Continuing Risk Aversion after Poor U.S. Performance Yesterday

September 10, 2015

Stocks fell 1.4% in China and Singapore, 2.2% in Hong Kong, 2.5% in Japan, 0.4% in India, 0.2% in Taiwan and 0.1% in New Zealand and Indonesia.

In Europe, equities are down 1.0% in Spain, 0.6% in France and Italy, 0.3% in Germany and the U.K., and 0.2% in Switzerland.

The main currency development overnight was a sharp recovery in the offshore yuan.  With the officials yuan holding steady, the spread between the dual rates has greatly narrowed.  There’s been speculation of Chinese intervention to converge the two prices as yet another move to persuade investors that officials still control their financial markets and the rebalancing of Chinese growth in such a way that the overall pace doesn’t slow excessively.  But markets remain doubtful such can be done.

In other currency market action, the U.S. dollar jumped 2.0% against the kiwi, following a third cut since June in the New Zealand Official Cash Rate, which was lowered 25 basis points to 2.75%.  See my review.  The dollar lost 0.8% against the Aussie dollar, 0.2% vis-a-vis the loonie, and 0.7% versus sterling but has firmed 0.6% relative to the yen and 0.1% versus the euro.

Oil bounced 0.9% up to $44.56 per barrel of WTI grade.  Comex gold edged 0.1% lower to $1,106.54 per ounce.

Ten-year German bund and Japanese JGB yields fell two basis pints each to 0.68% and 0.34%.  The 10-year British gilt is a basis point softer at 1.86%.

The Bank of England retained a 0.50% Bank Rate in an 8-1 vote and decided unanimously not to modify the GBP 375 billion ceiling on the asset purchase program.

Chinese CPI inflation in August accelerated 0.4 percentage points, reaching the 2.0% level for the first time in a year.  Such began 2015 at 0.8% in January.  However, producer prices recorded a deeper on-year decline of 5.9% following drops of 5.4% in July and 4.8% in June.

Japanese corporate goods prices slid 0.6% in August and posted a bigger on-year decline of 3.6%.  Between August 2014 and last month, export and import prices respectively fell by 6.1% and 19.5%, each exceeding July’s on-year decline.

Core domestic Japanese machinery orders fell 3.6% in July on top of a 7.9% plunge in June.  Public-sector orders dived 27% on month, while foreign orders advanced 10.2%.

Japanese stock and bond transactions in the week of September 4 generated a net JPY 3.31 trillion capital outflow, 76% greater than in the previous week.

Australian labor statistics showed continuing improvement in August.  17.4K jobs were created in the month, slightly more than three times greater than anticipated although only about half as many as in July.  The unemployment rate slid back to 6.2% after rising from 6.0% in June to 6.3% in July.  Expected inflation in Australia settled back to 3.2% in a September survey.

Britain’s Halifax house price index jumped 2.7% on month in August, the biggest gain since May 2014.  This raised the 3-month on-year rate of increase to a 2-month high of 9.0% in June-August.  The Royal Institute of Chartered British Surveyors house price balance index rose to 53% in August from 44% in July.

Irish real GDP increased 1.9% last quarter, posting on-year growth of 6.7% after 7.2% in the first quarter.  Turkish GDP increased 1.3% on quarter and 3.8% on year in 2Q.

French industrial production unexpectedly sank 0.8% on month in July and was merely 0.7% above the year-earlier level.  Finnish industrial production eased 0.3% on month and fell 1.3% on year in July.  Spanish industrial production rose by 0.6% in July, producing a 5.2% working day-adjusted advance from a year before.  Malaysian industrial output dipped 0.1% in July but was 6.1% higher than a year earlier.

Greek unemployment, which fell to a 3-year low of 25.0% in June, edged back upward to 25.2% in July.  Swedish seasonally adjusted unemployment stayed at 4.0% in August, while the unadjusted 4.3% was at a seven-month high.

In the year to August, consumer prices rose 0.8% in The Netherlands, 2.0% in Norway, and 0.7% in Portugal.  Irish CPI inflation was zero that month.  Danish CPI inflation slowed to a 4-month low of 0.5%.  The CPI fell on year by 0.2% in Sweden and 1.9% in Romania.  Norwegian producer prices plunged 10.0% over those dozen months, much more than the 6.6% slide registered in the year to July. 

U.S. import prices and weekly jobless insurance claims get reported today.  So do Canadian capacity utilization and new house prices. Peru’s central bank is due to reveal its latest decision on interest rates.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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