Upbeat Investor Mood in Spite of Vegas Tragedy

October 3, 2017

The dollar rose overnight by 0.3% against the yen and kiwi, 0.2% relative to the peso and 0.1% vis-a-vis the Australian dollar. The dollar also drifted 0.2% lower against the euro and 0.1% versus the loonie and Swiss franc.

Both gold and oil slipped 0.2% overnight.

The Chinese, German and South Korean markets are closed. China’s out all week for its National Holiday, and today is the 27th anniversary of the reunification of East Germany with West Germany. The South Korean Chusek Full Moon Festival began.

Elsewhere in the Pacific Rim, equities rose 3.3% in Hong Kong, 1.1% in Japan, 0.7% in India and 0.4% in Indonesia. Stocks in Europe fell 0.7% in Spain, still rattled by the violent election referendum in Catalonia, and 0.2% in Italy but have firmed 0.2% in France and Switzerland and 0.1% in Great Britain.

The ten-year British gilt yield increased five basis points.

As expected, the Reserve Bank of Australia retained a 1.5% Official Cash Rate. Officials project a gradual pick-up of growth but note low real wage growth and subdued inflation, which is also projected to increase eventually. The hopes for higher growth and inflation could be compromised, however, by Aussie dollar appreciation that would weigh on prospects for jobs growth and faster industrial production.

Investors are excited by the possibilities of U.S. tax cuts and a change in Fed leadership with people predisposed to raising the federal funds target more quickly. Yesterday’s report of a higher U.S. manufacturing purchasing managers index spurred enthusiasm, too.

Consumer confidence in Japan rose 0.6 points to a four year high reading of 43.9. On-year growth in the Japanese monetary base slowed to 15.6% in September from 15.8% in 3Q17 as a whole, 20.1% in the first half of 2017, 25.0% in 2016, and 34.0% in 2015.

Producer prices in the euro area climbed 0.3% in August, thanks to a 0.7% increase in the energy component. All other producer prices edged up only 0.1%, and the full-PPI was 2.5% higher than a year earlier in the month.

New home sales in Australia rebounded 9.1% in August after a 15.4% monthly plunge in July. Building approvals were 15.5% lower in August than a year earlier.

The British construction purchasing managers index dropped 3.0 points in September and at 48.1 also slipped under the 50 level that separates improving activity from a contraction of such.

India’s manufacturing PMI reading of 51.2 in September was the same as August’s 3-month high. A 101-month low had been touched in July.

Norway’s manufacturing PMI fell 2.4 points to an 8-month low of 52.5 in September.

South Africa‘s Absa-compiled PMI in manufacturing recovered 0.9 points to a 3-month high but still weak 44.9 in September.

Private non-oil purchasing manager indices for September in Egypt, Saudi Arabia and the U.A.E. printed respectively at a 3-month low of 47.4, a 3-month low of 55.5 and a 4-month low of 55.1.

The global manufacturing PMI, compiled by JP Morgan, remained steady in September at August’s 75-month high of 53.2.

The National Bank of Romania kept its monetary policy rate at 1.75%. It’s been at that level since a 25-bp cut in May 2015. Separately, officials decided to squeeze the symmetrical corridor of interest rates on the standing lending and borrowing facilities that flank to policy rate target. This was done by raising the deposit rate by 25 basis points to 0.50% while leaving the lending facility rate at 3.0%.

U.S. auto sales from last month will be reported today.

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

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