Final Quarter of 2017 Kicks Off With a Bang

October 2, 2017

Spain’s Catalan region is closer to a declaration of independence after the weekend’s vote, which the national government considered illegal, evoked widespread police violence directed at people trying to vote.

  • Spanish equities tumbled 1.5% in response, and Spain’s ten-year sovereign debt yield leaped ten basis points. The euro was dragged 0.6% lower against the dollar.

A sniper attack last night at a country music festival in Las Vegas killed at least 50 people and wounded over 200.

More than 25 factory-sector purchasing manager surveys from September were published. Euroland’s index, 60.6, was at a 77-month high. Jobs growth was the fastest ever reflected in at least two decades, and production and demand expanded in all reporting members of the common currency union.

The Bank of Japan’s quarterly corporate Tankan survey reflected much more improved business conditions than predicted three months ago.

British Prime Minister May spoke enthusiastically about the virtues of capitalism at her Conservative Party’s annual conference.

U.S. President Trump was very active over the weekend on Twitter, lashing out at NFL players, North Korea, and local authorities in Puerto Rico.

In addition to its 0.6% rise versus the euro, the dollar has strengthened 0.8% vis-a-vis sterling, 0.4% relative to the yen, 0.3% against the loonie, Swissy, peso and Australian dollar. The kiwi slipped 0.2%.

A number of markets were closed for holiday, including China, Hong Kong, India, and South Korea. China will be shut all week for the commemoration of the 1949 communist victory over Chinese nationalists who fled to Taiwan.

Japan’s Nikkei firmed 0.2%, and the Australian and Taiwanese equity markets advanced by 0.8%. Stocks in Europe sank 1.5% in Spain and 1.3% in Greece but have risen by 0.5% in Switzerland and the U.K., 0.2% in Germany and Italy as well as 0.1% in France.

The ten-year British gilt and German bund yields are down two and 0ne basis points. Japan’s JGB yield rose a basis point. Japan’s factory purchasing managers index climbed 0.7 points to 52.9 in September, which is a 4-month high.

According to government releases, China’s manufacturing PMI rose 0.7 points to a 2017 high of 52.4, while the non-manufacturing PMI climbed 2.0 points to 55.4, an 8-month high. The Caixin-compiled Chinese manufacturing PMI slipped 0.2 points to a 3-month but nonetheless for a fourth straight month exceeded the 50.0 level that separates improving conditions from weakening conditions.

West Texas Intermediate crude oil slumped 2.0% to $50.62 per barrel on signs of increasing U.S. production. Comex gold fell 0.7% to $1,276.00 per ounce.

Australia’s performance of manufacturing index fell back 5.6 points to a 2-month low of 54.2 in September.

The British PMI reading in September of 55.9 was 0.8 points below August’s score, suggesting that momentum in manufacturing started to ebb at the end of last quarter.

Within Euroland, Germany posted the highest PMI, a 77-month peak of 66.6, followed by a 79-month Dutch high of 60.0, a 4-month low in Austria of 59.4, an unchanged Italian reading of 56.3, a 77-month high in the French index of 56.1, a 2-month Irish low of 55.4, a 3-month Spanish high of 54.3 and a 111-month peak in Greece of 52.8. Italy’s August PMI had constituted a 78-month high.

Among reported Asian manufacturing purchasing manager indices compiled by IHS Markit Economics, Vietnam’s index rose 1.5 points to a 5-month high of 53.3. Thailand scored a 3-month high of 50.3, and South Korea’s PMI reading moved above 50 to a 22-month high of 50.6. The Filipino PMI increased 0.2 to 50.8 after setting an all-time low in August. The Indonesian and Taiwanese PMI reading of 50.4 and 54.2 were each at 2-month lows. Scores of 50.0 separate expansion from contraction.

Russia’s factory PMI increrased 0.3 points to a 2-month high of 51.9 with solid production and demand performances but accelerating inflation. Input price inflation picked up steam in most reporting economies.

Turkey’s PMI fell 1.8 points to a 2-month low of 53.3.

The Polish PMI reading of 53.7 was at a 5-month high, and so was the Czech score of 56.6. Hungary’s 59.3 after 56.8 reading was a 4-month high.

The Swiss purchasing managers index, 61.7 after 61.2 in August, was the best reading since February 2011. And Sweden’s 63.7 reading was substantially up from 54.7 in August and constitutes a 5-month high.

Diffusion indices (DIs) in the Bank of Japan Tankan survey measure the difference between the percent of companies facing good and poor business conditions. For all 10,687 firms surveyed in September, the DI printed at 15, twice as much as respondents were anticipating in the June survey. Large manufacturers perceived the best conditions in a decade with a DI of 22 in September, and small manufacturers had a reading of 10, 3 points better than in June. Big and small non-manufacturers had DI scores of 23 and 8 in the latest quarter. Projected capital spending growth this fiscal year by all companies increased 1.7 percentage points to 4.6%, thanks to a rise in all small firms’ plans. Projected sales and profits also got revised higher.

Euroland’s jobless rate was 9.1% for a third straight month in August.

On-year Japanese auto sales growth slowed to 0.4% in September, continuing a see-saw pattern after rising 4.7% in August and 9.7% in June sandwiched around a 1.1% on-year drop in July.

In the year to September, consumer prices rose 2.1% in South Korea and 3.7% in Indonesia.

Swiss retail sales fell less sharply (0.2%) in August after a 0.7% drop in the year to July.

The U.S. manufacturing PMI and construction spending data will be reported later today.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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