Comparatively Quiet Markets

September 11, 2013

In the wake of President Obama’s address on Syria, the dollar is unchanged against the Swissie, kiwi and yuan, up 0.1% versus the euro and Australian dollar, and down 0.2% relative to sterling and the loonie and by 0.1% against the yen.  Sterling touched an intra-day high of $1.5827, a 7-month peak.

The Nikkei did not react to released Japanese data and closed unchanged, as did stocks in India and Taiwan.  Equities rose 0.6% in Australia, 0.3% in China and 0.2% in New Zealand.  The Paris Cac is unchanged, and Britain’s Ftse has edged off 0.1%.  Stocks elsewhere in Europe are up 1.0% in Italy, 0.6% in Spain and 0.5% in Germany.

The yields on 10-year British gilts and Japanese JGBs slid by two and one basis points.  The 10-year German bund is a basis point firmer at 2.08%.

Obama presented a mixed message that labeled Syria’s use of chemical weapons a U.S. national security risk but delayed a congregational vote to authorize retaliation pending the results of a Russian-sponsored diplomatic effort to resolve the issue expeditiously.  Obama didn’t indicate the length of this pause, but a U.N. resolution proposed by France calls for a hiatus of up to two weeks.  Obama’s plea for national support seemed unconvincing.  He didn’t look straight into the camera, focusing instead on a point slightly above the TV viewer’s eye level.  In wars, Americans are now trained to seek a specific mission defined and completed without undue delay.  Today marks the 12th anniversary since the 9/11 attacks, in other words 12 years of ongoing conflict, longer than the four years of civil war, 1-1/2 years in WWI, 4-1/2 years in WW2, or nine post-Gulf of Tonkin years in Vietnam.  There isn’t a draft, which galvanized opposition in Vietnam, but this time Americans associated the state of endless war with the weakness of the economy and believe that peace is necessary for improved fiscal accounts and sustainable economic growth.  Politicians are not trusted to tell the truth.

Japanese corporate goods prices rose 0.3% in August and posted a 2.4% on-year advance.  The domestic CGP index had fallen 0.5%, in contrast, between March 2012 and March 2013.

Japan’s Ministry of Finance released its quarterly survey of business sentiment, showing a doubling of the index for all large firms to a 4-year high of 12.0 in 3Q from a reading of 5.9 in 2Q.  For large manufacturers, the index climbed to 15.2 from 5.0, and the large non-manufacturing index rose 4.0 points to a score of 10.4.  Some retreat in business confidence over the coming two quarters is anticipated, presumably because of the likely sales tax hike to 8% next April from 5% currently.  In that regard, BOJ Board member Ishida gave a talk today that urged is colleagues not to overly compensate for the temporary blow to growth from the higher sales tax, nor to be unduly alarmist about its impact on sustainable growth.  Ishida also said that exports need to play a larger role in Japan’s recovery.

The Westpac gauge of Australian consumer confidence climbed 4.7% in September to a reading of 110.6, highest since 2010.

South Korea’s jobless rate edged a tenth percentage point lower in August to 3.1%.  Filipino joblessness of 7.3% in 2Q was down from 7.5% in the prior quarter.

Malaysian industrial production jumped 1.9% on month and accelerated to a 7.6% on-year increase in July.

Europe’s main data release today involved British labor statistics, which were better than expected.  The claimant count of unemployment fell by 32.6K in August and to 4.2% from 4.3%.  ILO-basis unemployment in May-July averaged 7.7%, down from 7.8%.  But average wage earnings in May-July was just 1.1% with bonuses and 1.0% without such.

The Conference Board’s index of leading British economic indicators jumped 0.7% in August, outpacing a 0.2% rise in the index of coincident indicators.

German CPI inflation in August was confirmed at the preliminary estimate of 1.5%.  On-year inflation was down from 1.9% in July.  Consumer prices were unchanged from their July level.

The French current account deficit widened to EUR 3.2 billion in July from EUR 1.8 billion in June. 

Italy’s 1- and 10-year sovereign debt auctions produced 29- and 26-basis point hikes in yields compared to the previous auctions.

Consumer prices in August rose 0.2% on year in Portugal, 3.7% in Romania, and 1.3% in Hungary.

U.S. mortgage applications plunged 13.5% in the first week of September to the lowest level in nearly 5 years.  The anticipation of Fed QE tapering has spooked potential homeowners.  The 4.80% 30-year fixed mortgage rate was the highest of 2013.  U.S. wholesale inventories and weekly oil inventories data will be released later today.

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

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