Fresh Drop in European Equities

October 20, 2014

European share prices are selling off again following Friday’s interrupted downtrend.  The German Dax, British Ftse and Paris Cac are down 1.1%, 0.9%, and 0.8% so far.  Investors remain worried about the outlook for European growth and fear the ECB Governing Council will not do enough to forestall another slide into recession and possible deflation.

Friday’s rebound in stocks had earlier continued in the Pacific Rim, boosting markets there by 4.0% in Japan, 1.8% in Taiwan, 1.6% in South Korea, 1.2% in Indonesia, 1.0% in New Zealand and 0.9% in Australia.

The dollar has declined 0.3% against the Swiss franc and kiwi and 0.2% versus the euro, loonie and sterling.  The yen, yuan and Aussie dollar are steady.

WTI oil and Comex gold have firmed 0.1% to $82.82 per barrel and $1,241.60 per ounce.

Sovereign debt yields are little changed in Japan, Britain or Germany.  No significant data releases are scheduled today.

Japan’s August index of leading economic indicators was revised to 104.4, still a 3-month low, from 104.0 reported initially.  Moreover, the index of coincident economic indicators was revised lower to a 13-month low of 108.3.  Such was at 109.9 in July, and officials warned that the data suggest a possible “turning point.”  BOJ Governor Kuroda nevertheless stuck to his oft-repeated view that growth remains in a moderate upward trend.

Japanese department store sales were 0.7% weaker than a year earlier in September after posting a 0.3% on-year drop in August.

New Zealand consumer confidence dropped 3.4% in October, reversing September’s advance by a factor of two.  New Zealand’s service-sector purchasing managers index improved 0.3 points to 58.0 in September.

South Korea producer prices fell 0.3% on month and 0.4% on year in September, while Hong Kong’s jobless rate stayed at 3.3% last month.

Turning to Europe, German producer prices, which last posted a month-on-month increase in December 2013, were unchanged in September.  The on-year 1.0% decline was the largest since January of this year.  Energy costs were down 3.8% on month despite a 0.1% monthly uptick.

Euroland’s seasonally adjusted current account surplus narrowed EUR 2.7 billion to a 2-month low of EUR 18.9 billion in August.  In the twelve months to August, the current account equaled 2.5% of GDP, up from 2.1% of GDP during the prior year to August 2013.  The unadjusted surplus over the last twelve months from current account transactions and portfolio and direct investment capital flows was EUR 277.7 billion, 19.3% greater than the net inflow in the prior 12 months.

Industrial orders in Italy rose 1.5% in August but were unchanged from June’s level. 

Britain’s Rightmove house price index jumped 2.6% in October, most since May, but decelerated to a 7.6% on-year advance from 7.9% in the year to September.

Moody’s downgraded Russia’s credit rating to Baa2 from Baa1.  The action depressed the ruble somewhat.

Canada reports wholesale turnover today.

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

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