Different Responses to Terrorism

December 7, 2015

President Obama gave a rare nationwide address Sunday in prime time, stressing the difficulty of combating terrorist acts like the one in California last week but urging calm.  Hysteria and broad characterizations play into enemy’s intent.

In the first round of French regional elections, the right-wing National Front claimed the most popular votes and won in half the mainland regions.  The center-right led by former President Sarkozy came in second and won a third of the votes.  Current President Holland’s Socialists came in third, a big psychological defeat and indication of strong dissatisfaction with the handling of migrants and the threat of terrorism.  The second round vote is slated for December 13.

The dollar opened this week higher, rising 1.2% against the kiwi, 0.8% relative to the Canadian and Australian dollars, 0.6% versus the Swissie and euro, 0.2% relative to sterling and 0.1% vis-a-vis the yuan and yen.

In continuing response to last week’s announced increase in OPEC oil production quotas, WTI crude sank an additional 3.2% and is below $39/barrel.  Gold dropped 0.6% to $1,079.97 per ounce.

The ten-year British gilt yield fell four basis points to 1.88%.  10-year U.S. Treasuries and German bunds are steady, and the 10-year Japanese JGB yield is a basis point lower.

U.S. stocks opened lower.  In the Pacific Rim, share prices rose 0.7% in Japan, 0.8% in Singapore and 0.7% in Taiwan but fell 0.8% in New Zealand, 0.4% in India and 0.3% in China and South Korea.  European stocks climbed so far by 2.0% in Germany, 1.5% in France, 0.8% in Switzerland, and 0.3% in Italy and Britain.

German industrial production only recovered 0.2% in October following drops of 0.6% in August and 1.1% in September.  Energy and intermediate manufactured goods fell by 5.9% and 1.1%.  Production was unchanged from October 2014.  The results are weaker than forecast despite a strong 2.7% increase in capital goods output.

There are signs of division on the Bank of Japan Board.  Governor Kuroda rejected adoption of a negative deposit rate, claiming aggressive quantitative stimulus is sufficient.  Board member Sato said quantitative stimulus is yielding diminishing returns.

Australia’s construction purchasing managers index fell 1.4 points to a 4-month low of 50.7 in November.

South Africa’s PMI recovered 0.6 points to a 2-month high of 56.3 last month.

Egypt’s non-oil PMI slumped 2.2 points to a 26-month low of 45.0 in November, showing a considerable rate of contraction.

Saudi Arabia’s non-oil PMI recovered 0.6 points to a 3-month high of 56.3 in November, which is still one of the lowest results ever.

The United Arab Emirates’ non-oil purchasing managers index rose 0.5 points to a 2-month high of 54.5 last month.

Japan’s index of leading economic indicators rose 1.3 points to a 2-month higher of 102.9 in October.  The index of coincident economic indicators climbed 2.0 points to a 9-month high of 114.3, but its trend was still labeled as “weakening” by officials.

Japanese FX and other  international reserves fell $1.120 billion last month and by $26.5 billion over the first 11 months of 2015.

There is a European Group meeting today.  Today is also the 74 anniversary of the Japanese attack on Pearl Harbor that propelled the United States into the Second World War.

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

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