Switzerland’s combined PPI/import price index increased 0.3% both on month and on year in September.  Domestic producer prices rose 0.4% on year, while import price inflation was just 0.1%.

Czech producer prices were unchanged in September, trimming their 12-month increase to 1.7% from 1.9% in August.  The Czech current account deficit of CZK 26.59 billion in August was 2.3 times larger than in July but 15.3% narrower than a year earlier.  Danish producer prices rose 0.6% in September and accelerated to a 4.1% 12-month increase from 3.2% in August.  Norway’s trade surplus narrowed 24% on year NOK 23.57 billion in September. 

Investors await the release of U.S. retail sales, business inventories, and the Empire State manufacturing indices.  Lacker and Bullard of the Federal Reserve speak publicly.  The Bank of Canada releases the 3Q business outlook survey.  Canadian existing home sales figures also get reported today.  The second Romney-Obama debate is tomorrow night.

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

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