Stocks and Commodities Up, Manufacturing PMIs Out, and FOMC Announcement on Tap

November 1, 2017

On this All Saints Day, the dollar rose 0.5% to a 6-month high against the yen and also posted advances of 0.4% against the Swiss franc while moving above par and 0.3% relative to the euro. The dollar is steady against the loonie, peso and sterling but has fallen 0.7% relative to the kiwi and 0.3% vis-a-vis the yuan and Australian dollar.

Equities around the Pacific Rim closed up 1.9% in Japan, 1.3% in South Korea, 1.2% in India, 1.1% in Hong Kong and 0.5% in Singapore, Australia and Indonesia. Most West European bourses are open despite the holiday and so far show gains on the day of 1.9% in Germany, 1.6% in Greece, 1.1% in Italy, 0.5% in France and 0.2% in Britain. The U.S. market opened slightly higher.

Industrial metal prices like those for copper and nickel advanced over 1.0%, and WTI oil climbed 1.1%. Gold is 0.3% firmer.

Ten-year British gilt and German bund yields rose by 3 and 2 basis points.

Several October purchasing manager manufacturing survey results were reported today. 21 of 24 of them had overall indices above 50.0, meaning that factory conditions improved last month. The higher the index lies above 50, the faster was the rate of improvement in manufacturing. The economies with sub-50 readings implying a deterioration of conditions were Malaysia (48.8, a 3-month low), Thailand (49.8, a 2-month low), and South Africa (47.8, a 3-month high).

In those economies with PMI readings above 50, very few were above their September levels. The Dutch and Swiss PMIsĀ  of 60.9 and 62.0 were at 80-month highs, and the Czech reading of 58.5 was at a 78-month peak. IHS reported a 9-month high in its U.S. index, and the British (56.3) and Norwegian PMI (54.5) were at 2-month highs. China’s reading of 51.0 matched September’s 3-month low. Australia’s PMI slumped to a one-year low of 51.1, and the Irish and Turkish indices fell to 7- and 6-month lows of 54.4 and 52.8, respectively. The PMI’s of Brazil (51.2) and Vietnam (51.6) dropped to 5-month lows. Russia’s 51.1 score was a 4-month low. Five economies had PMI readings above 50 but at their lowest since July: India (50.5), Greece (52.1), Indonesia (50.1), Taiwan (53.6) and the U.S. report compiled by the Institute of Supply Management, which fell to 58.7 from 60.8 the month before. The factory-sector PMIs for Sweden (59.3), Japan (52.8) and South Korea (50.2) were lower than their September readings but above August levels.

Because of today’s holiday, the batch of economies releasing manufacturing purchasing manager surveys today did not include the usual full batch of suspects. Euroland, Germany, France, Italy, Spain, Poland, and the Philippines report tomorrow.

New Zealand third-quarter labor statistics were released. Unemployment fell to 4.6% from 4.8% in 2Q and 4.9% in 1Q. The labor participation rate advanced 1.1 percentage points to 71.1%. Labor costs increased 0.8% on quarter and by 1.9% on year, an acceleration from 1.6% on year in 2Q and 1.5% in 1Q.

The ADP estimate of private-sector U.S. jobs growth in October was 235K, more than twice as many workers as in September and even higher than the street forecast of 200K.

Consumer price inflation in Thailand remained steady in October at 0.9%.

South Korean CPI inflation slowed to 1.8% last month. Indonesian consumer price inflation of 3.6% in October was twice as high as in South Korea but a touch lower than September’s on-year increase.

The British Nationwide house price index remained sluggish in October, edging up 0.2% on month and 2.5% on year. The average on-year pace was 2.3% in the latest three months versus a mean of 3.0% in July-August and 4.6% in October 2016.

British shop prices were again less than their year-earlier level according to the British Retail Consortium. The 12-month dip in October, as in September, was 0.1%.

Japanese motor vehicle sales contracted 4.7% on year in October following on-year increases of 0.4% in September and 4.7% in August.

U.S. construction spending rose 0.3% on month and 2.0% on year in September. The penultimate FOMC meeting of 2017 ends today. A statement of its decision and factors affecting the decision will be released at 14:00 local time. No interest rate change is expected, and no press conference is planned. The identity of the nominee for Fed Chair is expected to be revealed no later than Friday. The terrorist incident in NYC yesterday afternoon does not appear to have influenced financial markets much, if at all, today. Mueller’s investigation into Russian meddling in the 2016 U.S. election continues.

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

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