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Car industry down as Eurozone sees hope

Share Markets:

European stocks were pushed higher by comments from the ECB President regarding government bond purchases (see below) and by encouraging trade numbers (see below).

The FTSE rose 0.3% and the Dax was up 0.6%. In the US, the Dow and the S&P500 both rose 0.1%.

Interest Rates:

US 10 year government bond yields rose marginally overnight despite some modestly disappointing economic news (see below).

Two year yields were unchanged. In Australia, 10 and 3 year government bond yields declined. US long bonds currently yield 2.34% while Australian 10 year yields are at 3.26%.

Foreign Exchange:

The US dollar rebounded overnight, partly helped by comments made by ECB President Draghi.

He boosted hopes that a broad-based QE program would eventually be implemented (see below). The AUD is subsequently weaker against the USD this morning.

Commodities:

A pickup in the US dollar and the surprise slip of Japan into recession (see below) pushed major commodity prices lower overnight. Gold, copper and oil prices all fell.

Australia:

New motor vehicle sales fell 1.6% in October, after rising 2.8% in September. For the year to October, new motor vehicle sales are down 0.5%, a deterioration from growth of 0.6% in the year to September.

China:

No data of significance was released.

Europe:

Eurozone exports jumped 4.2% in September, more than reversing the 1.4% fall in August. With imports up 3.0% in September, the trade surplus widened to €17.7bn, its second highest on record.

Overnight, ECB President Mario Draghi explicitly cited government-bond buying as a policy tool to stimulate the Eurozone economy if the outlook worsens.

Unlike the US bond purchase program, the ECB would face difficult decisions in determining which government bonds to purchase.

Japan:

Japan's economy unexpectedly contracted in Q3. GDP growth fell 0.4% in Q3, widely missing consensus expectations for a 0.5% increase.

In Q2 Japan's economy experienced a contraction of 1.9%, following the April increase of the sales tax to 8 percent, from 5 percent.

Japan's economy is officially in recession, raising the prospect that Prime Minister Abe will postpone a further hike in the sales tax scheduled for October next year.

New Zealand: 

Retail sales volumes were stronger than consensus expectations, rising 1.5% in Q3, led by food-related industries.

This followed retail sales volumes growth of 1.1% in Q2. It was the largest increase in retail sales volumes since 2012.

The performance of services index eased to 57.8 in October, from 58.0 in September.

United Kingdom:

UK house prices rose 8.5% in the year to November according to the Rightmove index of asking prices.

United States: 

US industrial production fell 0.1% in October.

There was, however, a modest 0.2% rise in manufacturing output. A decline in auto output (down 1.2% in October) and an unusual 0.9% decline in mining output were the main factors behind the overall decline.

The US New York Fed factory index recovered a modest 4 points from 6.2 to 10.2 in November, with orders and shipments both up more than 10 points from October, but jobs growth was down a little from 10.2 to 8.5.

Topics:  economy st george



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