U.S. Debt Deal Still Eluding

October 14, 2013

Three markets are on holiday today, dampening activity.

  • U.S.: Columbus Day (partial closure).
  • Japan: Health Sports Day
  • Canada: Thanksgiving

A deal to extend the $16.7 trillion U.S. debt ceiling and avert a default was not finalized over the weekend despite promising signs on Thursday-Friday.  The government partial shutdown has begun a third week.  Debt ceiling deadline is Thursday.

The dollar has declined 0.6% against the kiwi, 0.3% versus the yen, Swissie and sterling, 0.2% relative to the yuan, Australian dollar and euro, and 0.1% vis-a-vis the yen.

Share prices were mixed in the Pacific Rim, dropping 0.7% in the Philippines, 0.5% in Singapore, 0.9% in Taiwan, 0.4% in Australia, 0.2% in South Korea, and 0.1% in New Zealand but rising 1.2% in Hong Kong, 0.7% in Indonesia, 0.4% in India and 0.2% in China.

The 10-year German bund yield fell two basis points, while the 10-year British gilt is steady.

WTI crude oil is 0.7% softer at $101.34 per barrel, but gold recovered 0.6% to $1276.10 per ounce.

Several Chinese economic statistics have been reported.

  • The trade surplus narrowed by a sharp $13.4 billion or 47% to $15.2 billion, a six-month low, and was more than $10 billion smaller than forecast.  Exports dipped 0.3% on year, their first drop in three months, while imports were 7.4% greater than in September 2012.  China’s terms of trade hit a 6-month low.
  • Chinese reserves increased $163 billion in the third quarter to $3.66 trillion.
  • Consumer prices rose 0.8% on month and accelerated to a 7-month-high on-year pace of 3.1% in September from 2.6% in the year to August.
  • Producer prices, down 1.3% in the year to September, recorded their smallest on-year drop of 2013.  PPI inflation has been negative since March 2012.
  • M2 money grew 14.2% in the year to September, a half percentage point less than in August but matching expectations.
  • Chinese bank lending last month of 787 billion yuan exceeded forecasts by some 20%.  The figure was up from CNY 711 billion in August and CNY 700 billion in July.

Policymakers at the Monetary Authority of Singapore conducted a semi-annual monetary policy review and for the third straight such examination left the slope, width, and center of the Singapore dollar’s targeted trading corridor unchanged.  The policy calls for modest but gradual appreciation in order to promote growth but contain inflation.

GDP in Singapore fell considerably less sharply in 3Q13 (just 1%) than expected following a big second-quarter advance.  On-year growth accelerated to 5.1%.  Retail sales in August increased 3.6% on month but remained 7.8% lower than a year before.

Wholesale price inflation in India accelerated to 6.46% in September from 6.10% in August.

New Zealand’s services PMI reading of 55.6 in September after 53.2 in August reflected a faster rate of expansion.  The score has been 50 or better for the past year.

Home loans in Australia recorded the largest drop in over 2-1/2 years in August, declining 3.9%.  It was the first drop of any sort since January.

In the euro area, industrial production advanced 1.0% in August, reversing a 1.0% drop in July.  Output in July-August was 0.1% lower than the 2Q average after having risen 0.7% (2.7% annualized) between 1Q and 2Q.  There were August-over-July increases of 8.2% in Portugal, 1.8% in Germany and 2.4% in the Netherlands.  Output fell by 0.8% in Ireland, 0.3% in Italy, and 0.1% in Finland and only rose 0.2% in France and 0.1% in Spain.

The Irish construction purchasing managers index catapulted above 50 for the first time since 2007 to 55.7 fro a reading of 49.7 in August, 47.5 in July, and 43.4 in June.

The Swiss PPI/import price index edged up 0.1% in September and was unchanged from a year earlier.  Such had risen 0.2% in the year to August.

Greek import prices declined 4.4% between August 2012 and August 2013.  The Dutch trade surplus of EUR 3.39 billion in August was smaller than July’s EUR 3.95 billion but considerably larger than a surplus in August 2012 of EUR 1.7 billion.  Finnish CPI inflation stayed at 1.2% last month.

Eugene Fama, Lars Hansen, and Robert Shiller have been jointly awarded the 2013 Nobel economics prize for their empirical work studying asset prices.

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

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