Many Balls in the Air

September 18, 2014

There is much for investors to watch this Thursday.

  • A Scottish referendum on independence will determine the future of Great Britain and have implications far beyond the Commonwealth.  The vote is considered too close to predict, although latest polls suggest a marginal edge toward rejections.
  • Markets continue to react to yesterday’s FOMC hand-outs and press conference.  The big takeaways are one more dissenter, more policymakers favoring a sooner rate hike, the emphasis on labor market developments and a stress on data-driven future policymaking that implies an earlier rate advance than policymakers expect if data continue to be better than forecast.
  • Central bank decisions in Switzerland, Malyasia and and Norway all kept existing interest rate levels.  Still to come: South Africa.
  • Japan reported another large trade deficit that embodied declines in both exports and imports.
  • Second-quarter growth in New Zealand was softer than forecast.
  • British retail sales were a shade weaker than predicted, and the Britain’s industrial trends survey produced the softest report so far of 2014.
  • Further evidence emerged that China’s property market continues to lose strength.
  • The ECB’s first targeted LTRO fetched only EUR 82.6 billion (about $106 billion), much less than hoped.

The dollar and yen are weaker.  The dollar rose 0.3% against Japan’s money but is down 0.4% versus the kiwi, 0.3% relative to sterling and the Swiss franc, 0.2% vis-a-vis the loonie, and 0.1% against the euro and Aussie dollar.  The euro hit a new 14-month low of $1.2834.  The Oz touched $0.8939, a 6-month trough.

In equity action, share prices rose 1.8% in India, 1.1% in Japan, 0.5% in Taiwan, 0.4% in Indonesia 0.3% in China, and 0.2% in New Zealand and Australia but fell 0.9% in Hong Kong and 0.7% in South Korea.  Stocks have risen 1.0% in Germany, 0.7% in France and Spain, and 0.5% in Britain.

10-year sovereign debt yields have climbed five basis points in Britain, two bps in Germany and a basis point in Japan.

Comex gold fell by 1.0% to $1,223.90 per troy ounce.  WTI oil slid 0.2% to $94.20 per barrel.

Housing prices slumped for a fourth straight month in China, falling 1.1% between July and August.  68 cities reported a drop versus just one that experienced a rise.  Property values were just 0.5% higher than a year earlier, down from a 2.5% rise in the year to July. 

Japan’s customs trade deficit of 948 billion yen in August was 2.4% smaller than a year earlier, as exports dropped 1.3% and imports slipped by 1.5%.  Import volume slumped 4.6% on year.  The seasonally adjusted JPY 924 billion deficit was 9.6% smaller than July’s JPY 1.022 trillion imbalance.

A 0.7% rise in New Zealand GDP last quarter was the smallest in a year, but on-year growth of 3.5% was the best since 3Q07.

The Swiss National Bank reaffirmed a 0-0.25% 3-month Libor target and a cap of 1.20 francs per euro.  The asymmetric exchange rate target (depreciation but not appreciation is allowed) has now been in place for the past 3 years.

The Executive Board of Norges Bank retained a 1.5% key interest rate.  It’s been there since a cut of 25 basis points in March 2012.  No increase is likely before 2016 according to officials.

Bank Negara Malaysia kept its policy interest rate, which was cut by 25 basis points in July, at 3.25%.  Future policy will be data-driven.

Bank of Japan Governor Kuroda gave a speech to stock brokers, adhering to the party line of a moderate recovery and core inflation hovering for some time around 1.25%.

British retail sales volume rose 0.4% in August following no change in July and accelerated to a 3.9% on-year pace.  Sales rose 0.5% in June-August and surpassed the year earlier level by 3.2%.

The Confederation of British Industries announced a totally unexpected 15-point drop in the industrial trends index to minus 4, the weakest result in 11 months.

Irish GDP advanced 1.5% between 1Q and 2Q and by a robust 6.5% on year.  Ireland posted a EUR 2.9 billion current account surplus in the latest quarter.

The Swiss trade surplus contracted 64% on month in August, due to a 12.5% plunge in imports. 

Dutch consumer confidence fell a point to minus seven in September, but Dutch unemployment also dropped in August.  Greek unemployment slid marginally in the second quarter to a still-lofty 26.6% of the labor force.

Wholesale turnover in South Africa sank 5.2% on month and 4.6% on year in July, a sharp turn for the worse compared to the prior month’s result.

Growth on year in Japanese machine tool orders was revised to 35.5% in August from 35.6% reported initially.  That’s similar to gains of 37.7% in July and 34.1% in the year to June.

Scheduled U.S. data arrivals today cover housing starts, building permits, the Philly Fed manufacturing index and weekly jobless insurance claims.

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

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