Friday’s Sharp Market Shifts Remain Largely Intact

November 6, 2023

The markets saw a more dovish message from last Wednesday’s Federal Reserve press conference than I and were therefore preconditioned to react to Friday’s weaker-than-forecast U.S. jobs report and ISM services and composite purchasing manager survey results, which sent equities soaring and both the dollar and long-term interest rates falling.

In the Pacific Rim, share prices this Monday advanced 5.7% in South Korea, 2.4% in Japan, 1.7% in Hong Kong, 1.3% in Indonesia and Singapore, 1.2% in New Zealand, and 0.9% in China, Taiwan and India. In Australia, where a 25-basis point central bank interest rate hike is thought likely tomorrow, the stock market closed only 0.3%. European equities and U.S. stock futures so far today are narrowly mixed after Friday’s dynamic gains.

The dollar has lost further ground today and is 2.0% softer than last Wednesday’s level on a weighted basis. Overnight drops of the U.S. currency amount to 0.4% against the Chinese yuan, 0.3% versus sterling, and 0.2% relative to the euro and Swiss franc.

Ten-year sovereign bond yields fell four basis points in Japan today but recouped 6-7 basis points Germany, France, Spain, and Great Britain. Italy’s 10-year government bond yield rebounded ten basis points, while the U.S. 10-year Treasury yield firmed only 3 bps and still shows a 40-basis point net dive since October 21.

The price of bitcoin climbed 0.4% today but remains 1.8% below last Thursday’s level. Prices for oil (+1.1%) and gold (-0.4%) have moved in opposite directions.

Released data this Monday features a bunch more purchasing manager surveys.

  • Euroland’s revised October composite PMI (46.5) matched the 35-month low estimated initially. Readings from the big three economies in the bloc (45.9 in Germany, 44.6 in France, and 47.0 in Italy) were quite far from the 50 level of neutrality, raising the distinct possibility that GDP is headed for a second consecutive quarterly contraction. To characterize Euroland’s economy as recessionary would be incomplete, since the juxtaposition of weak demand and production against continuing price elevation makes “stagflationary” a more apt description of the current situation.
  • Euroland’s service sector PMI last month printed at 47.8, the third sub-50 result in a row and the weakest reading in 32 months. Service sector PMIs ranged from 45.0 in France to 51.1 in Spain.
  • Following Friday’s news of 3- and 2-month British composite and service PMIs of 48.7 and 49.5 in October, a 2-month high British construction sector PMI of 45.6 was reported today. That down from 51.7 as recently as July and not much above September’s 40-month low of 45.0.
  • Japan’s composite and service sector purchasing manager indices fell to 10-month lows in October of 50.5 and 51.6, according to upwardly revised data.
  • Saudi Arabia’s non-oil purchasing managers index rose 1.2 points to a 4-month high of 58.4 last month.
  • But Egypt’s non-oil PMI sank 1.1 points to a 5-month low of 47.6.
  • Brazil’s composite and service-sector purchasing manager indices rose in October to 2- and 4-month highs of 50.3 and 51.0, respectively.

German industrial orders had been expected to record a decrease in September following August’s sizable rise but instead eked out a 0.2% increase, thanks to a 4.2% rebound in export orders. However, the jump in overall orders during August was revised down by 2 percentage points to 1.9%, which made for very weak third quarter comparisons of -3.9% versus 2Q and -6.9% against the third quarter of 2022.

Czech industrial production fell 1.8% on month and 5.0% on year, its biggest 12-month decline in 23 months.

The Sentix gauge of investor confidence toward Euroland’s economy remained significiantly sub-zero but at -18.6 was the least negative in five months.

Indonesian GDP grew more slowly in 3Q than 2Q, causing year-on-year growth of 4.9% to slide below 5% for the first time in two years.

Consumer prices in Thailand in October dipped 0.3% both month-on-month and relative to the same period a year earlier. Inflation there had crested at 7.9% in August 2022.

Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: ,


Comments are closed.