Risk On Mood Continuing

November 4, 2019

Friday saw share prices rally on trade optimism and the aversion thus far of a hard Brexit.

Subsequent official comments from U.S. and Chinese officials did not dash investor hopes, and Euroland PMI data suggest that the downturn in manufacturing did not intensify last month.

Japanese markets were closed today for the Culture Day holiday. Elsewhere in the Pacific Rim, stocks rose 1.7% in Hong Kong, 1.4% in South Korea and Taiwan, 0.6% in China and 0.3% in India. Among key European bourses, share prices have thus far today advanced at least 1.0% in the U.K., France, Germany and Italy and by 0.8% in Spain.

The ten-year Treasury yield dropped 4 basis points in futures trading, but comparable German bund and British gilt yields are up two basis points each.

West Texas Intermediate crude oil advanced 1.2%, and Comex gold has firmed 0.2%.

The dollar declined 0.5% against the yuan but has appreciated modestly relative to the yen, euro, sterling, Swiss franc, and the Australian and Canadian dollars.

The October manufacturing purchasing manager indices of Euroland, Germany, and France rebounded to 2-month highs and slightly exceeded preliminary estimates for the month. However, Euroland’s PMI level, 45.9, was still significantly below the 50 no change threshold, indicating that the factory sector this quarter continued to exert a drag on the whole economy. The Italian and Spanish PMI readings fell to 7- and 78-month lows of 47.7 and 46.8. The German PMI was 42.1, so among eight Ezone member PMIs in manufacturing, half were above 50 but half were in contractionary territory including those of Germany, Spain and Italy. There was also evidence of further disinflation in the region.

Among other released PMI surveys today,

  • The British construction purchasing managers index rebounded 0.9 points to a 2-month high of 44.2.
  • Poland’s manufacturing PMI sank 2.2 points to a 124-month low of 45.6.
  • The Filipino manufacturing PMI improved 0.3 points to a 9-month high of 52.1.

Euroland’s Sentix gauge of investor confidence greatly exceeded street forecasts, rebounding by 12.3 index points to a 5-month high of -4.5 in November. This was the sixth straight sub-zero score.

Swiss consumer sentiment relapsed 2.4 points in the final quarter of 2019 to a reading of -10.4, its weakest score since the summer of 2009.

Christine Lagarde delivers her first speech since taking the ECB president’s baton from her predecessor, Mario Draghi, who had held the position for eight years. The speech will be made locally in the evening in Berlin. Germany has been critical of ECB quantitative stimulus and the bank’s negative interest rates. Lagarde is the ECB’s fourth president and the second to be of French nationality. The central bank has thus far not been led by a German.

Australian retail sales grew more slowly than forecast in September, ticking up 0.2% on month and retaining a 12-month 2.4% rate of increase, which compares to 3.1% in the year to October 2018. Retail sales volume slid quarterly by 0.1% in 3Q.

Malaysia’s MYR 100.8 billion trade surplus in January-September was 17.5% wider than a year earlier, but September’s surplus of MYR 8.34 billion was the smallest since August 2018.

Price data reported today showed

  • A further slide in Turkish CPI inflation to 8.55% in October from 9.26% in September and a crest of 25.24% hit exactly one year earlier. Core CPI decelerated to a 74-month low of 6.67%. Turkey’s PPI inflation rate in September of 1.7% was down from 46.15% a year earlier.
  • A drop in Thailand’s CPI inflation rate to a 28-month low of 0.1% associated with a core CPI rate of 0.4%. Producer prices in Thailand were 2.5% lower than a year earlier and down 0.4% compared to the prior month.
  • Romanian producer price inflation ticked down 0.1 percentage point to a 26-month low in September of 3.1%.

Today marks the 40th anniversary of the seizure by Iranian militants of the U.S. embassy in Tehran and the taking of hostages there. This was a watershed moment in U.S. foreign policy, ushering in an era of almost non-stop military engagement in the Middle East.

U.S. factory orders, motor vehicle sales and the New York regional PMI known as the NAPM index get reported later today.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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