Some Guarded Relief as Stocks Rally around the World

November 7, 2016

Knowing that it won’t be over until it’s over, global stocks nonetheless rallied on yesterday’s FBI announcement that the investigation of emails found on Anthony Wiener’s computer did not change the original conclusion from July that Hillary Clinton did not commit any criminal acts warranting the Bureau to press charges against her.

Share prices closed up 2.6% in New Zealand, 1.6% in Japan, 1.4% in Australia, 1.2% in Hong Kong, 1.3% in Taiwan and 0.8% in South Korea and India. In Europe, equities so far have rebounded 2.2% in Greece, 2.1% in Italy, 1.8% in France and Switzerland, 1.7% in Germany, 1.6% in Spain, and 1.5% in Britain.

10-year sovereign debt yields are up four basis points in the U.K., 3 bps in U.S. Treasury futures, and one basis point in Germany and Japan.

Commodities have rallied, too, except for a 1.3% drop in Gold. WTI oil is up 1.7%, and industrial metals have advanced strongly.

The dollar has risen 0.7% against the Swiss franc and 1.2% versus the yen, two currencies with appeal to safe haven-seeking funds against the possibility of a Trump victory. The Mexican peso, the best financial market proxy for implicit odds of a Trump win, has climbed strongly as well. The dollar otherwise shows upticks of 0.7% relative to sterling, 0.3% versus the yuan, 0.6% vis-a-vis the euro and 0.2% against the yuan. The loonie ticked 0.1% higher.

Latest opinion polls give Clinton only a narrow lead in the popular vote, however, and it’s considerably less than the final Brexit surveys were suggesting that British voters would vote no to leaving the EU. Those polls proved wrong.

The FBI probe has unquestionably changed the electoral math even though it concluded that the briefly renewed investigation had led to no reason not to close the probe as was done last July. The polls are much closer, and so even if Clinton wins, the congressional election results will probably be more successful for Republicans than would have been the case had the FBI waited until it had the facts before going public.

More purchasing manager survey results from October came to light.

  • Euroland’s retail PMI fell 0.6 points to a 4-month low. The German and French scores of 51.0 and 47.5 were at 6- and 7-month lows. Italy’s retail PMI rose 1.5 points to a 7-month high but remained 3.5 points below the 50 no-change level.
  • Australia’s construction PMI sank 5.5 points to a 45.9.
  • Germany’s construction PMI rose 0.5 points to a 6-month high of 52.9.
  • The global composite and services purchasing manager indices each printed at 11-month highs of 53.3 and 53.2, respectively, according to the estimate made by J.P. Morgan.
  • Brazil’s composite and services PMI readings of 44.9 and 43.9 constitute 2-month lows.

The Sentix gauge of investor sentiment toward the euro area economy rose unexpectedly to its best reading of 2016 during November. Such printed at 13.1, up from 8.5 in October and 9.6 last January.

German real industrial orders unexpectedly fell in September. There was an on-month drop of 0.6%, with domestic demand falling 1.1% and export orders dipping by 0.3% (but by 4.3% counting just other members of Euroland). Orders in the final month of 3Q were 2.6% greater than in September 2015 but 0.1% softer than the third quarter average.

The Halifax British house price index recorded a lower 12-month 5.2% rate of increase in October, the least so far this year and down from 9.7% in the year to October 2015.

Swiss CPI deflation remained at 0.2% in October, unchanged from September’s 12-month dip.

Minutes from the Bank of Japan’s September 20-21st Policy Board meeting observed that expected inflation had declined and agreed that efforts had to be made then to reverse that development. The policy framework was reoriented to a focus on the yield curve and a commitment was agreed upon to retain ultra-aggressive monetary stimulus until core CPI inflation actually moves above the 2.0% target.

Japanese nominal labor cash earnings were only 0.2% higher in September than a year earlier.

Indonesian GDP recorded on-year growth of 5.0% last quarter.

In the year to September, industrial production rose 0.8% in Spain but fell 5.7% in Denmark and 12.4% in Norway. Retail sales advanced 11.1% in Romania, 5.1% in Hungary, and 4.7% in the Czech Republic.

U.S. consumer credit figures and the Fed’s labor market conditions index will be released today.

North America returned to standard time this past weekend, restoring the normal time differentials with Europe but reducing the differences with Tokyo by one hour.

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



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