Dollar Mixed, Stocks Down in Europe and Asia, Oil Up But Sovereign Debt Yields Sharply Lower

October 3, 2022

On this first trading day of the fourth quarter, the dollar fell 1.3%, 0.9%, 0.7% and 0.4% against the kiwi, Aussie dollar, loonie, and sterling but rose by 0.4%, against the euro, 0.2% versus the Swiss franc and 0.1% vis-a-vis the Japanese yen. China is closed most of this week.

Stock markets sank 1.1% in India, 0.9% in New Zealand and Taiwan, 0.8% in Hong Kong, and 0.7% in South Korea. Equities are down 0.5% or slightly less in Germany, France and Italy, but U.S. futures are in the black.

The price of West Texas Intermediate oil jumped 4.4% on signals that OPEC is set to approve a larger production cut. Bitcoin rose 0.9%, while gold is little changed.

Ten-year sovereign debt yields opened the quarter with losses of 16 basis points in the U.K., 13 bps in the U.S. and 10 bps in Germany. Brazil’s 10-year sovereign debt yield plunged 26 bps. Although challenger Lula won 6 million more votes than the extreme right-wing incumbent Bolsonaro in yesterday’s election, he failed to secure a majority, and a run-off second round to decide the country’s next president will be held in four weeks.

Economic weakness around the world was on display in today’s manufacturing purchasing manager survey results for September. About 60% of the many countries reported sub-50 scores, signalling a contraction of activity.  The best score was a record high 55.2 in Thailand; the lowest belonged to Taiwan, which posted a 28-month low of 42.2.

Euroland’s PMI was revised 0.1 point lower to a 27-month low 48.4, with readings ranging from France’s 28-month low of 47.7 to Ireland’s 2-month high of 51.5 that followed a 22-month low in August. Aside from tumbling demand for manufactured goods, Euroland saw inflationary pressure intensify.

In Eastern Europe, PMIs for Hungary, Poland and the Czech Republic printed in the 40s, while the Russian index of 52 rose to a 42-month high. In Nordic Europe, The Danish and Norwegian indices printed at 49.8 and 49.2, while the Swedish PMI fell to a 27-month low of 49.2.

Japan’s manufacturing PMI dropped to an 8-month low of 50.8. Australia’s 53.5 reading was the weakest in 13 months. Malaysia’s 49.1 was a 1-year low, and Indonesia, Vietnam and the Philippines experienced readings in the low 50s.

South African manufacturing (47.7) printed below 50 for the second time in three months. Turkey’s PMI stayed under 50 for a sixth straight time with a reading of 46.2.

The PMI surveys showed elevated inflation continuing, with some lessening of price pressure felt by some economies, whereas other saw inflation get worse.

Turkish CPI inflation accelerated to a 29-month high of 83.5% in September from 80.2% in August and 19.6% in September 2021. PPI inflation in Turkey reached 151.5% versus 44% a year earlier.

Swiss CPI inflation of 3.3% last month was the lowest since May.

The Bank of Japan’s Tankan survey of corporate conditions fell to a six-quarter low for large manufacturers with a diffusion index of +8. The reading for all 9,268 firms surveyed rose one point to a score of +3. Projected investment spending for all large firms this fiscal year were revised upward to a 21.5%.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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