Days of Wonder

November 1, 2016

Tomorrow’s FOMC statement is expected to prepare markets for a December rate hike. Ten-year sovereign debt yields are up 5 basis points in the U.S., 4 bps in Britain, and 3 bps in Germany. In Japan, where the BOJ now targets the 10-year JGB, that yield remained unchanged overnight.

The U.S. election one week from today is being compared to 2000, when the suspense continued well past election. The race has tightened following the FBI’s intervention and will be hotly contested by whomever gets fewer electoral votes.

A pipeline break in Alabama sent gasoline prices sharply higher.West Texas Intermediate crude at $47.20 is 0.7% higher. Gold has moved closer to $1,300 with a 1.3% overnight advance to $1,289 per ounce.

Dollar softness partly explains gold’s bid tone. The dollar fell 0.9% today against the Aussie dollar, 0.7% relative to the Swiss franc, 0.4% vis-a-vis the euro, 0.2% versus the kiwi and loonie and 0.1% against the yuan. The dollar is 0.1% higher relative to the yen and sterling.

Share prices in the Pacific Rim climbed 1.2% in Hong Kong, 0.7% in China, and 0.1% in Japan but are down 0.5% in Australia, 0.4% in New Zealand, and 0.2% in Taiwan and Indonesia. Stocks in Europe are down 1.0% in Greece and 0.2% in France, Switzerland and Germany.

The Bank of Japan by a vote of 7-2 left monetary policy unchanged but revised projected inflation lower. The dissents wanted a tighter stance. The Policy-Rate Balance remains at -0.1%, and the 10-year JGB yield target is about zero. About 80 trillion of JGBs will be bought annually.

The Reserve Bank of Australia maintained a 1.5% official cash rate. Such had earlier been cut this year by 25 basis points in both May and August.

Many manufacturing PMI surveys for the month of October were reported but not those of Euroland as a whole and many of its members.

  • The U.S. Institute of Supply Management PMI index rose 0.4 points to a 3-month high of 51.9. Growth in output accelerated, but that of orders slowed down.
  • The U.S. PMI compiled by Market Economics printed 1.9 points higher at 53.4.
  • Three Chinese PMIs were released, each of which exceeded expectations and revealed faster expansion than seen in September. The Caixin factory PMI increased 1.1 points to a 27-month high of 51.2. The government-authorized factory PMI improved 0.8 points to a reading of 51.2 as well, and its companion non-manufacturing PMI rose 0.3 points to a 10-month high of 54.0. PMI trends in China pointing to a stabilization of that economy’s slowdown have been a factor behind the global bond sell-off.
  • Japan’s manufacturing PMI of 51.4 was 0.3 points below the preliminary indication but a full point higher than September’s level and at a 9-month high.
  • Australia’s PMI reading, 50.9, was above the 50 no change level for the first time since a score of 51.8 in June.
  • Britain’s PMI settled back to 2-month low of 54.3 from September’s 27-month peak of 55.5.
  • The Swiss PMI increased 1.5 points to a 5-month high of 54.7.
  • Sweden’s 58.4 reading was near a 4-year high and 3.5 points higher than its September level.
  • India’s manufacturing PMI rose 2.3 points to a 22-month high of 54.4.
  • Russia’s PMI, like Sweden’s, was near a 4-year high at 52.4.
  • Turkey posted a 5-month PMI high in manufacturing of 48.6.
  • Brazil’s PMI, 46.3, still connotes sharp contraction yet at the slowest downward pace since January.
  • Mexico’s PMI dipped 0.1 point to a 2-month low of 51.8.
  • Canada’s PMI rebuonded 0.8 points from a
  • Norway’s 52.7 score matched September’s 2-month high.
  • Indonesia’s reading of 48.7 slipped beneath 50 for the second time in four months.
  • Vietnam’s 51.7, down from 52.9 in September, constitutes a 7-month lo w.
  • Thailand’s 48.8 matched September’s ten-month low.
  • But Taiwan’s 52.7 was a half-point better than in September and the highest such has been since August 2014.
  • South Korea scored a 48.0, a 3-month high after 14-month low of 47.6 in September.
  • Malaysia’s manufacturing PMI moved 1.4 points farther below 50 to a 4-month low of 47.2.
  • The Dutch PMI rose 2.3 points, helped by firmer energy, to a 15-month high of 55.7.
  • The Greek PMI fell 0.6 points to a 5-month low of 48.6.
  • Ireland’s 52.1 reading after 51.3 was at a 4-month high.
  • The Czech PMI of 53.2 represents a 5-month high.

U.S. construction spending fell 0.4% in September following a 0.5% drop in August.

The U.S. IBD/TIPP optimism index edged up 0.1 to a reading of 51.4 in November.  Still to come: U.S. auto sales later today.

Canadian monthly GDP increase 0.2% in August, with the service sector stagnating but industrial production advancing 0.7%. GDP surpassed the year-earlier level by 1.3%.

Swiss retail sales volume posted a 2.3% on-year drop. Adjusted for working day variations in September, however, there was an increase, albeit 0.2%, for the first time this year.

In the year to October, consumer prices rose 3.3% in Indonesia, 1.3% in South Korea and 0.3% in Thailand. Thai producer prices fell 0.5%.

On-year growth in Japanese motor vehicle sales slowed to 0.8% in October from 3.7% in September and 5.7% in August.

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

 

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