Several Developments to Watch

November 3, 2016

A few new U.S. political polls show Clinton still leading, but the race has narrowed, leaving the eventual outcome in doubt. The Mexican peso trimmed its recent losses.

Britain may get softer Brexit terms after all. A U.K. court has ruled that parliament must vote on the invocation of Article 50, which will begin the 2-year timetable for a complete exit. Prime Minister May had sought invoking the countdown no later than March 31st and without necessary parliamentary approval.

A few European banks have reported better-than-feared 3Q earnings.

A large rise in U.S. energy inventories reported yesterday contributed to a rise in West Texas Intermediate crude oil today of 1.0% to $45.77 per barrel, which breaks a downward streak.

The Bank of England left policy unchanged. Several easing moves had been taken in August at which time a forecast was laid out that if accurate would probably have triggered more easing now. But the central bank’s new quarterly outlook observes that growth since August has been better than assumed and inflation prospects have inclined further upward. So there wasn’t additional easing, but officials chose to let its growth mandate override its inflation goal in the short run, and not reverse policy direction either at this time. The Bank of England Bank Rate stays at 0.25%, and quantitative stimulus (the buying of gilts and corporate bonds) will continue as outlined in August.

There had been political pressure from Brexit supporters for BOE Governor Carney to step down because of his pre-referendum warnings about the consequences of a vote to leave the EU. Instead, Carney has decided to serve his full term to mid-2019.

The Czech National Bank kept its policy unchanged after the latest review.

The Egyptian pound will be floated. This news buoyed the country’s stock market.

The dollar lost further ground, and this time sterling joined that trend. The greenback fell 1.0% versus sterling, 0.2% against the yen, kiwi, and Aussie dollar, and 0.1% relative to the loonie. The dollar rose 0.2% against the euro, 0.1% versus the yuan and is unchanged against the Swiss franc.

Japan was closed for Culture Day. Elsewhere in the Pacific Rim, stocks dropped 1.4% in Indonesia, 0.8% in Taiwan, 1.1% in New Zealand, and 0.5% in Hong Kong but climbed 0.8% in China and 0.5% in South Korea.

Among European stock markets thus far, those in Switzerland, Italy, and the U.K. have lost 0.4%, 0.5% and 0.3%, whereas those in France, Germany and Greece are up by 0.8%, 0.2% and 0.2%.

Comex gold fell 1.5% to $1,288.40 per troy ounce.

The 10-year German bund is two basis points higher, while its British counterpart is unchanged from yesterday’s close.

More purchasing managers survey results got reported.

  • The best such news of the day is that China’s composite PMI rose 1.5 points to a 43-month high of 52.9. A rise in manufacturing growth had been revealed earlier. Now comes news that the services PMI rose 0.4 points to a 4-month high of 52.4.
  • Economies in the Middle East, in contrast, are softening. Lebanon’s private PMI (43.8) and┬áSaudi Arabia’s non-oil PMI of 53.2 were below September levels by 1.3 and 2.1 points and at record lows for these data series. Egypt’s non-oil PMI dropped 4.3 points to a 39-month low, and The U.A.E. PMI fell 0.8 points to a 6-month trough of 53.3.
  • Hong Kong’s private sector PMI slid 1.1 points to a 3-month low of 48.2.
  • India’s composite PMI rose 3 full points to a 44-month high of 55.4. The services PMI for India printed at a 2-month high of 54.5. Input price inflation accelerated.
  • Australia’s service sector PMI rose for a second straight month and moved back above the 50 no change line for the first time since July to print at 50.5.
  • Great Britain’s services and composite PMI scores were each at their best levels since January after October increases. The services PMI was 54.5 after 52.6 the month before, and the composite score was 54.8, up from 53.9.
  • Ireland’s services PMI dropped 1.6 points to a 41-month low of 54.6. Brexit poses very difficult challenges for the Irish economy.
  • Despite a 5-month low in Russia’s services PMI of 52.7, its composite purchasing managers index rose another 0.6 points to a 44-month high of 53.7.
  • South Africa’s private PMI index, compiled by Standard Bank, edged down 0.2 points 50.5. Sub-50 readings had occurred in June-through-August.
  • J.P. Morgan’s global manufacturing PMI climbed a full point to 52.0 in October. Growth accelerated in both production and orders.

Euroland’s jobless rate was 10.0% in each month of the third quarter. That’s down from 10.6% in September 2016. The improvement from a year ago was faster for young workers than others.

The Swiss consumer confidence index rose 2 points to -13 in its latest quarterly observation. It was at -17 a year ago.

Australia’s trade deficit narrowed more sharply than expected in September to A$ 1.227 billion from A$ 2.01 billion in August and A$ 2.32 billion a year earlier.

Turkish consumer and producer price inflation for the year to October was at 7.16% and 2.84%.

U.S. new jobless insurance claims averaged 257-3/4K over the latest four week, similarly ultra-low to 252-3/4K in the prior four-week period.

U.S. non-farm productivity jumped 3.1% last quarter, but outsized increases typically happen in the third quarter. In on-year terms, productivity was unchanged from 3Q15. It had risen a measly 0.7% in the year to 3Q15 and 1.6% in the year to 3Q14. Unit labor costs on a year over year basis edged up 0.3% in 3Q16, down from 0.8% in the previous statement year. Unit labor costs had dropped 0.2% between 3Q13 and 3Q14.

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


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