A Regional Provocation by China’s Government

November 25, 2013

Thanksgiving week began with a light schedule of second-tier economic data releases.

The main development is Beijing’s unilateral designation of an “air defense identification zone” over the East China Sea including the islands whose sovereignty China and Japan dispute.  Planes entering such space must identify themselves.  Japanese political leaders of course protested this action, and U.S. officials reaffirmed their pledge to back up regional allies.  The yen hit multi-month lows of 138.01 per euro and 101.93 per dollar.

The escalation of cold war hostilities between Japan and China overshadowed an agreement with Iran, in which Teheran agreed to end expansion of its nuclear enrichment program in exchange for money and lessened trade restrictions.  Israel of course condemned this deal as an historic mistake.

Bank of Japan Governor Kuroda reiterated the pledge to retain its qualitative and quantitative very easy policy for years, modifying such if necessary. 

ECB Governing Council member Noyer, a Frenchman, made dovish remarks about needing to keep interest rates very low for an extended period of time and cutting such further if necessary.

The dollar has risen 0.5% against the yen, 0.4% versus the Swiss franc, 0.3% relative to the loonie, 0.2% against the euro and 0.1% vis-a-vis sterling.  The Aussie dollar and Chinese yuan are steady, and the kiwi gained 0.3%.

Some equities in the Pacific Rim recorded solid gains like India (1.9%), Japan (1.5%) and Taiwan (0.9%).  Share prices in the Philippines, still grappling with an humanitarian disaster, fell another 1.3%.  Equities rose 0.5% in South Korea, 0.4% in Indonesia, and 0.3% in Australia and Singapore but fell 0.4% in China and 0.1% each in New Zealand and Hong Kong.  In Europe, share prices are unchanged in Spain but up 0.9% in Germany, 0.5% in France and 0.3% in Britain.

Commodities sank sharply on the Iran nuclear deal.  Oil is off 1.3% at $93.58 per barrel.  Gold had dropped 1.0% to $1,231.20 per ounce.

The ten-year Japanese JGB yield rose two basis points to 0.64%.  The British 10-year gilt is a basis point lower at 2.78%, and the 10-year German bund is steady at 1.75%.

French business sentiment held steady in November at a reading of 98.  This was the third such score in three months, but ten points higher than April’s trough of 88.

Dutch business sentiment edged up to -0.4 in November from -0.5 in October. Czech economic sentiment improved 1.6 points to 4.5 in November, led by a 4.2-point rise in consumer confidence but also embodying a 0.9-point gain in business sentiment.

British mortgage approvals according to BBA data slipped to a lower-than-forecast 42,808 in October from 43,182 in September.

Spanish producer prices fell 0.6% last month, swing the 12-month change into the red (-0.2%).  Finnish producer prices were 0.9% lower than a year earlier in October.

Singapore CPI inflation accelerated to 2.0% last month from 1.6%.  Vietnamese CPI inflation edged down 0.1 of a percentage point to 5.8%.  Brazilian consumer confidence rose 1.0%.  Taiwanese industrial output was 0.8% higher than a year before in October.

Greece posted a EUR 1.09 billion trade deficit in September, 5% narrower than in August. 

Swiss employment expanded 0.7% on quarter in 3Q.

Scheduled U.S. data releases today include the Dallas Fed manufacturing index, pending home sales, and a flash estimate from Markit Economics of the U.S. service-sector purchasing managers index in November.  The Bank of Israel will announce its latest interest rate decision.

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

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