Quarter-End and Supercharged 8.1% Leap in Chinese Equity Market Sucks the Energy Out of Other Stock Markets
September 30, 2024
Just prior to China‘s week-long national holiday, more measures were announced to support that economy’s depressed housing market and help secure this year’s overall goal of 5% GDP growth. The release of September purchasing manager surveys suggest that the stimulus is badly needed. The government-compiled NBS non-manufacturing PMI printed at a 21-month low of 50.0, indicating that conditions neither improved nor deteriorated. With the companion manufacturing sector arriving below 50 for a fifth straight month, the composite NBS index was only 50.4. The privately compiled Caixin composite PMI fell to an 11-month low of 50.3, with manufacturing sinking to a 14-month low of 49.3, and services at a 1-year low of 50.3.
Japan’s Nikkei-225 equity index fell 1910 points or 4.8% on the final day of the quarter. On Japan’s political front, the former Defense Minister Ishiba won the leadership contest of the ruling Liberal Democratic Party, which effectively makes him the incoming prime minister. Ishiba’s predisposition aligns with fiscal policy expansionists, and he has cautioned against tightening monetary policy too quickly. Several Japanese data reports also arrived this Monday. Retail sales rose 2.8% in August, lifting their 12-month rate of increase to a higher-than-forecast 2.8%. Industrial production, on the other hand, slumped 3.3% on month and 4.9% on year, which were weaker results than anticipated. Housing starts dropped 5.1% on year, but construction orders increased by 8.7%.
Among other stock markets in the Pacific Rim, Hong Kong’s Hang Seng index rose 2.4%, but hefty declines occurred elsewhere of 2.6% in Taiwan, 2.2% in Indonesia, and 1.4% in India. European stock markets also have succumbed to profit-taking, with declines so far today of 1.8% in Italy, 1.7% in France, 0.8% in the U.K. and 0.7% in Germany and Spain. In pre-open U.S. futures trading, more modest declines have occurred. The U.S. vice-presidential debate is set for tomorrow, and September labor market data arrive Friday.
Prices for Bitcoin (down 3.1%), WTI oil (-0.8%) and gold (-0.3%) are all in the red. So are sovereign bond prices, lifting ten-year yields by two basis points in the U.K., France, Italy and Spain and by a basis point in Japan and the United States. The dollar has risen 0.2% against the Swiss franc and Japanese yen but fallin by 0.3% relative to the euro, sterling and Australian currency and by 0.2% versus the kiwi and Mexican peso.
British real GDP growth last quarter has been revised downward to +0.5% relative to 1Q and to a 2-year high of +0.7% compared to its year-earlier quarter. Britain’s current account deficit nearly doubled to a nine-quarter high of GBP 28.4 billion, equivalent to 4.0% of GDP. The British Nationwide house price index accelerated both month-on-month to +0.7% and year-on-year to a 22-month high of 3.2%, which nonetheless remains far under the 14.3% peak in March 2022.
German consumer price inflation decelerated more rapidly than anticipated in September. According to the preliminary estimate reported today, the CPI was flat month-on-month following a 0.1% downtick in August. This softened the year-on-year inflation pace to a 43-month low and sub-target 1.6% from 1.9% in August and a peak of 8.8% in November 2022. Core CPI inflation slowed a tenth of a percentage point further to 2.7%. In conjunction with sharply lower-than-expected CPI inflation of 1.2% in France and 1.5% in Spain reported just before the weekend, a case is building for a rate cut at the mid-October ECB Council meeting.
German import price data were also released today. Such fell 0.4% on month and to a 3-month year-on-year low of just 0.2%. Lower costs for imported energy were the main disinflationary factor.
Among other price releases today,
- Italian consumer prices slid 0.2% in September and to the smallest year-on-year advance (0.7%) since last December.
- Producer price inflation rose to a 14-month high of 3.0% in Hungary.
- Austrian producer price inflation of -2.0% in August printed below zero percent for a 14th straight month.
- PPI inflation in Singapore of -3.0% returned to sub-zero territory in August for the first time since March.
- Slovenian PPI inflation also was in the red last month, printing at -1.0% versus a cyclical high of +22.5% in May 2022. Such was complemented by news that consumer prices held steady in September, depressing their 12-month increase to a 42-month low of 0.6%.
- In Sri Lanka, where consumer price inflation peaked at a high of 67.4% in September 2022, the 12-month pace of change was negative this month (-0.5%) for the first time in nearly three decades. Sri Lankan PPI inflation in August of 1.8% constituted a 3-month low.
- Greek producer price inflation of -2.4% in August was at a 4-month low.
- Polish CPI inflation, which fell from 18.4% in February 2023 to 2.0% by this past March, rose to a 9-month high in September of 4.9%.
- Portuguese CPI inflation of 2.1% in September is down from 10.1% in October 2020.
A measure of Swedish business confidence improved in September to its best level since shortly before Russia initially invaded Ukraine in February 2022.
Danish quarterly GDP growth in 2Q 2024 got revised sharply higher to 1.1% from 0.6% estimated initially. Year-on-year growth of 3.4% was up from 1.5% during the four quarters that ended in 2Q 2023.
In the twelve months through August, retail sales fell 5.8% in Estonia and 2.5% in Ireland but rose 5.7% in Croatia, 5.3% in Portugal and 0.5% in Sweden.
As opinion polls had suggested, an extreme-right party picked up the most seats in Austria’s parliamentary election over the weekend, but the FPO may not be able to form a workable coalition with other parties.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British GDP and current account, Chinese September purchasing managers surveys, German CPI and import prices, Japanese retail sales and industrial production
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