Attention to Central Banks and PMI Data

November 21, 2013

The Bank of Japan did not change monetary policy nor its economic assessment but did upgrade its view of overseas economic conditions.  Governor Kuroda talked confidently about economic trends and the achievements so far of quantitative and qualitative monetary stimulus.

Chatter continues after FOMC minutes proved a bit more hawkish than expected. 

Reserve Bank of Australia Governor Glenn Stevens expressed growing impatience with the stronger-than-desired Aussie dollar.  He still doubts the effectiveness of currency intervention but isn’t ruling out that option.

ECB President Draghi played down the imminence of adopting a negative deposit rate, saying there have been no further developments on that score since his last press conference.  Despite disinflation, he played down the risk of such evolving into deflation.

The South African Reserve Bank is holding a policy meeting today.

The dollar is mixed.  It has strengthened by 0.8% against the yen and Aussie dollar and by 0.7% versus the kiwi.  It’s also 0.2% higher relative to the loonie but down 0.2% versus the euro, Swiss franc and sterling.  China’s yuan is steady.

Stocks slumped in the Pacific Rim, dropping 2.0% in India, 1.3% in Taiwan, 1.2% in South Korea, 0.6% in China and Indonesia, 0.5% in Hong Kong and New Zealand, and 0.4% in Australia and Singapore.  A 1.9% rebound in the Japanese Nikkei-225 was an exception to this pattern of weakness.  In Europe, stocks are down 0.5% in Paris and 0.4% in Frankfurt.  The London Ftse and Spanish Ibex are unchanged. 

10-year sovereign debt yields have jumped nine and six basis points in Britain and Germany.  The 10-year JGB is a basis point firmer.

Gold fell by 0.7% to $1248.70 per ounce.  Oil is 0.2% firmer at $94.07 per barrel.

China’s manufacturing purchasing managers index, according to the flash HSBC report, fell from a 7-month high of 50.9 in October to 50.4 in November.  That’s still the second highest reading over that period.

Japanese supermarket sales recorded on-year growth in October of 0.5% after September’s 0.4% rise.

The Euroland composite PMI fell to a 3-month low of 51.5 in November despite a 10-month high in Germany’s composite index of 54.3, which was 1.1 points above the German October score.  Euroland softness was concentrated in services, with a 3-month low of 50.9 after 51.6 in October.  The Ezone manufacturing PMI firmed 0.2 points to a 29-month high of 51.5.  All this substantiates the weak and fragile pace of the region’s recovery from a long recession.

The French composite PMI of 48.5 constitutes a 5-month low after a 50.5 reading in October.  Both manufacturing (48.8 and a 6-month low) and services (48.8 and a 4-month low) were below the 50 threshold separating contraction from expansion. 

Britain’s industrial trends index jumped 15 points to +11 in November.  The public sector net borrowing requirement of GBP 6.383 billion in October was 26% less than net borrowing the month before.  Italian wage inflation held steady in October at a low 1.4% rate.  Swiss M3 money growth slowed to a 12-month increase of 9.1% in October from 9.4% in the year to September.  The Swiss trade surplus in October of CHF 2.43 billion was almost unchanged from September’s result.

U.S. jobless insurance claims fell 21K to 323K last week.  Producer price inflation remained at 0.3% in October, matching forecasts, but core PPI ticked up to a 12-month increase of 1.4% from 1.2% in September.  Still to come: the Philly Fed manufacturing index, the Markit-compiled preliminary manufacturing PMI report, and remarks by the Fed’s Lacker and Bullard.

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

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