Bank Share Price Woes Escalate as Quarter Draws to a Close
September 30, 2016
There’s been the usual cornucopia of data releases on the final business day of the calendar quarter, but the big story of the day involves Deutsche Bank, whose share price is down nearly 10%. Deutsche’s woes are dragging down other stocks in the global financial sector despite supposed safeguards built into the system in the wake of the Lehman Brothers fiasco, which also occurred in the month of September. A good quarter is ending on a decisively scary note.
Share prices in the Pacific Rim lost 2.3% in Hong Kong, 2.1% in New Zealand, 1.6% in Japan, 1.2% in South Korea and Indonesia and 1.1% in Taiwan. China heads into an extended holiday observing the anniversary of the Communist Revolution there 67 years ago.
Stocks in Europe are down 2.0% in Spain, 1.6% in Italy, 1.4% in France, 1.2% in Switzerland, 1.1% in Germany and 0.9% in the U.K. so far.
Among ten-year sovereign debt yields, bunds and gilts fell three basis points overnight, and the JGB is off one bp.
West Texas Intermediate crude oil ended a strong week of rise on its back foot, settling back 0.4% to $47.64 per barrel. Comex gold edged up 0.3% to $1,329.60 per ounce.
Japan released consumer prices, household spending and income, labor statistics, industrial production, housing starts, construction orders and motor vehicle production.
- Core and headline CPI inflation in August was in each case negative 0.5%. After a few years with restored positive inflation, the economy slipped back into deflation in 2016.
- Tokyo core and headline inflation for September also amounted to negative 0.5%.
- Real household spending in August was 4.6% lower than a year earlier, despite a 0.6% uptick in real disposable income.
- The jobless rate edged back up 0.1 percentage point to 3.1% in August, matching June’s level but still low historically. Employment grew 1.3% on year, which the 1.37 ratio of job offers to applicants was unchanged.
- Industrial production jumped 1.5% on month in August, much more than anticipated, and this produced a solid 4.6% advance compared to its year earlier level. Officials upgraded their assessment of output to “showing signs of increasing at a moderate pace” from the previous designation of “fluctuating indecisively but showing signs of increasing in part.”
- Housing starts in August (+2.5) and construction orders (+13.8%) were each higher than a year earlier for the first time since May.
- Motor vehicle output grew 8.8% between August 2015 and August 2016.
Eurostat released CPI data and unemployment.
- The preliminary estimate of on-line harmonized consumer prices in September showed inflation doubling to 0.4%. Such was negative as recently as May. Inflation has accelerated a half percentage point since September 2015. Core inflation of 0.8% in the latest month was the same as in August and down from 0.9% in September 2015. Energy prices had fallen 8.9% in the year to September 2015 but only 3.0% in the latest 12-month period.
- Euroland’s jobless rate remained stuck at 10.1%. This is the lowest since July 2011 but remains a bit more than twice America’s level and has failed to move lower for the past several months.
British GDP growth in the second quarter was revised up 0.1 percentage point to 0.7%. Growth has been positive every quarter since the start of 2013. The 0.7% increase of GDP was led by personal consumption; until the very end of the period, the Brexit referendum was expected to be turned down. British consumer confidence rebounded six points to minus 1 in September from -7 in August and -12 in July. Such had been -1 in both May and June.
The U.K. current account deficit totaled GBP 28.684 billion in the second quarter, equal to 5.9% of GDP. That compares to shortfalls of GBP 26.666 billion in the first quarter and GBP 21.964 billion in the second quarter of 2015.
The Nationwide index of British house price inflation settled back to a 2-month low of 5.3% in September from 5.6% in August but otherwise was the greatest 12-month increase since March.
German retail sales volume fell 0.4% in August, twice as much as forecast, but was 3.7% greater than a year earlier. The average sales volume in July-August exceeded the 2Q mean by 0.6%.
In September, French and Italian consumer prices were 0.4% and 0.1% higher than a year earlier. Their producer prices in August were respectively 2.0% and 1.1% lower than in August 2015. French consumer spending rose 0.7% on month in August, its first increase since March, and 1.0% from a year earlier. Italian unemployment stayed at 11.4% in August, a mere 0.1 percentage point lower than a year earlier.
New home sales in Australia rose 6.1% in August, while private credit grew 0.4%. New Zealand business sentiment recovered in September from depressed August scores.
The Caixin compilation of China’s manufacturing purchasing managers index ticked up to 50.1 in September from 50.0 in August and 50.6 in July. Sub-50 readings had occurred previously.
South Korea’s manufacturing PMI fell a full point to a 14-month low of 47.6 in September. Export demand was near to a 3-year low.
Malaysia’s manufacturing PMI also was below the 50 demarcation of growth from contraction. However, at 48.6, such was at a 3-month high. It’s been below 50 for a year and a half.
The Bank of Mexico increased its policy interest rate to 4.75% from 4.25% to resist intensifying price pressures caused by a vulnerable peso. The peso would be highly exposed if Donald Trump wins the U.S. election.
The National Bank of Romania left is monetary policy rate unchanged at 1.75% but cut reserve requirements on foreign currency-denominated deposits to 10% from 12%.
Canada’s economy seems to be emerging from the doldrums. Monthly GDP, which had been dropping, recorded back-to-back increases of 0.6% in June and 0.5% in July, lifting the 12-month increase to 1.3%. A big turnaround occurred in industrial production, which rose 2.4% in June and 1.6% in July to cut the 12-month rate of decline to 0.7%. Canadian producer prices were 1.3% lower than a year earlier in August, same as July’s pace. Raw material prices posted a 0.6% on-year increase.
U.S. personal spending stagnated in August. The PCE price deflator increased 0.1% on month.
Still to come: the U. Michigan U.S. consumer sentiment index, the Chicago PMI, and a policy statement from the Central Bank of the Republic of Colombia.
Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British GDP and current account, Ezone CPI and inflation, German retail sales, Japanese CPI and industrial production