UN/U.S. Missile Strike in Syria Appears Just a couple Days Away

August 28, 2013

Markets continue to be rattled by the additional uncertainty of what escalating western military involvement in Syria will cause.  Although opinion polls show four in five Americans opposed to military retaliation, a missile attack by Thursday is believed likely.

Share prices fell 3.0% in the Philippines, 2.5% in Vietnam, 1.6% in Hong Kong, 1.5% in Japan, 1.1% in Australia, 0.8% in Singapore and 0.6% in China.  Equity losses today in Europe so far amount to 1.2% in Spain, 1.1% in Germany, 0.6% in Britain, and 0.4% in France and Italy.

The dollar has strengthened in this risk-off climate, gaining 0.7% relative to the Australian dollar, 0.6% versus the kiwi, 0.5% against sterling, 0.3% versus the euro, 0.2% vis-a-vis the loonie and Swissie, and even 0.4% against the yen, which earlier overnight had spiked to a 96.80/USD.  The Indian rupee and Turkish lira again set record lows.

WTI oil prices touched a 27-month high of $112.24 per barrel before settling back to a net 0.7% increase.  Gold is 0.2% higher at $1423.70 per ounce.

While 10-year JGB, German bund, and British gilt yields are somewhat lower, futures trading has sent Treasury prices lower and yields back upward.

Money and credit growth in the euro area sputtered further in July.  M3 posted on-year growth of 2.2%, down from 2.4% in June and 2.9% in May.  The ECB’s preferred 3-month on-year pace of M3 expansion decelerated to 2.5% from 2.8% in April-June.  Loans to firms were 3.7% smaller than a year earlier after a 3.2% on-year contraction in June, and mortgage lending recorded a measly 0.7% 12-month increase.  M1 growth dropped to 3.6% from 3.8% in June and 4.3% in the year to May.

Italian retail sales contracted 0.2% in June, 0.3% in the second quarter, and 3.0% between June 2012 and June 2013.

In spite of a 2.8% monthly advance in German energy import prices, overall import prices went up just 0.3% and posted a 12-month decline of 2.6%.  Germany’s consumer sentiment index printed at 6.9% in September, lower than analyst expectations and below August’s six-year peak of 7.0%.

The Swiss consumption indicator, compiled monthly by UBS, was revised downward to 1.41 in June after being reported initially as 1.44.  July’s reading was also 1.41.  Swedish consumer confidence improved less than forecast to 99.3 in August from 98.3 in July.  Turkish consumer sentiment fell 1.3 points to a reading in August of 77.2.

The CBI distributive trades survey for Britain showed continuing impressive recovery, printing at 27 in August (a nine-month high) after 17 in July, 1 in June and minus 11 in May.  Bank of England Mark Carney presents a speech today.  Markets believe the central bank interest rate will start to rise sooner than he has implied.

Icelandic CPI inflation accelerated to a six-month peak of 4.3% in August from 3.8% in July.

South Korean business sentiment improved in the latest month, but Thailand reported a bigger 4.5% on-year drop in industrial production in July.

U.S. pending home sales get released today.  Mortgage applications meanwhile continue to soften, falling 2.5 percent in the week ended August 23.

The Central Bank of Brazil is expected to announce another interest rate hike today.  Like the Indonesian rupiah, Indian rupee, and Turkish lira, the vulnerability of the Brazilian real has been exposed by the Fed’s apparent intention to rein in quantitative easing.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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