Unsettling European News Ahead of North American Labor Statistics

December 7, 2012

Monthly jobs data will be released in the United States and Canada at 13:30 GMT.

German industrial production sank 2.6% in October, five times greater than expected, after a 1.3% drop in September.  The Bundesbank warned of possible negative German growth both this quarter and the first quarter of 2013, and revised projected full-2013 GDP growth to 0.4% from 1.6%.  German industrial production was 3.7% weaker than in October 2011.  Production of capital goods plunged 4.3% in October and was 6.4% lower than the average level in 3Q12.

Former three-time Italian Prime Minister Berlusconi and his newly created right-wing party has withdrawn support for the technocratic Monti government, increasing the chances that such will collapse and that Italy may soon need new elections.

British industrial production data showing a drop of 0.8% in October instead of a rise of about that amount were considerably weaker than anticipated.  Industrial production and factory output were respectively 3.0% and 2.1% below year-earlier levels.  A separate release from the Bank of England indicated higher expected inflation of about 3.5% in the coming 12 months.

Share prices have slumped 1.2% in Spain and Italy.  The Paris Cac shows a 0.3% drop, and the German Dax and British Ftse are 0.2% softer.  Japan’s Nikkei also closed down 0.2%, and equities dropped by 0.3% in Hong Kong and India.  On the other hand, share prices jumped 2% in China, most in 3 months, and by 0.9% in Singapore and Australia.

The dollar and yen are unchanged against one another but stronger versus other currencies, which is a typical development at times of greater risk aversion.  The U.S. currency shows overnight gains of 0.4% against the euro, 0.3% versus the Swissie, 0.2% relative to the Aussie dollar, loonie and sterling, and 0.1% against the kiwi.  The yuan firmed 0.1%, helped by the stronger Chinese equity market.

The 10-year German bund yield is steady.  Its U.K. and Japanese counterparts are down 1 basis point and up a basis point.

Oil and gold prices eased by 0.4% and 0.3% to $85.96 per barrel and $1697.40 per ounce.

Australia experienced its largest trade deficit in 34 months, a shortfall in October of A$ 2.088 billion.  A 19.6% surge in exports to China was an encourage sign, however, for both the Chinese and Australian economies.  Australia’s construction-sector purchasing managers index meanwhile jumped 1.2 points in November to a 10-month high of 37.0.

Japan’s indices of leading and coincident indicators rose in October had lower-than-forecast readings of 92.5 and 90.6.  Japanese international reserves fell in November by $3.312 billion, bringing the two-month decline to $6.15 billion after a rise in September of $3.76 billion.  Japan posted a JPY 719 billion trade deficit in the first twenty days of last month.

South Korean large department store sales recorded the best on-year advance (10.2%) in eleven months in November.  The Asian Development Bank cut its projected Asian growth rate for next year to 6.6%.

Greece’s on-year GDP growth rate last quarter was revised to a drop of 6.9%.  Portuguese GDP fell by 3.5% in the year to 3Q.  Czech GDP was down 1.3%, and Hungary experience a 1.5% contraction of GDP.  In Iceland, however, GDP rebounded 3.5% on quarter and also advanced 2.1% from the third quarter of 2011.  Factory output in Norway slid 0.3% on month in October and was 2.7% greater than a year earlier.  Dutch factory output posted a 1.7% on-year contraction that month, while there was a gain over that period of 1.0% experienced in Denmark.

German labor costs rose 0.7% sequentially in 3Q from 2Q and accelerated to an on-year advance of 3.3% from 2.7% in 2Q and 1.9% in 1Q.

The EUR 4.685 billion French trade deficit in October was 6.2% narrower than September’s gap.

Brazilian CPI inflation held steady at 5.5% last month. 

The U.S. and Canada report unemployment, jobs growth today.  Canada also releases labor productivity, while the U.S. Conference Board and U. Michigan will be announcing data on consumer sentiment. Mexican consumer and producer price figures are due.  Some progress has been reported in the fiscal cliff talks, but who really knows the truth?

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

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