Data Surprises Prompt Risk-Off Action

December 8, 2015

Share prices plunged 1.9% in China, 1.4% in Hong Kong, 1.3% in Taiwan and Indonesia, 1.0% in Japan and 0.9% in Australia.  The sour mood extended into Europe, where stocks so far have lost 4.3% in Greece, 2.2% in Italy, 2.1% in Spain, 1.6% in France, 1.7% in Germany and 0.6% in the United Kingdom.  The DOW fell over 140 points (0.8%) in the first 25 minutes of trading.

West Texas Intermediate crude oil dropped another 2.6% to $36.66 per barrel, and Brent fell under $40 for the first time since February 2009.  Comex gold is 0.4% firmer at $1,075.94 per troy ounce.

Ten-year British gilt and Japanese JGB yields are a basis point softer.  The 10-year Treasury yield, 2.20%, is off two basis points.

The dollar shows mixed changes, with losses of 0.6% against the Swiss franc, 0.5% versus the euro and yen and 0.1% vis-a-vis the loonie but advances of 0.9% against the Aussie dollar, 0.4% relative to sterling and 0.1% against the kiwi and yuan.

Against China’s currency, the dollar has appreciated 3.5% since mid-2015.

Chinese trade figures provided one huge disappointment for investors.  The November surplus printed at $54.10 billion compared to expectations of about $64 billion.  Exports sank 6.8% on year, and imports collapsed even more sharply (8.7%).

Several Japanese economic statistics got released Tuesday.

  • Real GDP growth in 3Q was revised from -0.8% at an annualized rate to +1.0%, so it turns out that the economy didn’t contract in consecutive quarters after all.  The improvement, however, was counterbalanced by a more worrisome composition of growth last quarter.  Personal consumption growth and public investment were revised lower to 1.5% and negative 5.8%.
  • The seasonally adjusted JPY 1.494 trillion current account surplus in October was almost twice the size of the September surplus because of a 3.4% on-month plunge in imports rather than the strength of exports which were unchanged from September.  Compared to October 2014, exports fell 3.7%, and imports plummeted 16.4%.
  • In the first twenty days of November, customs clearance exports were 0.4% lower than a year earlier, and imports showed a 6.9% on-year dive.
  • Bankruptcies posted a smaller 3.4% on-year slide in November, fewer than the declines of 7.3% in October and 18.6% in September.
  • The economy watchers index, an index that measures perceptions of service sector workers like cab drivers, slumped to a 10-month low of 46.1 in November from 48.2 in October.  The forward-looking outlook component dropped 0.9 points to a 3-month low of 48.2.

British industrial production edged only 0.1% higher in October after no change in September but was 1.7% greater than a year earlier.  Factory output dropped 0.4% on month and 0.1% on year in October.

The British Halifax house price index dipped 0.2% last month, resulting in a 9.0% 12-month rate of increase in September-November, down from 9.7% in the year to August-October.

Revised eurozone national income accounts confirmed the preliminary third-growth estimates of 0.3% on quarter, down from 0.4% in the second quarter and 0.5% in the first quarter, along with a 1.6% four-quarter increase.  A 0.4% advance in consumption was a tad less than expected, and net exports exerted a surprising 0.3 percentage point drag on growth between 2Q and 3Q in spite of a more price competitive euro.  Negative growth resumed in Greece and continued in Finland.  Spain’s 0.8% quarterly growth outpace the increases of 0.3% in Germany and France and Italy’s rise of just 0.2%.

The business sentiment indices for France compiled by the Bank of France dipped a point in November for both manufacturers and non-manufacturers, prompting the central bank to revised projected fourth-quarter GDP growth lower to 0.3%.  France’s trade deficit widened to EUR 4.6 billion in October from EUR 3.6 billion in September and EUR 3.0 billion in August.

Icelandic GDP rose 0.7% on quarter and by a smaller 2.6% on year in 3Q15.

The index of Australian business conditions remained at +10 last month, while that for business confidence went up two points to +5, according to the National Australia Bank.

On-year growth in Turkish industrial output of 4.6% in October was a four-month high.  Industrial production in South Africa fell 1.1%, in contrast.

Canadian housing starts increased 7.2% on month to 211.9K in November, while building permits in October rebounded 9.1% on month from a 6.6% drop the month before.

The NFIB gauge of U.S. small business sentiment declined 1.3 points to 94.8 in November, lowest since the spring.  As disappointing as that news was, a 1.7-point increase in the IBD/TIPP Optimism index surprised analysts on the upside.  Job openings according to the Labor Department’s monthly JOLTS index printed at 3.6% in November, down from 3.7% in October.  Chain stores sales softened last week according to the weekly Johnson Redbook measure.

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

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