It Ain’t Over ‘Til It’s Over

September 27, 2016

Clinton was at first perceived as the clear debate winner last night, which spurred a rally of stocks in Asia and emerging market currencies like the Mexican peso. She was deemed the winner overall but also on virtually all issues discussed. Narrowest margin was on likely handling of the economy.

Donald Trump reserved one of his biggest swipes for the Federal Reserve and Chair Yellen, declaring monetary policy to being extremely political and disastrous. He had plenty of harsh words for China but also Japan.

Winning a debate is one thing, and winning the election is something quite different. Investors are holding their breath in anticipation of the tracking polls that may shed light on how much, if at all, the debate impacted the race.

European stocks did not extend the rally, however. A nearly 3% additional drop in Deutsche Bank led a broad-based market decline that also featured sharp losses in the auto and energy sectors. Equities are currently down 1.0% in Italy, 0.8% in Germany, 0.5% in France, 0.3% in Spain and Greece but just 0.1% in Britain.

Stocks in the Pacific Rim had risen 1.0% in Hong Kong, 0.8% in Japan and South Korea, and 0.6% in China but fell 0.5% in Australia.

West Texas Intermediate crude oil fell 1.5% to $45.26. Comex gold edged 0.2% lower to $1,341.00 per troy ounce.

Ten-year sovereign debt yields fell three basis points in Britain, two bps in Germany and a basis point in Japan.

Changes in the dollar compared to Monday closings in New York have been minimal and meaningless.

Minutes from the Bank of Japan’s late July Board meeting, which had commissioned staff to prepare a full assessment of the policy framework, reflect divergent views over how much stimulus can be safely deployed and highlighted mounting doubt among policymakers about whether 2% inflation can be achieved.

Japanese corporate service prices fell 0.3% on month and rose just 0.2% on year in August.

China reported some encouraging news: on-year growth in corporate profits accelerated to 19.5% in August from 11.0% in July, 5.1% in June, and 3.7% in May.

But the Confederation of British Industries’ monthly survey of distributive trades produced a clunker, with the index reverting to a reading of minus 8 in September after having rebounded from -14 in June to +9 in August.

German import prices slipped 0.2% on month, not enough to prevent a further narrowing the 12-month rate of decline to 2.6%. Imported energy fell 11.7% on year in August following a 19.4% plunge in the year to July.

Industrial orders in Italy recorded a big 11.8% 12-month rate of decline in July, all attributable to weaker export demand.

Three Swedish economic indicators were reported. Imports in August were 7% greater than a year earlier, while exports fell 2.0%. As a result, the trade deficit widened from SEK 2.7 billion in August 2015 to SEK 10.3 billion last month. Swedish retail sales bounced back 0.6% in August from a 0.8% drop in July, and such were 2.8% greater than a year earlier.  The PPI fell 0.3% in the year to August, as import prices dropped 1.7%.

Euro zone M3 money growth accelerated to 5.1% in August after averaging 5.0% in June-July. The speedup reflected faster expansion of the narrow M1 aggregate. Loans to firms and for mortgages respectively went up by 1.9% and 2.3%, similar to the prior month.

Finnish consumer confidence slipped a bit in September from a 64-month high in August, but business sentiment improved in manufacturing.

A slew of U.S. statistics arrive shortly later today: the Case Shiller house price index, the Conference Board gauge of consumer confidence, the Richmond Fed manufacturing index, an estimate of the PMI services compiled by Markit Economics, and weekly Redbook chain store sales.

Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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