Gloom Fails to Lift

September 11, 2015

West Texas Intermediate crude oil fell back 2.4% to $44.80 per barrel.

Comex gold is 0.4% lower at $1,126.80.

Ten-year British gilt and German bund yields slid two and one basis points.  The 10-year JGB stayed at 0.34%.

The dollar rose 0.4% against the Swiss franc, 0.2% relative to the loonie, sterling, kiwi and Aussie dollar, and 0.1% vis-a-vis the euro.  The yen is unchanged, and the yuan rose 0.2%.  EM currencies remain under considerable pressure.

Share prices declined 1.1% in South Korea, 0.3% in China, 1.4% in Singapore, 0.6% in New Zealand, 0.5% in Australia, 0.4% in Hong Kong and 0.2% in Japan.  In European markets, stocks are down 1.0% in Germany, 0.9% in France, 1.2% in Spain, 1.0% in Greece, 0.5% in Italy and 0.4% in Switzerland.  The Ftse is little changed.

Four central banks announced interest rate policy decisions.

  • The Central Bank of Peru raised its benchmark rate by 25 basis points to 3.50%, marking the first tightening since May 2011.
  • Faced with a free-falling ruble, the Bank of Russia paused easing and instead left its key rate at 11.0%.  Cuts earlier this year total 6 percentage points, including a 50-basis point reduction in late July.
  • The Bank of Korea’s record low 1.5% 7-day repo rate was not changed.  There were 25-bp reductions in March and June.
  • Bank Negara Malaysia likewise kept its overnight target rate unchanged at 3.25%, the level since a 25-bp hike in July 2014.

Less than a week remains before the FOMC rate announcement.  Amid continuing high financial market volatility, analysts have reduced their perceived probabilities that the federal funds rate is raised this month, but opinion is split over whether a hike or leaving the rate unchanged would offer the greatest chance of settling markets down.

Japan’s Ministry of Finance published its quarterly survey of business sentiment.  Such rose from -1.2 in the second quarter to +9.6 in 3Q, but firms anticipated some deterioration in the next two quarters.

The final estimate of German CPI inflation in August confirmed the preliminary data.  Consumer prices were unchanged on month, keeping the 12-month rate of increase at 0.2%.  July’s similar pace had been the lowest since February.  Energy paced disinflation, falling 2.1% on month and 7.6% on year.

German wholesale prices dropped 0.8% on month in August and 1.1% on year.  That was the biggest 12-month decline since March.  Wholesale prices on average had fallen 0.6% in 2013 and 1.2% in 2014.

British construction output fell 1.0% between June and July and recorded the first on-year decline of 2015, a drop of 0.7%.

Swedish GDP data were upbeat.  Not only did a revised quarter-over-quarter rise of 1.1% in 2Q and 12-month gain of 3.3% represent upward revisions, but growth in the first quarter of this year and last quarter of 2014 got revised up as well.  Swedish unemployment dipped 0.2 percentage points to 7.2% in August.

On-year Icelandic GDP growth accelerated to 5.6% last quarter from 4.8% in 1Q.

The New Zealand manufacturing purchasing managers index rebounded to a 2-month high of 55.0 in August from 53.7 in July.

Italian industrial production grew by a faster-than-forecast 1.1% in July and was 2.7% greater than its year-earlier level.

The French current account swung to a EUR 0.4 billion deficit in July from a EUR 0.8 billion surplus in June.

Spanish consumer prices fell 0.4% between August 2014 and August 2015 following a 0.1% uptick in the year to July.

U.S. producer prices and the U. Michigan consumer sentiment index get released shortly.

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

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