Fresh Doubts about How Soon the Fed Will Raise Interest Rates

October 2, 2014

The European Central Bank holds its monthly policy meeting today.  Investors are not expecting significant new stimulus but remain guarded about that possibility.  Confidence over the past month has waned in the likely effectiveness of plans to buy asset-backed securities.  Euroland CPI inflation dipped further in September to 0.3% overall and 0.7% on core items.  Producer price data for August, released today, showed a monthly dip of 0.1%, which was the fifth decline in six months, and an on-year drop of 1.4%, which compares with declines of 0.9% in June and 1.3% in July.

The ECB announcement at 11:45 GMT will be followed by President Draghi’s press conference starting at 12:30 GMT.  At the meeting last month, the Governing Council cut its interest rates by ten basis points to 0.05% on the refinancing rate, 0.30% on the marginal lending facility and minus 0.20% on the deposit rate.

U.S. motor vehicle sales were not as strong in September as in July-August, and the U.S. manufacturing purchasing managers index fell back 2.4 points to a reading of 56.6 in September. Other recent data showed a drop in U.S. construction spending of 0.8% in August, slower house price inflation in July, and a 7.4-point drop in the Conference Board consumer confidence index in September.

Scheduled U.S. data releases today are factory orders, the NAPM New York area PMI, and weekly jobless insurance claims.  Tomorrow investors get the September U.S. jobs report from the Labor Department plus a slew of service-sector purchasing manager survey results including for the United States.

The U.S. 10-year Treasury yield fell marginally below 2.40% yesterday but is at that level in futures trading before today’s open.  The German bund, British gilt and Japanese JGB yields are steady but low at 0.90%, 2.36% and 0.52%.

Hong Kong street protests continued for a seventh straight day, as government officials warned the mob not to take over any buildings.

West Texas Intermediate oil at $88.88 is down 2.0% on the day and below $90 per barrel for the first time in 17 months.

Comex gold is steady at $1,215.30 per ounce.

Share prices plummeted 2.6% in Japan, 2.7% in Indonesia, 1.3% in Hong Kong, and 1.1% in Singapore.  There were also declines of 0.7% in Australia, 0.6% in New Zealand and 0.8% in South Korea.  In European trading, stocks today have thus far fallen 1.1% in Italy, 0.7% in Switzerland and Spain, 0.4% in France, 0.3% in Britain and 0.2% in Germany.

The dollar fell back 1.0% versus the kiwi and is also down by 0.4% relative to the Australian dollar, 0.3% against the Canadian dollar, 0.2% vis-a-vis the yen and 0.1% against the euro.  The dollar is unchanged relative to the Swiss franc and yuan and has edged up 0.1% versus sterling.

Building approvals in Australia, which had fallen 3.8% in June but rebounded 2.1% in July, went up another 3.0% in August.  Approvals were 14.5% higher in the latest reported month than a year earlier.  Australia’s trade deficit narrowed more than forecast to A$ 787 million in August from A$ 1.075 billion the month before.

Growth Japan’s monetary base slowed further in September, dropping to 35.3% from 40.5% in August, 45.5% in the second quarter and 54.1% in the first quarter.

Japanese stock and bond transactions generated a JPY 815 billion net capital outflow in the final full calendar week of the first fiscal half compared to a net JPY 113 billion outflow in the prior week.

Consumer confidence in Thailand worsened 0.9 points to a reading of 79.2 in September from a 13-month high in August.

The British construction purchasing managers index improved to a reading in September of 64.2 from 64.0 in August and 62.4 in July.  It has been 60.0 or better each month thus far in 2014.

Consumer prices in Cyprus fell 0.9% between September 2013 and September 2014.  Romanian PPI inflation held steady at 0.5% in August.

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

Tags: , , ,


Comments are closed.