Progress Reported toward a Cease-Fire Accord for Ukraine

September 3, 2014

Equities have risen 1.3% in Germany, 1.0% in France, 0.7% in Great Britain, 0.9% in China, 0.5% in India and 0.4% in Japan on lessening concerns about the situation in Ukraine.

The dollar is unchanged against the Swiss franc, sterling and yen.  It’s fallen 0.6% relative to the Australian dollar where better-than-assumed 3.1% on-year GDP growth in 2Q was announced, and it has also fallen by 0.2% versus the loonie and 0.1% vis-a-vis the yuan, kiwi and euro.

The ten-year British gilt yield rose three basis points, whereas the 10-year German bund and Japanese JGB are steady.

Oil advanced 1.1% to $93.90 per barrel.   Gold increased 0.2% to $1,267.50 per ounce.

The National Bank of Poland’s interest rate was left unchanged at a record low of 2.5%, the level since a 25 basis point cut in 2013.  Analysts anticipate another reduction soon, since inflation is well below target amid a darkening overall growth picture due to soft European and Russian demand.

The Bank of Canada is not likely to change its monetary policy.  An announcement is expected there later this morning.

Brazil is also holding a monetary policy meeting today.

Retail sales in the euro area contracted 0.4% in July, somewhat more than forecast, and posted a reduced 0.8% 12-month rate of increase.  Food dipped 0.2% over the past year, while other retail sales went up 1.5%.  July’s retail sales level was 0.1% less than the 2Q mean.

In spite of a sharp drop in the terms of trade, Australian real GDP went up 0.5% between 1Q and 2Q and by 3.1% from a year earlier.  Business investment and consumer spending both increased.

Many service-sector purchasing manager survey results for August were reported.

  • In Euroland, the composite PMI retreated to a 5-month low of 52.5.  This was  below the flash estimate of 52.8 and July’s 54.2 reading.  It looks like Euroland GDP growth will return to the black in 3Q but just barely.  The post-midyear revival is falling well short of what ECB officials had been predicting. 
  • The Irish and Spanish composite PMIs within Euroland rose to 168- and 89-month highs, and the French composite score, though still under the 50 no change line at 49.5, was at a 4-month high.  But the German composite score of 53.7 was at a 10-month low, and Italy’s 49.9 was at a 9-month low.
  • Euroland’s service-sector PMI was 53.1, revised from a preliminary August estimate of 54.9 and at a 2-month low.  The Spanish and Irish service-sector indices were at 92-month and 2-month highs, while the Italian reading was a 5-month low.  The German and French indices are at 2-month lows.
  • Japan’s service-sector PMI edged back under 50, falling 0.5 points to 49.9.  The composite Japanese PMI of 50.8 in August is a 5-month high but connotes little more that stabilization.
  • HSBC reported a 4.1-point rebound of China’s services PMI to 54.1 after July’s record low.  The composite PMI of 52.8 was 1.2 points higher than in July and at a 17-month high.  The government’s services PMI only rose 0.2 points to 54.4, however.
  • In the Middle East, non-oil PMIs rose 2.6 points to an 8-month high in Egypt, 0.6 points to a 37-month high of 60.7 in Saudi Arabia, and 0.4 points to a record high of 58.4 in the U.A.E.  Lebanon’s PMI declined 2.4 points, in contrast, to a 6-month low of 45.5.
  • Despite its pariah status in world community, Russia’s service sector PMI rose 0.6 points to 50.3, limiting the dip in the composite PMI, which printed in August at 51.1, to 0.2 points.
  • India’s composite (51.6) and service-sector (50.6) PMI scores were both at 3-month lows.
  • Australia’s PSI-services index edged up 0.1 to a 3-month high of 49.4.
  • Britain’s service-sector PMI, in a big surprise, climbed to a 10-month high of 60.5.  Analysts were forecasting a 58.5 reading.
  • Sweden’s service-sector PMI dived 5.9 points to a 5-month low of 54.2.
  • The Vietnamese factory PMI worsened to a 9-month low of 50.3 from 51.7 the month before.
  • South Africa’s PMI improved 4.7 points to a 6-month high of 51.1.

Turkish CPI and PPI inflation in August stood at 9.5% and 9.9%.  Both rates were slightly higher than in July.

Romanian and Hungarian on-year GDP growth rates were at 1.2% and 3.7% last quarter, confirming their respective preliminary estimates.

Norway’s current account surplus contracted 38% last quarter to NOK 68.8 billion.

U.S. chain store sales last month were almost 5% higher than a year earlier.

This just in:

  • The Bank of Canada left its overnight interest rate unchanged at 1.0% as expected.  It’s been at that level since September 2010.
  • U.S. factory orders shot up 10.5% in July, led by the 22.6% upsurge in durable goods.  Non-durables fell 0.9%.

Still to come: Federal Reserve Beige book, U.S. motor vehicle sales, and the Brazilian Selic Rate decision.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.


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