Stronger Pound and Dollar Amid Mixed PMI Manufacturing Results

November 3, 2014

While unchanged against sterling, the dollar gained overnight by 1.2% against the yen (which sank as low as 113.74), 0.9% versus the Australian dollar (which hit a new low of USD 0.8704), 0.7% relative to the loonie, 0.5% vis-a-vis the kiwi, 0.3% against the euro and Swissie and 0.1% against the yuan.

Japanese markets were closed for Culture Day.  In trading around the Pacific Rim, equities rose 0.6% in New Zealand, 0.5% in Singapore, 0.3% in Taiwan, and 0.2% in China but lost 0.6% in South Korea, 0.4% in Australia, 0.3% in Hong Kong and 0.1% in Indonesia.  Stocks in Europe so far are down 1.5% in Italy, 0.7% in Spain, 0.6% in Switzerland, and 0.5% in the U.K., France and Germany.

The 10-year German bund fell by two basis points, while its British counterpart ticked a basis point upward.

Comex gold is unchanged at $1,111.80 per ounce, and WTI oil traded up 0.3% to $80.77 per barrel.

The Euroland factory purchasing managers index for October got revised to a two-month low of 50.6 from 50.7 reported initially.  Such a reading was barely above the 50 no change level and signifies scant growth in manufacturing operating conditions at the start of the fourth quarter.  Within the common currency area, manufacturing contracted in Greece (48.8), France (48.5), Italy (49.0) and Austria (46.9); those readings respectively represented a 2-month high, a 2-month low, a 17-month low, and a 24-month low.  Germany (51.4) and Ireland (56.6) posted 2-month PMI highs, while the Dutch score of 53.0 was at a 3-month peak.  Spain’s 52.6 was unchanged from the September 7-month low reading.  In characterizing these results, Euroland manufacturing was said to be struggling to recover traction.  Disturbingly for the immediate future trend, orders contracted for a second straight time.  German growth is only modest, and the region remains quite uneven in economic performance.  ECB officials will notice too that cost inflation continued to recede.

The official Chinese purchasing manager survey results were disappointing.  Manufacturing (50.8) was at a 5-month low, and non-manufacturing dipped 0.2 points to 53.8, indicating slower positive growth, too.  The HSBC-compiled manufacturing purchasing managers index improved to a 3-month high, albeit of just 50.4.

The Swedish PMI in manufacturing slid to a 2-month low of 52.1 from 53.4.  Norway’s index moved back above 50 to 50.7 versus 49.8 in September.

The Swiss PMI leaped to a 5-month high of 55.3 in October from 50.4 the month before, thanks to a 7.2-point advance in the orders subindex.

In eastern Europe, Poland’s score of 51.2 constituted a 6-month high and followed three sub-50 scores in a row.  Russia’s 50.3 was at a 4-month low, and the Czech reading of 54.4 was a 2-month low.  Hungary’s 54.9 reading was the best since 2007.

India shot a 51.6, a 2-month high following a 9-month low of 51.0.

Indonesia’s 49.2 in October after a manufacturing PMI of 50.7 was at a 14-month low.

Vietnam’s PMI fell 0.7 points to a 2-month low of 51.0.  South Korea experienced its worst reading in four month, 48.7 after 48.8 in September and 50.3 in August.

The Turkish PMI climbed 0.7 points to a 7-month high of 51.1.

Australia experienced a third straight sub-50 reading, this time of 49.4 after 46.5 in September and 47.3 in August.

The Aussie dollar hit a new low for the move, nonetheless, reacting to news that building permits in that economy slumped 11% on month in September, most in 21 months, and by 13.4% on year.  A slight acceleration in expected Australian inflation, a 5-month low in job ads, and a 16.9% on-year plunge in Australian commodity prices were also reported.

Various price data were reported.  Producer prices fell 1.3% on year in Thailand in October, but Turkish producer price inflation rose that month to 10.1%.  The Turkish CPI, up 9.0%, also slightly surpassed forecasts, while Thai consumer prices rose just 1.5%.  Total Indonesian CPI inflation ticked up 0.3 percentage points to 4.8% despite lower core inflation.

Italian officials revised projected 2014 GDP growth to negative 0.3% from a forecast of 0.6% made a half year ago.  This was accompanied by a halving of projected 2015 Italian GDP growth to just 0.5%.

Scheduled U.S. data today are construction spending, the manufacturing PMI and motor vehicle sales.

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



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