Lower Share Prices Again

October 7, 2014

Stocks fell 1.1% in India, 0.7% in Japan, and 0.6% in Taiwan.  The DOW is off 0.7%, and European equities have fallen by 1.9% in Spain, 1.5% in France and Italy, 0.9% in Germany and 0.8% in Britain.  Investors were bummed out by confusing Japanese policy signals and a much-greater-than-anticipated 4.0% drop in German  industrial production.

The dollar is mixed, with overnight losses of 0.6% relative to the Australian dollar, 0.4% versus the yen and 0.1% relative to the kiwi and sterling but gains of 0.5% vis-a-vis the loonie, 0.2% against the euro and 0.1% versus the Swiss franc.

Ten-year sovereign debt yields dropped today by five basis points in the U.K., three basis points in the United States, and a basis point each in Germany and Japan.

Oil fell back below $90 to $89.60, a net drop of 0.8%.  Gold rose 0.3% to $1,210.60 per ounce.

Japanese government officials including the prime minister expressed uneasiness about yen weakness, while Bank of Japan Kuroda signaled a lack of concern about that development.  The Bank of Japan retained its year and a half-old settings of a virtual zero interest rate policy enforced by quantitative and qualitative monetary easing.  But the assessment was downgraded overall and for industrial production and business sentiment.  The next BOJ meeting at the end of October will unveil revised growth and inflation forecasts.

The Reserve Bank of Australia retained a 2.5% Official Cash Rate, calling policy accommodative and consistent with in-target inflation over the coming two years.  The last OCR change was a cut of 25 bps in August 2013.

Bank Indonesia’s benchmark interest rate was left unchanged at 7.5%, the level since a 25-basis point hike in October 2013.  Growth is weak, inflation is slowing but concern continues about the vulnerability of the rupiah given Indonesia’s sizable current account deficit.

German industrial production fell by 4.0% in August(2.8% year-over-year), almost three times the expected drop and July’s 1.6% rise.  Output in July-August was 0.8% lower than the 2Q mean after having fallen by 0.6% in 2Q.  Factory output plunged 4.8% on month.

British industrial production stagnated between July and August but was 2.5% greater than a year earlier.  This result was close to expectations.  The NIESR estimates GDP growth of 0.7% in 3Q14 versus 0.8% in June-August compared to the previous three-month period.

In the year to August, industrial production rose 21.2% in Ireland, 2.9% in Hungary and 2.3% in Norway but fell by 5.2% in the Czech Republic.

Swiss consumer prices edged up 0.1% on month but down 0.1% on year in September.  Swiss retail sales climbed 2.3% on month and 1.9% on year in August.

Several more September purchasing manager surveys were published today.

  • Australia’s construction PMI spiked to a 9-year high of 59.1 from 55.0 in August.
  • After 3-year lows in August, India’s services and composite indices bounced to 2-month highs of 51.8 and 51.6, respectively.  Growth is positive but modest.
  • Hong Kong’s private PMI edged up 0.2 points to 49.8.  This was the fourth sub-50 outcome in the last six months.
  • The non-oil Saudi Arabian PMI rose 1.1 points to a 27-month high of 61.8.
  • Egypt’s non-oil PMI improved 0.8 points to a ten-month high of 52.4.
  • The U.A.E. PMI printed 0.8 points lower at 57.6, which nonetheless continues to compare favorably with the series’ long-term mean score of 54.0.
  • Lebanon scored below 50 for a fifteenth straight time, printing at 47.6 after 45.5 in August and 47.9 in in July.

Japanese reserves, which had fallen by $7.9 billion in July, recovered $2.0 billion in August but then slumped $13.7 billion in the final month of the first half of fiscal 2014.

Japan’s index of leading economic indicators declined 1.4 points to 104.0 in August after having rebounded 0.7 points in August.  The index of coincident economic indicators dropped 1.4 points and remains on a “weakening trend.”

In released U.S. data, the IBD/TIPP optimism index stayed at 45.2 in October.  Chain store sales were modest last week.  The Jolts survey of corporate job openings, hires and separations recorded on-year increases of 3.4%, 3.3%, and 3.2% in August.  These data are watched closely by the Fed.

Canadian building permits were 7.8% higher in July-August than a year earlier.

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

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