Mounting Possibility of a Near-Term ECB Interest Rate Cut

November 1, 2013

The euro fell 0.5% on net overnight and got below its 20-day average to as low as $1.3507.  There’s talk in the wake of CPI data released yesterday that the ECB may soon cut interest rates.  Total and core consumer prices in the year to October advanced just 0.7% and 0.8%, respectively.  The Ezone jobless rate is at a record 12.2%.

Several European countries, e.g., Spain and Italy, are closed for All Saints Day.

Some but not all the usual manufacturing purchasing manager surveys have been reported.

The dollar is 0.1% softer against the yen and kiwi and down 0.2% versus the Australian dollar.  The dollar has risen 0.3% relative to sterling and the Swiss franc.  It’s edged 0.1% higher against the yuan and remains flat against the loonie.

In the Pacific Rim, share prices rose 0.5% in China, 0.6% in South Korea, and 0.2% in Hong Kong, Malaysia, and India.  But stocks fell by 1.7% in Indonesia, 1.0% in Thailand, 0.9% in Japan, 0.3% in Australia, and 0.7% in Taiwan.  The German Dax and British Ftse are 0.2% lower.

The price of gold fell by 0.7% to $1315.00 per ounce.  WTI crude oil edged 0.1% lower to $96.60.

Sovereign debt yields are unchanged in Japan, Germany and Britain.

Australian producer prices jumped 1.3% between the second and third quarters, nearly twice as much as expected.  On-year PPI inflation accelerated to 1.9% from 1.2% in 2Q and 1.1% in the year to 3Q12.  Imported producer prices soared 5.9% between the latest two reported quarters.  Australian commodity prices in SDRs fell 1.0% in the year to October, down from a 3.1% on-year drop in September.

Japanese motor vehicle sales growth accelerated to 17.3% in October from a 12-month increase of 12.4% in September.

Indonesia reported a disappointing USD 660 million trade deficit in September.  Elevated October CPI inflation of 8.3% also weighed on the rupiah.

South Korean consumer prices went up only 0.7% in the year to October, by contrast, while Thailand reported a 12-month 1.5% rise in its CPI along with a 0.1% on-year dip in producer prices.

China’s purchasing managers indices showed strengthening, albeit modest, activity growth in manufacturing last month.  The HSBC gauge printed at 50.9, same as the preliminary estimate, but up from 50.2 in September.  The government-authorized CFLP PMI was 51.4 in October after printing at 51.1 in September, 51.0 in August, 50.6 in July and 50.1 in June.

Norway’s manufacturing PMI climbed 1.2 points to a 17-month high of 53.6 in October.

But a 4-point drop in Sweden’s PMI to 52.0 gave a mixed message for the Nordic region.

The Swiss PMI slipped 1.1 points to a below-forecast score of 54.2, which is still respectable.

Three members the euro area but not Germany, France, Italy, or Spain reported PMI results.

  • The Dutch manufacturing PMI eased back to a 2-month low of 54.4 from a 29-month high in September of 55.8.
  • The Irish PMI jumped 2.2 points to a 30-month high of 54.9.
  • Greece’s PMI score of 47.3 signaled continuing contraction in manufacturing and was below readings of 47.5 in September and a 44-month high of 48.7 in August.

The Czech PMI climbed 1.1 points to 54.5, best since mid-2011.

Britain’s manufacturing PMI settled back 0.3 points to 56.0 but averaged 56.5 in August-October, suggesting that factory output was expanding at around a 1.5% annualized rate at the turn between 3Q and 4Q.

Russia’s PMI reading of 51.8 in October was close to its long-term average and above 50 for the first time since June.

India’s PMI stagnated at a sub-50 reading of 49.6.  This was the third sub-50 score in a row.  Equally worrisome, input price inflation hit a 16-month high.  The Reserve Bank of India lifted its repo rate earlier this week in an effort to contain inflation.

South Korea’s PMI rose a half-point to 50.2, the first signal that manufacturing is expanding since a score of 51.1 in May. 

Indonesia’s PMI rose to 50.9, a 4-month high, from 50.2 in September and 48.5 in August.

Vietnam’s PMI stayed level at 51.5 in October.  Such had been south of 50 prior to September.

Taiwan’s PMI rose to 53.0 from 52.0 in September, 50.0 in August, and 48.6 in July.

Turkey’s PMI fell 0.7 points to a 2-month low after posting an 8-month high of 54.0 in September.

The South African PMI bounced to 50.7 after slumping by 6.5 points to 50.0 in September.

Australia’s manufacturing PMI recorded a second straight reading above 50, rising 1.5 points to 53.2.

Brazil’s on-year 2.0% growth of industrial production in September was less than forecast.

Still to come: the U.S. manufacturing PMI, U.S. auto sales, and public comments from several Federal Reserve officials.  PMIs for Mexico, Brazil and Canada are scheduled, too.

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

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