Here's my summary of the key news in 90 seconds at 9 am, including news of a series of key PMI data released for many big economies.
China kicked off the set late yesterday with the HSBC Flash series which came it at 51.2, above expectations and above the previous 50.1 reading. This latest reading is a six month high.
A score above 50 shows that manufacturing is expanding.
France was next with 49.5, below both expectations and the previous reading.
Then it was Germany at 51.3, also less than what markets expected and less than the previous month.
And finally, the US came in at 52.8, the highest of the four but also below market expectations and the previous reading.
So, generally factory readings were weaker in September. But at the same time the parallel services readings for Europe generally came in stronger and all above 50 - including for France.
ECB boss Mario Draghi said he’s ready to deploy another long-term refinancing operation to provide funds to Europe’s banking system if needed.
Staying in Europe, there have been interesting moves by euro MPs to force the International Accounting Standards Board to change to policies. It's not often that accounting standards get threatened by politics. The pressure is on to have this independent international body subservient to European law. It could well be the fracturing of international accounting standards.
And finally, Apple says it has sold nine million of its latest iPhone models in three days with demand for the iPhone 5S outstripping supply. Maybe in a related story, Foxconn is reporting that more fights have broken out in one of its huge Chinese manufacturing units.
The Dow is lower in late trade, oil is down markedly, gold is steady, and the UST 10 yrs yields are down again too, now at 2.71%.
The NZ dollar starts today at 83.8 USc, 88.8 AUc, and the TWI is at 78.0.
The easiest place to stay up with today's event risk is by following our Economic Calendar here »
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11 Comments
A couple of overnight things:
Correlation between laughter in Fed Reserve meetings and rising interest rates:
http://www.businessinsider.com.au/inflation-sparks-laughter-during-fede…
China bought 5% of Ukraine
http://qz.com/127258/why-china-just-bought-one-twentieth-of-ukraine/
There was another link on zerohedge I found interesting, with Bill Dudley of the Fed Reserve explaining a few things. Zero hedge describe Dudley as a lunatic, so form your own views. There are a few themes. One is that they have noted commodities have gone up in price faster than other things. PDK will be gratified.
In contrast, over the past decade, commodity prices generally have been on an upward trend. For example, as shown in Chart 25, fuel prices have generally been in a rising trend since 1999 and non-fuel prices since 2001—both trends interrupted temporarily by the financial crisis.
Dudley argues that this won't feed into regular inflation in the US. I think it's this argument ZH thinks is lunatic. Regardless, it will be an interesting dynamic for small countries like NZ. If this increase is sustained, do we hammer everything else to keep inflation very low, or do we allow for it in some way?
He has a bit on money creation, and the effect of QE, and of pulling it back.
Banks have always had the ability to expand credit whenever they like. They didn't need a pile of “dry tinder” in the form of excess reserves to do so. That is because the Federal
Reserve's standard operating procedure for several decades has been a
commitment to supply sufficient reserves to keep the fed funds rate at its target. If banks wanted to expand credit that would drive up the demand for reserves, the Fed would automatically meet that demand by supplying additional reserves as needed to maintain the fed funds rate at its target rate. In terms of the ability to expand credit rapidly, it
makes no difference whether the banks have lots of excess reserves on their own balance sheets or can source whatever reserves they need from the fed funds market at the fed funds rate.3
Dudley talks then of the will to fight inflation. He says yes, but he is part politician at the end of the day.
So we have the means to tighten monetary policy when the time comes, but do we have the will? I think there should be no doubt about this. It is well understood among all the members of the FOMC that allowing inflation to gain a foothold is a losing game with large costs and few, if any, benefits.
And a piece I liked where he compared the Fed's role as Central Banker with any concerns over the Fed's gains or losses on their balance sheet.
Fed policy is driven by the objectives set out in the dual mandate, and the net income earned by the Fed is the consequence of the policy choices that advance those objectives. The Federal Reserve's net income statement does not drive or constrain our policy actions. In short, we act as a central bank, not an investment manager.
Bill English in particular often seems far more concerned with the RBNZ balance sheet, than its role as central banker. That is a core failing in my view.
Considering more than a few ppl think ZH is the lunatic, thats just funny.
My take is fuel prices will take money out of ppls pockets just like raising interest rates would and not generate inflation. So sure petrol will go up in cost, but with wages not rising other things will have to drop, ie deflationary.
The interesting thing is petrol costs rising is not productive, no extra goods are made or sold, but with compensating sectors in deflation that will mean less goods and goods sold....so less productive....so yes, no inflation.....not until productivity rises and ppls wages do likewise. Peak oil says that wont happen again, ever.
regards
so yes, no inflation.....not until productivity rises and ppls wages do likewise. Peak oil says that wont happen again, ever.
Never say never - a reversion to historical levels of labour's share of a nation's output might drive remarkably unexpected outcomes. Read more
The Ukraine was a logical place for China to go. Now they need a naval base in the black sea to protect their assets.
Ukraine’s “black earth” – the chernozem – is an amazingly deep, fertile soil whose prodigiously productive capacity led the country to be christened “the bread basket of Europe”.
The country has close to a third of the arable land area of the whole EU, some 34m hectares, 70 per cent of which is black earth up to six metres deep.
http://www.ft.com/intl/cms/s/0/268d74fc-f8e0-11e1-8d92-00144feabdc0.html#axzz2fkvHvSL9
Given inflation has been mostly over their target for 5 years, this is not really news. Classic British management though, from my time there.
Pretend to do one thing that seemed politically correct, all the while doing something else. It took a while to understand the game, but once you got the hang of it, it sort of worked.
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