A Better Market Appetite for Risk

December 3, 2012

Chinese PMI’s suggest foundation for recovery.

Details released of Greek debt buyback plan.

Yen retreat stalls on Shirakawa remarks.  Dollar/yen down 0.3% at 82.22.

Manufacturing PMIs suggest less intense downturn in Europe.

Australian retail sales weaker than forecast.

The euro advanced 0.6% to $1.3059.  The euro also strengthened against the Swissie to 1.2090.  The dollar has also lost 0.4% against sterling, 0.2% relative to the Swiss franc, kiwi, and Canadian dollar, and 0.1% versus the Aussie dollar.

Share prices fell 1.4% in China and 1.2% in Hong Kong but climbed 0.6% in Australia, Indonesia and the Philippines.  Japan’s Nikkei edged 0.1% higher.  Stocks in Europe advanced 1.4% in Italy, 1.1% in Spain, 1.0% in France, 0.7% in Germany, and 0.5% in Britain.

10-year Greek bond yields plunged over a percentage point to 14.2%.  German bunds and British gilt yields are up by four and three basis points.  10-year JGBs slid to a new low for the move of 0.71%.

Gold and oil prices firmed by 0.4% to $1719.50 per ounce and $89.15 per barrel.

In their remarks over the weekend about the fiscal cliff talks, Republicans and Democrats engaged in a continuing game of chicken and exhibited no inclination to compromise.

Moody’s downgraded the rating of ESM/EFSF one notch and left the outlook at negative.  Spain’s Prime Minister Rajoy made remarks suggesting that Spain’s budget deficit this year will exceed the mandated target of 6.3% of GDP.

Comments from Bank of Japan Governor Shirakawa stressed that price stability remains an important goal and signaled that the central bank is not going to do Shinzo Abe’s bidding so long as he’s governor.  Abe leads the opposition Liberal Democratic Party and is favored to replace Prime Minister Noda after December 16 elections.

A load of purchasing managers surveys of manufacturers were released.

  • China’s CFLP PMI Index, the one authorized by the government, hit a 7-month high of 50.6, up 0.4 points from October.  The HSBC PMI score of 50.5 was above the 50 breakeven level for the first time since October 2011.  Meanwhile, the service-sector PMI had a reading in November of 55.6, the ninth above-50 score in a row.
  • Britain’s factory PMI reading jumped much more than anticipated from 47.5 in October to a three-month high of 49.1 in November.
  • The Swiss PMI increased 2.4 points to 48.5, best since July and above forecasts of a reading around 47.
  • Euroland’s 46.2 reading matched the preliminary reading and constitutes an 8-month high. 
  • Within the euro area, the index of Ireland (52.4) was a 4-month high.  That of Greece (41.8) and Germany (46.8) hit two-month highs.  France’s 44.5 was a 3-month high.  On the other hand, the Dutch score of 48.2 was a 6-month low.  Spain’s 45.1 was a 15-month low, Austria’s 49.3 was a 5-month trough, and Italy’s 45.1 was a 3-month low.
  • The Saudi non-oil PMI implied slower expansion with a reading of 57.0 after 59.8 in October and 60.3 in September.
  • Sweden’s PMI ticked up to 43.2 from 43.1 in October.  Norway posted a reading of 50.1 in November, and the October score was revised to 49.0 from 48.7 reported last month. 
  • The Czech PMI rose 1.0 points to 48.2.  Poland’s 48.2 was 0.9 points than the October reading. Hungary’s 52.3 erased most of the slide between 52.5 in September and 49.9 in October.
  • South Africa’s PMI increased 2.4 points to a three-month high of 49.5.
  • India’s PMI advanced to a 5-month high of 53.7 after 52.9 in October and 52.8 in both August and September.
  • The Vietnamese PMI rose 1.8 points to 50.5, the first reading above the no-change level of 50 since September 2011. Taiwan’s PMI dipped by 0.3 points to 47.4, and Indonesia’s PMI slid 0.4 points to 51.5. 
  • Russia’s manufacturing PMI fell back to 52.3 after rsing to 51.9 in October from 51.4 in September.
  • The Australian PMI dropped to a 4-month low of 43.6 from 45.2 in October and was the ninth straight score below 50.

Australia reported other weak data that cemented expectations of a 25-basis point rate cut by the Reserve Bank of Australia this weeks.

  • Retail sales stagnated in October, a three-month low, and recorded a smaller 12-month increase of 3.1%.
  • Job ads sank for an eighth straight time in November, this time by 2.95.
  • Corporate earnings sank 2.9% in 3Q12, their fourth consecutive quarterly decline.
  • Expected inflation over the coming 12 months slid 0.1%, the first month-on-month drop since June.
  • Australia’s commodity price index posted an 11.6% on-year decline in November in SDR terms.

New Zealand’s terms of trade (the ratio of export prices to import prices) declined 3.2% in the third quarter.

Japanese capital spending last quarter rose 2.2%, only about half as much as assumed.  Japanese motor vehicle sales wee 3.3% smaller than a year earlier in November.

Indonesian CPI inflation dipped to 4.3% in November from 4.6% in October.  That economy posted a record $1.54 billion trade deficit in October, reflecting a 7.6% on-year drop in exports.  Thai inflation slowed to 2.7% in November from 3.3% a month earlier.

Turkish CPI inflation slowed further to 6.4% in the year to November from 12-month increases of 7.8% in October and 9.2% in September.  PPI inflation, in contrast, accelerated to 3.6% from 2.6%.

The volume of total Swiss retail sales posted a smaller 2.7% on-year increase in October after a gain of 5.0% in the year to September.

The British Hometrack house price index ticked 0.1% lower on month and dipped 0.3% on year in November.

The Institute of Supply Management releases the U.S. PMI manufacturing survey results at 10:00 EST.  U.S. car sales and construction spending figures also are due. St. Louis Fed President Bullard speaks publicly.  Important monetary policy meetings later this week are being held in Australia, Britain, the euro area, Canada and New Zealand.  On the data front, service sector PMI’s arrive Wednesday, and Canada, Australia, and the United States report monthly labor statistics.

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

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