Focus on China and Russia and a Softer Dollar

November 10, 2014

The annual summit of APEC leaders began in Beijing.  Chinese President Xi met with Japanese Prime Minister Abe and agreed to a framework for handling geopolitical crises between the two Asian powers.  A stock trading link between China and Hong Kong was finalized and will be launched on November 17th.

China also reported October price and trade data.

  • CPI inflation stayed at 1.6%, the September level which had been the lowest since January 2010.  Non-food inflation was just 1.2%, while food was 2.5%.
  • Producer prices (down 2.2% versus drops of 1.8% in September, 1.2% in August, and 0.9% in July) were below year-earlier levels for a 32nd straight time.
  • On-year import growth of 4.4% remained weak, indicating domestic demand continues to run soft and, in conjunction with an 11.6% advance in exports following 15.3% in September, resulted in a $45.8 billion trade surplus, a 2-month high.

The Central Bank of the Russian Federation abolished a trading range for the ruble but not the readiness to intervene to promote currency market stability.  Details are explained in this released statement.

The dollar has declined 0.6% against the kiwi, 0.4% relative to the yen and Australian dollar, 0.3% vis-a-vis the euro and Swiss franc, and 0.2% versus the loonie and sterling.  The yuan is steady against the dollar.

Stocks in China (+2.5%) and Hong Kong (0.8%) got a boost from the aforementioned link announced today.  In other Pacific Rim action, equities rose 1.5% in Taiwan, 1.0% in South Korea and New Zealand, and 0.4% in Singapore but fell 0.6% in Japan, 0.5% in Australia, and 0.4% in Indonesia.  In Europe, share prices have risen 0.5% in Spain, 0.4% in France and the U.K., and 0.3% in Germany, Italy and Switzerland.

WTI oil rebounded 1.3% to $79.70 per barrel.  Gold eased 0.1% to $1,168.80 per ounce on the Comex.

The 10-year British gilt and Japanese JGB yields are four and two basis points lower, while the German bund is steady.

The Sentix measure of investor sentiment toward the euro area recovered 1.8 points to -11.9 from October’s 17-month low but remained 22.0 points weaker in November than its July level.

Several countries reported 12-month declines in industrial output.  Industrial production in Italy sank 0.9% on month and 2.9% on year in September, which was considerably weaker than anticipated.  Greek industrial output dropped 5.1% on year in September, which was not quite as great as forecast.  Finnish September industrial production reversed a 0.7% monthly drop that had occurred in August but was still 1.6% weaker than a year earlier.  Danish output fell 3.7% in the year to September, but Romania proved an exception to this pattern, announcing that its industrial production was 4.8% higher than in September 2013.

Norwegian CPI inflation edged 0.1 percentage point lower to an as-expected 2.0% in October, but producer prices clocked a 3.4% year-over-year drop.  Greek consumer prices fell 1.7% in the year to October.  Czech and Danish consumer prices were 0.7% and 0.5% higher on year.

Ireland’s construction purchasing managers index climbed 2.9 points to 64.9 in October, highest since April 2004 and the second best score since mid-2000 when this data series began.

The Danish current account surplus narrowed 8.6% on month to DKK 15.77 billion in September.

Japanese international reserves increased $1.52 billion last month following wide swings of +$7.9 billion in July, +$2.0 billion in August and -$13.6 billion in September.

Australian home loans fell for a second consecutive time in September, dropping 0.7%.

Canada reports housing starts later today.  Bank are closed for Veterans Day in both Canada and the United States tomorrow, but U.S. stocks will be trading.

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

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