Dollar Little Changed But Equities Rebound on Day Before U.S. Election

November 2, 2020

U.S. stock futures point to a rise of more than 1.0% at today’s open. Overseas, share prices closed up 1.5% in Hong Kong and South Korea and by 1.4% in Japan, and key European bourses currently show rises of 1.8% in France and Italy, 1.7% in Germany, 1.4% in Switzerland, 1.3% in Spain and 1.1% in Great Britain.

The dollar is unchanged from Friday closing levels against the euro, yen and yuan. The greenback has lost 0.2% versus the Australian, Canadian and New Zealand dollars but risen 0.2% relative to the Mexican peso and stereling.

The price of oil continues to tumble, losing 2.6% so far today and 16% since October 20th. The price of gold firmed 0.6% overnight.

Ten-year U.S. Treasury and British gilt yields slipped two and 3 basis points.

Data reports today feature manufacturing purchasing manager surveys for October, but the market’s mood is dominated by anxiety over the uncertain outcome of tomorrow’s U.S. election. A toxic fear is fixated on the possibilities of Russian hacking, other dirty tricks, and  President Trump’s threat to litigate any outcome that doesn’t allow him to stay in office. Record turnout at least in modern times is assured, including an unprecedented share of early voting.

The election campaign is winding down against the backdrop of record Covid cases and deaths both worldwide and in the United States. Several European governments are reimposing much tighter restrictions against social activity, including those in Germany, the U.K., and France.

Euroland manufacturing PMI rose 1.1 points to a 27-month high of 54.8 in October, but improvement was very concentrated in Germany, where a new lockdown will hit services and could depress manufacturing too. Manufacturing in France, Ireland, and the Netherlands was subdued last month, with respective factory PMI readings of 41.3, 50.3 and 50.4. The Greek PMI fell below 50, implying a contraction of activity, to a 3-month low of 48.7.

The British manufacturing PMI printed at a 4-month low of 53.7, having crested in August at 55.2.

The Swiss PMI fell 0.8 points to a 2-month low of 52.3.

Nordic manufacturing has been resilient by comparison. The Swedish, Danish and Norwegian purchasing managers indices printed at respective 32-, 24- and 14-month highs of 58.2, 55.1, and 53.4 in October.

Eastern European PMI scores were less buoyant. Although at a 24-month high, the Czech PMI was only 51.9 after only emerging above the 50 level in September. That divides improvement from deterioration. Poland’s score of 50.8 was even lower than the Czech PMI and no higher than in September, while Hungary’s index stood at 50.1, essentially conveying stagnation. Russia’s manufacturing PMI had finally climbed above 50 in August but followed that with back-to-back sub-50 scores including a 5-month low of 49.6 in October.

Turning to Asia, Chinese PMI data paint a picture of continuing recovery from the pandemic. The government-authorized NBS non-manufacturing PMI printed at a 7-year high of 56.2, while its companion manufacturing index edged down just 0.1 point from its 7-month high reached in September. Moreover, the privately compiled Caixin PMI for manufacturing in China rose to a 127-month high of 53.1.

Japan’s manufacturing PMI surpassed its preliminary estimate by 0.7 points and at 48.7 conveyed the slowest rate of contraction since the first month of 2020.

India‘s manufacturing PMI jumped 2.1 points to 58.9, indicating the fastest expansion rate in over a decade during October.

The PMI readings of 51.8 in Vietnam, 50.8 in Thailand, and 47.8 in Indonesia represent 15-, 18- and 2-month highs. But Malaysian factory activity contracted more sharply in October when its PMI fell a half point to a 5-month low of 48.5.

Australia‘s AIG-compiled manufacturing PMI soared 9.6 points to a 25-month high of 56.3 in October. Although down 0.2 points, the Commonwealth Bank of Australia’s manufacturing PMI of 54.2 also depicted a robust rate of expansion last month. So does the Turkish 2-month high PMI reading of 53.9, and the ABSA-compiled South African PMI broke above the 60 level to a record peak of 60.9.

In other data reports, Hong Kong retail sales posted their 20th consecutive year-on-year drop in September. The 12-month slide of 13.4% matched August’s result. Together these months represent the slowest rate of contraction in this whole streak.

Indonesian CPI inflation accelerated to a 3-month high of 1.44% in October.

Hungarian PPI inflation jumped two percentage points to a 23-month high of 5.2% in September.

South Korea’s trade surplus of $33.7 billion in January-October was marginally above its year-earlier $33.6 billion level.

In Portugal, industrial production relapsed 3.8% in September, which trimmed the 12-month rate of decline to 2.9%.

Building permits in September leaped 15.4% in Australia and rose by a lesser 3.6% in neighboring New Zealand. Mortgage loans in Australia also continued to revive, posting a fourth straight month-on-month increase, this time of 6.0% and by a total of 41% over that whole stretch.

Still ahead: U.S. construction spending and manufacturing PMI. Also Canadian manufacturing PMI. Brazil, Mexico and the Philippines observed holidays today.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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