Continuing Slide in Share Prices

November 16, 2012

Equities in Europe show further losses so far today of 1.4% in Italy, 0.6% in Germany, Britain and Spain, and 0.3% in France.  Share prices also fell 0.9% in India, 0.8% in China, 0.5% in South Korea and 0.3% in Australia. 

Contrary to the trend in most other bourses, Japan’s Nikkei-225 index jumped 2.2%.  Japanese Prime Minister Noda as expected dissolved parliament and called lower house elections fro December 16.  Significant fiscal and monetary stimulus actions are expected.  A fiscal blueprint is due at the end of this month.  The BOJ is being urged to raise its inflation target by a full percentage point.  Governor Shirakawa’s term ends March 19.

The dollar is unchanged against the yen, loonie, sterling and yuan.  The greenback has strengthened 0.3% against the Swiss franc, 0.2% versus the euro and kiwi, and 0.1% relative to the Australian dollar. 

The 10-year British gilt yield ticked a basis point higher, while the 10-year Japanese JGB is down by 1 bp at 0.73%.  It was at 0.84% at midyear and posted period averages of 1.03% in the second half of 2011 and 0.93% in the first half of this calendar year.

Commodity prices have softened.  Gold is down 0.4% at $1706.40 per ounce, and oil has eased 0.3% to $85.19 per barrel.

Japan’s government released its November economic assessment, asserting that Japan’s economy shows weakness recently due to the deceleration of the world economy.  This was the fourth straight overall downgrade and stressed turns for the worse involving personal consumption (shows weakness), business investment (shows weak tone), corporate profits (flattening further), and jobs (improvement pausing). 

Investors are spooked by generally soft U.S. data released yesterday, tensions between Israel and Gaza Palestinians, the coming fiscal cliff in America, and squabbling in Europe, where long-term peripheral yields have again elevated.  Spain still hasn’t submitted to a conditional aid package, and EU leaders failed to nail down a banking union or a plan for Greece.  In the U.S., President Obama sits down with leaders in Congress this morning for talks on tax and spending plans.  All sides remain rhetorically dug in.  Any softening of positions is not likely to emerge early, if at all.  The Petraeus Affair isn’t helping, either.  The former CIA chief will testify in a closed session before Congress on the Benghazi snafu today.

Data released by the European Central Bank on the current account and by Eurostat on Euroland’s trade balance gave somewhat mixed signals.

  • The seasonally adjusted EUR 0.8 billion current account surplus in September was the smallest since a deficit in October 2011.  Such represented a 10.1 billion drop from the August surplus.  Merchandise trade, services, investment income, and transfer payments all contributed to the deterioration.  Over the twelve months to September, an unadjusted current account surplus of EUR 74.6 billion accrued, which compares to a EUR 5.6 billion deficit in the prior statement year. 
  • The seasonally adjusted trade surplus on Eurostat data widened from EUR 8.9 billion in August to 11.3 billion euros in September.  However, exports posted a 1.1% monthly drop, and imports fell by 2.7%.  There was EUR 54.6 billion surplus in January-September versus a EUR 24.8 billion deficit in the first nine months of 2011.  Exports in January-September were 8.0% greater than a year earlier;  imports rose just 1.8%.

Singapore GDP sank 5.9% in the third quarter to post a reduced 0.3% on-year advance after a gain of 2.5% between 2Q11 and 2Q12.  This first contraction since 3Q11 exceeded expectations.

GDP in Hong Kong firmed by a less-than-forecast 0.6% last quarter and was just 1.3% higher than its year-earlier level. 

Malaysian on-year GDP growth of 5.2% in 3Q12 was somewhat stronger than forecast but a bit less than the second-quarter’s 5.4% pace.

South Korea’s index of leading economic indicators went up 1.2% in September.

Turkish consumer confidence dropped to a reading of 85.7 in October from 88.8 in September, 91.1 in August, and 92.8 in July.

Swiss National Bank Pdt Jordan defended the central bank’s Swiss franc policy, called the currency still overvalued, and conceded risks involved in the buildup of reserves associated with enforcing a ceiling on the exchange rate versus the euro.

Italy recorded a 408 million euro trade surplus in September versus a 483 million euro deficit the month before.

Industrial production in Hungary posted only a 0.6% on-year working day-adjusted increase in September, which was a mere third as much as experienced in August.  Output in January-September was down 0.8% from a year before.

U.S. data releases today feature industrial production, capacity usage, and Treasury-reported capital flows known as the “TIC” data.  Mexican GDP and Canadian securities transactions figures arrive today as well.

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

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