Last Jobs Report Before Election Day

November 2, 2012

U.S. stocks rallied yesterday in response to a slew of better-than-forecast economic statistics — the ISM manufacturing survey, consumer confidence, the ADP and jobless claims.  Asian share prices picked up that tone, climbing Friday by 1.3% in Hong Kong, 1.2% in Japan, 1.1% in South Korea, 0.7% in Thailand, 0.5% in Singapore and 0.4% in Taiwan and China.

European stocks are up 0.3% in Spain but down 0.6% in Italy and 0.2% in France.  The German and British bourses have merely treaded water.

The dollar has gained 0.5% against the euro and Swiss franc, 0.2% versus the Australian dollar, the Canadian dollar, and British pound, and 0.1% relative to the yen.  The kiwi is steady.

10-year German bund and Japanese JGB yields are unchanged, too, while the 10-year British gilt slid a basis point.

WTI oil prices fell 0.8% to $86.37 per barrel.  Gold prices are 0.3% softer at $1709.60 per troy ounce.

Euroland’s purchasing managers manufacturing index (PMI) was revised up a tick to 45.4 from a flash estimate of 45.3, but it was down from 46.1 in September.  Activity got off to a poor start in the fourth quarter, with weakness in exports, domestic demand, and employment plus a pickup in input price inflation. 

The 45.4 final reading of the euro area manufacturing PMI was a two-month low.

  • Germany registered a 2-month low of 46.0, down from 47.4 in September and a long-term average reading of 52.0.  Both output and orders fell at a faster pace than in September.
  • The French PMI of 43.7 was a 2-month high after 43.5 in September. 
  • Italy posted a 45.5 reading, down from 45.7 in September.  It was the 15th straight sub-50 score, but export orders managed to rise for the first time since April.  Input inflation hit a 7-month high.  The overall Italian reading as in Germany was at a two month low.
  • Spain’s manufacturing PMI fell to a 3-month low of 43.5, highlighting a substantial decline in domestic demand. 
  • The Dutch index of 48.9 was also at a 3-month low.
  • The Greek index of 41.0 was a 4-month low, and Austria’s 44.8 reading represented a 40-month low.
  • Only Ireland had an above-50 reading, a 3-month high of 52.1.  Ireland was the only reporting Ezone economy with rising employment as well.

Norway’s manufacturing PMI fell to a three-month low of 48.7 in October from 49.1 in September.

Denmark’s PMI rebounded sharply to a reading of 55.6 from 50.5 in September.

South Africa’s PMI fell 1.2 points to 47.1.

Mexico’s purchasing managers index rose to 55.5 from 54.4.  New business grew at the fastest rate in 5 months, and input price inflation slowed.

Australian producer prices went up 0.6% sequentially in the third quarter, half as much as forecast.  This left on-year PPI inflation at 1.1%.  Such had risen 2.7% in the year to 3Q11.  In the year to 3Q12, domestic producer prices went up 1.1%, while import prices rose only 0.4%.

New Zealand commodity prices increased 1.3% in October, a slower pace than in September.  Consumer confidence in Thailand improved to a reading of 68.1 in October from 67.5 in September.

Minutes from the Bank of Japan’s policy meeting on October 4-5 reflected a growing predisposition to expanded quantitative easing in the face of mounting evidence that Japan is sliding back into recession.  The central bank’s balance sheet showed 153.7 trillion yen of assets at the end of October, 2.2% more than at the end of the third quarter and 7.0% greater than at midyear.

Japan’s monetary base posted higher on-year growth of 10.8% in October versus 8.0% in the third quarter and 2.6% in the second quarter.

The National Bank of Romania left its key interest rate unchanged at 5.25%, its level since a 25-basis point cut in late March of this year.  There have been 13 reductions since 2009, totaling 225 basis points in 2009, 175 bps in 2010, 25 bps in 2011, and 75 bps this year.  Romanian producer price inflation slowed to 6.6% in September from 7.2% in August.

Norway’s jobless rate dropped to a 5-month low of 2.3% in October.  Austrian unemployment increased last month to 6.7%.

Besides the weak PMI data out of Euroland, investors had to digest bad news regarding Greece.  An official at the Bundesbank complained that Greek officials are still dragging their feet in meeting promised budget cuts and other reforms.

Britain’s National Institute of Economic and Social Research revised down projected 2013 GDP growth to 1.1%.  A 2.0% CPI rate next year was predicted.

At 12:30 GMT, the U.S. and Canada report October labor statistics.  Other U.S. releases today are factory orders and the NAPM index.  Tarullo and Williams of the Federal Reserve speak publicly.

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

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