Doubting the Recent Strength of Equities

November 19, 2013

Share prices have dropped back 0.9% in Spain, 0.7% in Italy, 1.0% in France, 0.5% in Britain and 0.4% in Germany.  Equities also lost 1.2% in the Philippines, 0.7% in China, 0.6% in New Zealand and Australia, and 0.3% in Japan and Singapore.

The U.S. dollar advanced 0.5% against the Australian dollar.  Minutes from the Reserve Bank of Australia’s November Board meeting did not rule out an eventual rate cut and continue to characterize the Aussie dollar as too expensive.  Officials are presently keeping the policy status quo while assessing the positive effect on growth of previous monetary stimulus.

The greenback otherwise is 0.1% firmer against the euro, Swissie, and loonie, up 0.2% relative to sterling and unchanged against the yen, yuan and kiwi.

Ten-year German bunds and British gilts are unchanged.  The 10-year Japanese JGB yield is a basis point lower.

Oil and gold slid by 0.3% to $92.78 per barrel and 0.2% to $1,269.50 per ounce.

The Monetary Policy Council at Turkey’s central bank left key interest rate settings unchanged as analysts were expected.  The one-week repo rate is 4.5%.

Australia’s indices of leading and coincident economic indicators went up 0.3% and 0.1%, respectively in September.

Japan’s index of leading economic indicators in September was revised down to a reading of 109.2 from 109.5 reported earlier.  That still exceeded August’s 106.8 score 2.4 points and was in fact the highest reading since July 2007.  The coincident index was revised to 108.4 from 108.2 estimated initially.

Japanese department store sales swung to an on-year drop of 0.6% in October from a 2.8% advance in September.  Tokyo sales grew 1.2%, only a third as much as their 12-month gain in September.

Chinese foreign direct investment slowed to a 4-month on-year low of 1.2% in October from a gain of 4.9% in the year to September and 6.2% on average over the first nine months of the year.

The People’s Bank of China conducted its greatest liquidity injection in six weeks.

Construction output in the euro area fell 1.3% in September.  It was the first drop in at least a half year and didn’t prevent the 12-month decline from shrinking to only 0.2% from 1.3% in August.  Output recorded an on-year slide of 1.7% last quarter, down from declines of 6.1% in the year to 1Q13 and 4.0% in 2Q.

Investor confidence in Germany according to the ZEW expectations index improved to a higher-than-forecast reading of 54.6 in November from 52.8 in October and 49.6 in September, this despite a one-point drop in perceived current conditions to a score of 28.7.  The ZEW expectations index of Euroland rose 0.3 points to 60.2, while current conditions fell by 0.7 points to minus 61.6.

Car sales in the European Union of 27 economies were 4.7% higher than a year earlier in October.  They had risen 5.4% in the year to September.

Italian industrial orders posted increases in September of 1.6% from August and 7.3% from a year earlier.

Greece’s finance minister disclosed efforts to nail down a loan from its Troika of creditors by the semi-annual EU conference.  The Greek current account surplus narrowed 21% to EUR 964 million in September.

Norwegian GDP grew 0.7% in 3Q.  Output on the mainland, excluding offshore oil, was 0.5% higher.

Interest is keen in what tomorrow’s released FOMC minutes will show.  New York Fed President Dudley made remarks yesterday indicating somewhat more confidence in latest indicators monitoring the U.S. recovery.  Could tapering begin before March?  Stay tuned.

The OECD is out with new semi-annual growth forecasts that for the world economy are below those issued in May.  The organization of industrial economies looks for GDP globally to advance 2.7% this year and 3.6% in 2014.  Lower assessments of India and Brazil account for much of the downgrade.  Chinese growth is expected to accelerate a half percentage point to 8.2% in 2014.  The U.S., Japan and euro area are projected to expand next year by 2.9%, 1.5% and 1.0%, respectively. 

The U.S. employment cost index data for 3Q get released today.  The central bank of Chile announces its latest interest rate decision at the end of the day.  There will be keen interest in what Chicago Federal Reserve President Evans, a dovish member of the FOMC, says in public remarks today.

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

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