A Difficult Day for Stocks in China and Hong Kong
January 19, 2015
Global financial markets last week were convulsed by a profound and unexpected change in Swiss currency policy. With the United States closed for Martin Luther King Jr’s birthday, another policy-induced bout of turmoil hit the stock markets of China and Hong Kong, which respectively tumbled 7.7% and 1.5%. The former drop was the greatest since June 2008 and triggered by constraints placed on brokerage loans to support margin buying of stocks.
Swiss markets meanwhile continued to be volatile. The franc recovered 1.7% against the dollar. Swiss equities rose 3.3%, and the 10-year Swiss sovereign debt yields rose four basis points.
The dollar otherwise shows narrow changes from Friday’s close. It has edged up 0.4% against the Australian dollar, 0.2% versus the yuan, and 0.1% vis-a-vis the loonie. Sterling and the kiwi are unchanged against the U.S. currency, which has also fallen 0.2% against the euro and 0.1% relative to the yen.
Share prices rose 0.9% in Japan, 0.8% in South Korea, 0.5% in India, 0.4% in Taiwan and New Zealand and 0.2% in Australia and Singapore. In Europe, equities so far have gained 0.9% in Italy, 0.6% in Spain, 0.4% in Germany and 0.1% in France and Britain.
West Texas Intermediate oil fell 1.1% to $48.17 per barrel, while Comex gold is unchanged at $1,277.20 per troy ounce.
The 10-year Japanese JGB yield declined another four basis points, dropping through 0.2% to a new record low of 0.19%. The 10-year British gilt declined three basis points, and the 10-year German bund is a basis point lower.
Markets are speculating that the ECB Council will agree at this Thursday’s meeting to do somewhat more than 600 billion of quantitative easing, but analysts and traders do doubt that quantitative easing will be effective as a deterrent to deflation and promoter of strengthening activity in Euroland.
Construction output in the euro area dipped 0.1% on month in November but was nonetheless 2.2% higher than in November 2013.
The euro area current account surplus narrowed to a 3-month low of EUR 18.1 billion in November. Street forecasts had projected a bigger surplus of slightly more than EUR 21 billion, and the trade surplus in fact did widen EUR 0.3 billion to EUR 18.7 billion. The year-to-November current account surplus was EUR 238.9 billion, 11.4% greater than in January-November of 2013.
The Swiss PPI/import price index posted a fifth consecutive monthly decline in December, this time of 0.4% which left such 2.1% lower than in December 2013. The average drop in 2014 was 1.1%, most for a calendar year since 2009. Import prices fell 1.8% last year, while domestic producer prices dropped by 0.8%.
Chinese property prices slid 0.2% on month and 4.3% in December. Prices fell on month in 66 of 70 reporting cities and were lower than a year earlier in 68 of them.
Japanese consumer confidence recovered 0.9 points to a 2-month high of 38.3 in December but had an average reading in the fourth quarter of 38.1, donw from 41.1 in 3Q and even lower than the second quarter’s mean of 39.3.
Japan’s decline of industrial production in November was revised marginally to 0.5% from 0.6% reported initially. Output fell 3.7% on year but was 1.5% greater in October-November than its third-quarter average score. Capacity use fell 0.8% on month and 1.7% on year, while capacity declined 2.4% on year in November.
New Australian motor vehicle sales recovered 3.0% last month, trimming the 12-month rate of decline to 1.0% from 3.7% in November. A gauge of expected Australian inflation was sliced fairly significantly to 1.5% in last month’s survey from 2.2% reported in the November survey.
South Korea producer prices posted a 2.0% on-year decline last month, somewhat more than twice as much as the drop of 0.9% in the year to November. Hong Kong’s jobless rate stayed at 3.3% last month.
The Rightmove index of British home prices increased three times more than forecast in January, climbing 1.4% from December and resulting in a larger 12-month rise of 8.2%. Icelandic consumer prices were 0.4% lower than a year before in December. Portuguese producer prices posted a 3.3% 12-month drop in December, three times greater than the slide in the year to November.
Copyright 2015, Larry Greenberg. All rights reserved. No secondary distribution without express permission.