Awaiting U.S. Retail Sales, Consumer Price Data, and FOMC Minutes

November 20, 2013

After predictably dovish remarks from Ben Bernanke, the soon-to-be ex-Fed Chairman, the dollar has ticked down 0.2% against the euro, Swiss franc, Australian dollar and sterling.  The yen is unchanged following report of another large trade deficit, and the kiwi has risen 0.2% after higher-than-expected New Zealand producer price figures.  The yuan is also unchanged as investors ponder China’s promise to adapt a more managed foreign currency float with wider daily trading boundaries.

Share prices are lower.  Equities fell 1.8% in the Philippines, 1.2% in India, 1.1% in Indonesia, 0.9% in Australia, 0.5% in New Zealand and Malaysia, 0.7% in South Korea and Taiwan, and 0.3% in Japan and Singapore.  In Europe, stocks show losses today so far of 0.9% in Madrid, 0.5% in London, 0.4% in Paris, 0.3% in Milan and 0.2% in Frankfurt.

The ten-year British gilt yield and German bund firmed three basis points and two basis points, respectively, whereas the 10-year Japanese JGB slid a basis point.

Gold weakened 0.9% to $1,262.10 per ounce.  West Texas Intermediate crude oil recovered 0.1% to $93.44 per barrel.

Fed Chairman Bernanke expressed agreement with Janet Yellen’s recent confirmation testimony.  He endorsed continuing very accommodative policy, stressed that it would be a long time after tapering ends before the fed funds rate rises, defended September’s decision not to start tapering quantitative easing because of recent slower job gains, and said that it could be well after the jobless rate is at 6.5% or lower before the central bank hikes interest rates.

A Deputy Governor of the Reserve Bank of Australia repeated that central bank’s desire to see a weaker Aussie dollar but said that achieving such is contingent in large part on the timing of reduced Federal Reserve quantitative stimulus.  According to the Westpac compilation, Australia’s idnex of leading economic indicators ticked 0.1% higher in September, reversing a same-sized dip in August.

Chile’s central bank cut its interest rate by another 25 basis points to 4.5%.  Analysts were divided over whether this would happen.  The rate had been cut in October and also in January 2012.

Minutes from the Bank of England’s November 6-7 meeting revealed unanimous 9-0 policy votes and agreement that none of the forward-guidance circuit breakers had been triggered.  The minutes stressed the high level of uncertainty surrounding the outlook for British growth and inflation and claimed that such uncertainty warrants caution in deciding when the accommodative policy stance ought to start being snugged.

Japanese customs trade data for October showed quickening export growth but also a huge jump in energy imports, such that the deficit again surpassed JPY 1.0 trillion both on an unadjusted and a seasonally adjusted basis.  Exports went up 1.5% on month and 18.6% on year, but imports expanded 26.1% compared to October 2012.

Japan’s all-industry index, a supply-side proxy for monthly GDP, went up 0.4% in September after a 0.3% rise in August.  The index was 0.5% higher in 3Q than 2Q, halving its advance in the spring quarter.  The September all industry index was also 2.2% above its year-earlier level.

China’s business sentiment index dropped two points to a 4-month low of 53.3 in October.  Such peaked in August at 58.0.

The Conference Board (CB) reported a 0.6% increase of China’s index of leading economic indicators in October, the smallest rise in three months.  The index of coincident indicators went up 0.8%.  The CB also released France’s index of leading and coincident economic indicators.  Both dipped 0.1% in September.

New Zealand producer output prices leaped 2.4% on quarter in 3Q13, while the PPI-input index climbed 2.2%.  Those gains respectively represented the largest increases in five years and 2.5 years and resulted in 12-month advances of 4.1% and 3.3%.

German producer prices fell 0.2% on month and 0.7% on year in October.  Those declines slightly exceeded expectations.  Energy experienced a 1.9% drop from October 2012.  Bundesbank President Weidmann nonetheless argued against any further loosening of ECB policy.

The Swiss ZEW expectations measure improved to a 3-year high of 31.6 in November from an October reading of 24.9.  Dutch consumer confidence rose 9 points in November to a better-than-forecast reading of minus 18.  Spain’s trade deficit widened to EUR 2.59 billion in September from EUR 1.80 billion in August and EUR 0.79 billion in July. 

South Africa’s CPI rose 0.2% on month but fell 0.5 percentage points in on-year terms to 5.5% between October 2012 and October 2013.

U.S. mortgage applications fell 2.3% last week.  The 30-year mortgage rate rose to 4.46% from 4.44%.  Other scheduled U.S. data today are retail sales, consumer prices, business inventories, and existing home sales.  Dudley and Bullard speak publicly, and the FOMC minutes will be released.

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

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