Markets Not Expected U.S. to Default

October 15, 2013

Investors anticipate some kind of deal before Thursday’s deadline to create a temporarily higher U.S. debt ceiling.

Share prices rallied 1.1% in Taiwan, 1.0% in South Korea and Australia, 0.7% in Indonesia, 0.5% in Hong Kong, and 0.3% in New Zealand and Japan.  Equities are up 0.9% in Britain, 0.7% in Germany, 0.6% in France, and 0.5% in Spain.

The dollar has slid 0.3% against the New Zealand and Australian dollars and 0.1% vis-a-vis the Chinese yuan.  In contrast, the dollar has climbed 0.7%, 0.5%, and 0.4% against the Swiss franc, euro and sterling.  The yen is unchanged, and the loonie has dipped 0.1%.

The price of gold has retreated 1.6% to $1256.20 per ounce.  WTI crude oil is 0.5% softer at $101.89.

Sovereign debt yields advanced five and four basis points in Britain and Germany.  The 10-year JGB edged up a basis point, too.

British CPI inflation remained at an above-target 2.7% in September instead of dipping modestly as analysts had predicted.  A rise in core CPI inflation to 2.2% from 2.0% was also unexpected.  Retail price inflation punched in at 3.2% after 3.3% in August.  Producer output prices edged 0.1% lower on month and subsided to 1.2% in the year to September from 1.7% in August.  The core rate of PPI-O also eased to 0.7% from 1.0%.  Producer input inflation was more than halved to 1.1% from 2.4%.

German import prices recorded a 3.4% on-year drop in August, their greatest decline since November 2009.  Non-oil import prices fell by 2.6% on year.  Export prices were unchanged from July and 1.0% lower than in August 2012.

French consumer prices fell 0.2% on month and rose by an unchanged 0.9% on year in September according to revised figures.

In further evidence of an absence of inflationary pressure, Danish producer prices fell by 0.3% on month and 1.8% on year in September.  Czech producer prices were just 0.6% higher than in September 2012.

The ZEW Institute reported results of the October survey of investor sentiment toward Germany and the whole euro area.  The German expectations index rose 3.2 points to a reading of 52.8, best since April 2010, but this was accompanied by a slightly softer assessment of current conditions (29.7 versus a score of 30.6 in September and 18.3 in August).  The Euroland expectations index went up 0.5 points to 59.1 in October, while the Ezone reading on the current situation was marked down to minus 60.9 from minus 59.7 in September and minus 74.1 in August.

Dutch retail sales fell 0.7% in value and 3.0% on a volume basis between August 2012 and August 2013.  Industrial production in Hungary posted increases of 0.7% on month and 0.9% on year in September.

A NOK 21.69 billion Norwegian trade surplus was reported for September, down from NOK 28.8 billion in August.  The Irish trade surplus widened to EUR 3.25 billion in August from EUR 3.21 billion in July.  Finland posted a EUR 36 million trade surplus in August after a EUR 139 million deficit in July.

Auctions of Spanish 6-month and 1-year sovereign debt generated lower yields.

Sri Lanka’s central bank unexpectedly cut interest rates by 50 basis points.

Minutes from the Reserve Bank of Australia’s October Board meeting expressed an intentional decision to signal neither a inclination to cut interests rates further soon nor a consensus to draw the line against more monetary relief further in the future.  Officials are content to watch trends for now, believing that rate cuts taken earlier are still impacting demand favorably.  Inflation is expected to remain within target in the policy-relevant time frame.

Australian motor vehicle sales dipped 0.1% in September and were 3.5% lower than a year earlier.  The Aussie dollar touched a 4-month high against its U.S. counterpart in overnight trading.

Revised Japanese data showed a somewhat greater 0.9% drop of industrial production in August after a 3.4% jump in July, such that July-August output was still 1.4% higher than the 2Q average level.  Output was 0.4% lower than in August 2012, however.  The inventory ratio went up 1.8% in August but was 2.6% lower than a year earlier.  Capacity use fell by 2.1% on month, while capacity dipped by 0.2%.

The Empire State manufacturing index will be released by the New York Fed, as will weekly U.S. chain store sales figures from Johnson-Redbook and ICSC.  Canadian existing home sales statistics arrive today as well and Brazilian retail sales.

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

Tags: , ,


Comments are closed.