Syria, PMIs and a Holiday for Workers

September 2, 2013

President Obama decided to seek authorization from Congress before taking retaliatory action against the Assad regime in Syria.  This presumably delays the time table by over a week.

There are Labor Day market closures today in both the United States and Canada.  Labor Day traditionally starts the autumn season of foreign exchange trading.

Reported manufacturing PMI results in markets that are open support a recovery in Europe but also struggles in those emerging markets whose currencies have been battered lately.

Ten-year sovereign debt yields have jumped seven basis points in Britain, four bps in Germany and two bps in Japan.

The dollar has climbed 1.1% against the yen but fallen by 1.1% against the Australian and New Zealand dollars.  Sterling has risen 0.6% against the dollar and to a two-month high versus the euro.  The dollar is unchanged against the euro and yuan, up 0.1% relative to the Swiss franc and off 0.1% against the Canadian dollar.

Stocks are sharply higher in Europe, with gains so far of 1.8% in Spain, 1.7% in France, Britain and Germany and 1.5% in Italy despite a growing risk that the governing coalition may soon collapse.  In the Pacific Rim, equities slumped 2.2% in beleaguered Indonesia but rose 2.0% in Hong Kong, 1.4% in Japan and India, 1.2% in New Zealand, 1.0% in Australian, and 0.9% in Singapore.  Stocks ticked up 0.3% in China and 0.2% in Taiwan but slipped 0.6% in Malaysia, 0.2% in the Philippines and 0.1% in South Korea.

Oil and gold prices each dropped 0.5% to $107.14 per barrel and $1388.50 per ounce.

Euroland’s purchasing managers index for manufacturing printed at 51.4 in August, a 26-month high and 0.1 points above the flash indication. July’s 50.3 had broken a long string of sub-50 readings.

  • Italy’s 51.3 after 50.4 in July constituted a 27-month high.  The Dutch score, 53.5, also marked a 27-month high.
  • Spain’s 51.1 versus 49.8 in July was at a 29-month high.
  • Germany’s 51.8 was not quite a good as the preliminary 52.0 but a 25-month peak nonetheless.
  • Lowly Greece surprised with a reading of 48.7, up from 47.0 and a 44-month high.  Scores below 50 imply contracting activity.
  • The French reading of 49.7 matched July’s reading, which was the best since February 2012.
  • Austria and Ireland posted 52.0 readings, respectively representing 18- and 9-month peaks.

The British manufacturing PMI reading of 57.2 was 2.4 points higher than July’s revised reading and highest since February 2011.

The Swiss PMI settled back to a 2-month low of 54.6 after spiking to 57.4 in July from 51.9 in June.

Among Nordic economies, Norway’s PMI improved five whole points to a 17-month high of 53.0.  Sweden’s 52.2 score was 0.9 points above the July reading.  Denmark’s PMI recorded a six-month high of 59.4, up from 58.2 in July and 56.7 in June.

Among reporting East European nations, the Hungarian PMI rose 1.7 points to a 5-month high of 51.7.  The Czech reading of 53.9 was 1.9 points above July’s score and at a 26-month high. Poland’s PMI improved 1.5 points to a 25-month peak of 52.6, but Russia’s PMI remained under 50 for a second straight time and was just 0.2 points above July’s score of 49.2. 

Investors were comforted to learn that the government-compiled CFLP manufacturing PMI for China rose to a 16-month high of 51.0 and exceeded the 50 no-change threshold as it did for all seven prior months in 2013.  The HSBC PMI for China, however, was only 50.1 after an 11-month low of 47.7 in July.

Beleaguered Indonesia saw a PMI reading of 48.5, a 15-month low and the first sub-50 outcome since January.

Taiwan’s PMI sat on the fence, printing at 40.0 after three-straight sub-50 readings.

South Korea’s 47.5 result was the third sub-50 score in a row but at a 2-month high after 47.2 in July.

Turkey’s PMI rebounded from July’s 12-month low of 49.8 to 50.9 in August.

The South African purchasing managers index improved 4.3 points to a five-year high of 56.5.

The Australian purchasing managers index rose to a 2-month high of 46.4 but continued to connote a contractionary cycle in manufacturing.

In other economic news this first trading day of September, Japanese business investment was unchanged between 1Q and 2Q.  A decline had been assumed in the preliminary GDP report, so this suggests that economic growth for last quarter may get revised upward.  A smaller 6.4% August-on-August drop in motor vehicle sales was also announced today, which compares with a 13.5% drop in July.

A 0.8% decline in Australian corporate profits last quarter was about 1.5 percentage points worse than assumed.  Spurred by an earlier series of central bank interest rate cuts, building permits in Australia posted big gains in July of 10.8% from June and 28.3% from a year earlier.  Aussie commodity prices fell 7.3% on year in August.

The British Hometrack house price index accelerated to a 12-month increase of 1.8% last month from 1.3% in July.

Retail sales in Hong Kong increased in July by 9.5% in value terms and 8.9% in volume terms.  Both gains were down from double-digit advances in the first half of the year compared to 1H12.

Indonesian CPI inflation accelerated to 8.8% last month, most since January 2009, from 8.6% in July.  Core inflation ticked up 0.1 percentage point.  Indonesia recorded a record $2.3 billion trade deficit in July.  CPI inflation in Thailand slowed to 1.6% from 2.0% in July.  South Korean total and core CPI inflation was at 1.3% last month.

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



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