German Election Results and Preliminary September Chinese and Euroland PMI Readings

September 23, 2013

Japan was closed in observance of the autumnal equinox.

The right-of-center Christian Democrats and Christian Social Union did much better than forecast.  Those sister parties picked up 72 seats in German national parliamentary elections to fall just marginally under securing an absolute majority.  Angela Merkel is assured of a third four-year term as German Chancellor.  But the Free Democrats, the junior partner in the outgoing ruling coalition, won just 4.8% of the vote, failing to secure the minimum of 5.0% required to hold any seats in the parliament and thus forcing Merkel to seek a different coalition structure than before.  The new Alternative for Germany, an anti-euro party, also just missed getting 5% of the vote, while The Left and the Greens saw losses of 12 and 15 seats.  The main left-of-center party, the Social Democrats, took 25.7% of the vote, somewhat more than in 2009 and will see a gain of over 40 seats.  Talk continues that it may be brought into a coalition with the CDU/CSU.

The dollar is narrowly mixed, with losses of 0.4% against the yen, 0.2% versus the Aussie dollar and sterling and 0.1% relative to the kiwi, no change versus the loonie and yuan, and slight appreciation of 0.2% against the Swiss franc and 0.1% versus the euro.

Movement in European share prices has been trivial following a large drop in the U.S. market last Friday.  Stocks are 0.3% and 0.1% higher in Italy and France but down 0.3% in Britain, 0.2% in Spain and 0.1% in post-election Germany.  In the Pacific Rim, equities fell 1.8% in India, 0.6% in New Zealand and Hong Kong, 0.7% in Singapore, and 0.5% in Australia and Indonesia, but they rose 1.6% in china, 1.0% in Taiwan and 0.8% in the Philippines.

While the 10-year German bund yield is steady at 1.94%, the comparable British gilt yield rose four basis points to 2.96%.

Gold is 0.7% weaker at $1323.80 per ounce.  Oil edged up 0.2% to $104.92 per barrel.

According to the HSBC preliminary Chinese better-than-forecast purchasing manager survey readings for September, manufacturing activity expanded at a somewhat faster but still pretty moderate pace.  The overall score was 51.2 after 50.1 in August, 47.7 in July and 48.2.  The reading was at a 6-month high and accompanied by a 5-month peak in manufacturing output.  Orders rose faster than in August, while jobs contracted at a slower rate than the month before.

Euroland’s composite PMI reading of 52.1 was the strongest score since June 2011 and 0.6 points above the August reading.  Manufacturing (51.1) slipped 0.3 points to 51.1, a 2-month low, but this dip was more than offset by a 1.4-point improvement in services to a 27-month high of 52.1.  The data suggest modest GDP growth in 3Q13 of about 0.2%.

Germany’s composite PMI of 53.8 was 0.3 points better than in August and the highest since January.  Services (54.4) experienced the strongest expansion in seven months, while manufacturing (51.3) was down 0.5 points to a 2-month low.  Service-sector business sentiment improved further.  Orders expanded.

The French composite PMI (50.2) crossed above the 50.0 no change threshold for the first time in 19 months, thanks to a 1.8-point advance in services to a 20-month high of 50.7.  Manufacturing (49.5) was 0.2 points lower than in August.  The French economy is only stabilizing.

Italian wage inflation held steady at 1.5% in August.  Swiss M3 money growth dipped to a 12-month increase in August 0f 10.4% from 10.8% in July.  Germany’s index of leading economic indicators rose 0.6% in July according to the Conference Board following a 0.9% increase in June.

CPI inflation edged up to 2.0% in August in Singapore from 1.9%, while CPI inflation in Hong Kong slowed sharply to 4.5% from 6.9%.

Markit Economics will release a preliminary estimate of its U.S. purchasing managers index for September, and the Chicago Fed National Activity Index arrives today as well.  So do Mexican retail sales and wholesale turnover, as well as an interest rate policy announcement by the Bank of Israel.  ECB President Draghi speaks publicly, as do several Federal Reserve officials (Lockhart, Dudley and Fisher). 

The crisis at the Kenyan mall entered its third day.  There are still terrorists loose in the place, and there’s an unconfirmed story that some of the perpetrators may have lived some time in the United States.

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

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