American Brand Image Sinking on Political Circus in Washington

October 3, 2013

No progress was made on the U.S. budget stalemate.  A much longer shutdown of the federal government than in 1996 seems assured, and odds of a default are rising.  Predictions of the start of Fed tapering have accordingly been pushed out to next March, mid-2014 or later.  The dollar touched a new overnight low of 1.3624 against the euro, but is currently just 0.2% softer on balance for the day.  Other dollar moves since Wednesday’s close are gains of 0.3% versus the yen, 0.5% against the kiwi and 0.1% relative to sterling.  The dollar is 0.1% softer against the Swiss franc and unchanged versus the loonie, Aussie dollar and yuan.

The euro is also being supported by PMI-service data relief that the attempted Italian no-confidence vote didn’t topple the Letta coalition.

China (National Day) and Germany (Unity Day) are closed.  U.S. jobless claims figures and service-sector PMI will be released today, but factory orders and the Labor Dept monthly jobs report, whose scheduled release times are today and tomorrow, are now unknown because of the partial government shutdown.

Share prices rose 1.7% in Taiwan, 1.0% in Hong Kong, 0.7% in Indonesia and 0.4% in the Philippines and Australia.  there were looses of 0.3% in Singapore and 0.1% in Japan.  In Europe, stocks are down 0.5% in Spain and 0.3% in France, unchanged in Italy, and up 0.3% in Britain.

The ten-year British gilt yield firmed two basis points.  The 0.64% 10-year Japanese JGB is unchanged and below the rate of inflation.  Spain and France conducted successful debt auctions.

Gold slumped 1.1% to $1306.70 per ounce. Oil edged 0.2% lower to $103.91 per barrel.

Ezone retail sales volume increased 0.7% in August, three times greater than forecast.  Sales in July-August were 0.6% higher than in the second quarter.  Monthly August advances amounted to 4.8% in Portugal, 3.8% in Spain, and 0.5% in Germany.  Sales posted a 12-month dip of 0.3%, however.

Service-sector purchasing manager survey results for September are out.  Note that readings above a score of 50 separate expansion from contraction.

  • Euroland’s index was revised up by 0.1 to 52.2, a 27-month high and the second above-50 score in a row.  The composite Ezone PMI also was revised upward by a tenth point to a 27-month high of 52.2.
  • Among individual members of the euro area, the service-sector PMI’s in September printed at 56.8 in Ireland (a 3-month low), 53.7 in Germany (a 7-month high), 52.7 in Italy (a 30-month high), 51.0 in France (a 20-month peak), and 49.0 in Spain (a 2-month low). 
  • Composite purchasing managers survey readings were 55.7 in Ireland (a 2-month low), 53.2 in Germany (also a 2-month low), 52.8 in Italy (a 29-month high), 50.5 in France (a 20-month high), and 49.6 in Spain ( a 2-month low).  The results suggest 3Q Ezone GDP grew about 0.2%, not annualized.
  • Britain’s service-sector PMI dipped from an 80-month high of 60.5 in August to 60.3.  This was the third reading in a row of 60-something and suggests GDP growth last quarter of around 1.2%.
  • Sweden’s service-sector PMI edged 0.4 points lower to a 3-month low of 53.3 in September, which is still a respectable score.
  • Russia posted service and composite PMI readings of 51.5 and 51.2.  Each is a 2-month low, signaling weakening economic growth of roughly 1.5%.
  • China’s government-authorized CFLP PMI survey of non-manufacturing showed a 6-month high of 55.4, up from 53.9 in August.
  • Japan’s service-sector and composite PMI readings of 53.0 and 53.2 constitute four-month highs despite disappointing new orders.
  • In the Middle-East, the non-oil PMI’s climbed 2.1 points to a 29-month high of 56.6 in the United Arab Emirates, 1.2 points to a 6-month high in Saudi Arabia and 2.5 points to a 3-month high of 44.7 in Egypt.
  • Australia’s service sector PSI index leaped 8.1 points to a 6-month high of 47.1.  But the third-quarter average of 41.8 was less than the 42.1 2Q mean and far worse than the 1Q13 average of 47.8.
  • The Brazilian service and composite PMIs each printed at 50.7 in September after 49.7 in August.

Turkish CPI inflation slowed 0.3 percentage points (ppts) to 7.9% in September, and PPI inflation dipped 0.2 ppts to 6.2%.  Consumer prices in Cyprus recorded a 12-month 1.0% rate of decline in September, same as in August. 

Retail sales volume in Hong Kong were 7.2% higher in August than a year earlier, down from gains of 8.7% in July and 14.4% in the first half of 2013.  Consumer confidence in Thailand dipped 1.4 points to a reading of 77.9 in September.

A slew of Federal Reserve senior officials speak today including Fisher, Powell, Lockhart, and Williams.

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


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